(CLO.2)Hamad studied finance at Al Ain University last semester. He is considering investing somemoney that he inherited. The following payoff tablegives the profits that would be realized during thenext year for each of the three investment alternativeshe is considering:

STATE OF NATURE

DECISIONGOODPOOR

ALTERNATIVEECONOMYECONOMY

Stock market100,000-30,000

Bonds40,00030,000

CDs30,00030,000

If the probability of a good economy is 50% answer the following:

(a) What decision would maximize expected profits?

(b) What is the maximum amount that should bepaid for a perfect forecast of the economy?

(d) What decision would minimize the expected opportunityloss? What is the minimum EOL?