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Q:3-20 Mickey Lawson is considering investing some money that he inherited. The following payoff table gives the profits that would be realized during the next
Q:3-20 Mickey Lawson is considering investing some money that he inherited. The following payoff table gives the profits that would be realized during the next year for each of three investment alternatives Mickey is considering: STATE OF NATURE DECISION ALTERNATIVE Stock market GOOD ECONOMY 80,000 30,000 23,000 0.5 POOR ECONOMY -20,000 20,000 23,000 Bonds CDs Probability 0.5 (a) What decision would maximize expected profits? (b) What is the maximum amount that should be paid for a perfect forecast of the economy
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