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PART 2 The management team wants to decide whether or not to hire an economist, Dr. Icarus Crane, to predict future interest rates. The economist

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PART 2 The management team wants to decide whether or not to hire an economist, Dr. Icarus Crane, to predict future interest rates. The economist can only predict if there will be high interest rates or low interest rates. In the past, when interest rates were low, the economist predicted high interest rates 10% of the time. When interest rates were moderate, the economist predicted high interest rates 40% of the time when interest rates were high, the economist predicted high interest rates 80% of the time. The economist is charging $100,000. Using the information above 5) Draw a decision tree for the scenario above 6) Calculate posterior probabilities for the tree 7) Calculate the expected value of Sample Information (EVSI) 8) Calculate the efficiency of the sample PART 2 The management team wants to decide whether or not to hire an economist, Dr. Icarus Crane, to predict future interest rates. The economist can only predict if there will be high interest rates or low interest rates. In the past, when interest rates were low, the economist predicted high interest rates 10% of the time. When interest rates were moderate, the economist predicted high interest rates 40% of the time when interest rates were high, the economist predicted high interest rates 80% of the time. The economist is charging $100,000. Using the information above 5) Draw a decision tree for the scenario above 6) Calculate posterior probabilities for the tree 7) Calculate the expected value of Sample Information (EVSI) 8) Calculate the efficiency of the sample

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