Katie has $220,000 to invest. there are three possible investment options: The first option is a savings account at the local Bank. This savings account has a 2.5% return rate regardless the condition of the future economy. The second option is a technology stock with a return rate of 9%, 7%, or -18%, depending on whether the future economy condition is good, average, or poor, respectively. The third option is a mutual fund with a return rate of 5%, 2%, or 1%, depending on whether the future economy condition is good, average, or poor, respectively. A business analyst at a well-respected business journal estimates the probability of a good, average, or poor future economy to be 25%, 35%, and 40%, respectively.

(Question 1) Construct a payoff table (in dollars) for Katie.

(Question 2) Explain which investment option Katie should select according to the optimistic approach.

(Question 3) Create a regret table for Katie.

(Question 4) Explain which investment option Katie should select according to the minimax approach.

(Question 5) Explain which investment option Katie should select according to the expected value approach.