A young couple has some money to invest in either savings bonds or a real estate deal. The expected payoff for each investment, given good and bad economic conditions, is shown in the following table:

Economic Conditions

	Economic condition good	bad economic condition
Investment	.5	.5
savings bonds	$3,000	$3,000
real estate	7,500	-2,500

Investments .5 .5 Savings Bonds $3000 $3000 Real Estate 7500 -2500

a). The probability of good economic conditions is 0.5, and the probability of bad economic conditions is 0.5. Compute the EMV for each investment. Which investment should the couple choose? Why?

b). What is the expected value of perfect information (EVPI) for the couple's decision?

c). Examine the probability of good economic conditions. For what value of this probability would the couple be indifferent between the two investments?