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GE You would like to invest in one of the three available investment plans: money market, bonds, or stocks. The payoffs (profits) of each plan
GE You would like to invest in one of the three available investment plans: money market, bonds, or stocks. The payoffs (profits) of each plan under two possible future economic conditions, PE (poor economy) and GE (good economy), are shown below. The probability of the occurrence of PE is 0.2. PE Money Market 1000 2000 Bonds 3000 2500 Stocks 2000 4500 Suppose that before making the investment decision, you consider hiring an economist who can provide either U = "unfavorable" or F = "favorabl e" report concerning the future economic conditions. Assume that the following information is also available: PLU/PE) = 0.6 P(F/PE) = 0.4 P(U/GE) = 0.2 P(F/GE) = 0.8 What is the posterior probability P(PE/F)? a. 0.238 b. 0.047 c. 0.089 d. 0.111 e. None of the above
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