Help References Mailings Review View -files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. 2. Enable Editing Amy Lloyd is interested in leasing a new Saab and has contacted three automobile dealers for pricing information. Each dealer has offered Amy a closed-end 36-month lease with no down payment due at the time of signing. Each lease includes a monthly charge and a mileage allowance. Additional miles receive a surcharge on a per-mile basis. The monthly lease cost, the mileage allowance, and the cost for additional miles follow: Dealer Forno Saab Midtown Motors Hopkins Automotive Monthly Cost Mileage Allowance $299 $310 $325 36,000 45,000 54,000 Cost per Additional Mile $0.15 $0.20 $0.15 Amy has decided to choose the lease option that will minimize her total 36-month cost. The difficulty is that Amy is not sure how many miles she will drive over the next three years. For purposes of this decision she believes it is reasonable to assume that she will drive 12,000 miles per year, 15,000 miles per year, or 18,000 miles per year. With this as- sumption Amy has estimated her total costs for the three lease options. For example, she figures that the Forno Saab lease will cost her $10,764 if she drives 12,000 miles per year, $12,114 if she drives 15,000 miles per year, or $13,464 if she drives 18,000 miles per year. a. What is the decision, and what is the chance event? b. Construct a payoff table for Amy's problem. If Amy has no idea which of the three mileage assumptions is most appropriate, what is the recommended decision (leasing option) using the optimistic, conservative, and minimax regret approaches? d. Suppose that the probabilities that Amy drives 12,000, 15,000, and 18,000 miles per year are 0.5, 0.4, and 0.1, respectively. What option should Amy choose using the ex- pected value approach?

Amy Lloyd is interested in leasing a new Saab and has contacted three automobile dealers for pricing information. Each dealer has offered Amy a cloced-end 36 -month tease with no down payment due ar the time of signing. Each lease includes a monthly charge and a mileage allowance: Additional miles receive a surcharge on a per-mile basis. The monthly lease cost, the mileage allowance, and the cost for additional miles follow: Amy has decided to choose the lease option that will minimize her totat 36 -month cose The difficulty is that Amy is not sure how many miles she will drive over the next three years For purposes of this decision she believes it is reasonable to assume that she will drive 12,000 miles per year, 15,000 miles per year, or 18,000 miles per year. With this assumption Amy has estimated her total costs for the three lease options. For example, she figures that the Forno Saab lease will cost her $10.764 if she drives 12,000 miles per year. $12.114 if she drives 15,000 miles per year, or $13,464 if she drives 18,000 miles per year. a. What is the decision, and what is the chance event? b. Construct a payoff table for Amy's problem. c. If Amy has no idea which of the three mileage assumptions is most appropriate, what is the recommended decision (leasing option) using the optimistic, conservative, and minimax regret approaches? d. Suppose that the probabilities that Amy drives 12,000,15,000, and 18,000 miles per year are 0.5,0.4, and 0.1 , respectively. What option should Amy choose using the expected value approach