Question 2 CWD Investments Ltd must decide between three alternative investments stocks and bonds and the money market. The return for each investment, given three future economic conditions, is shown in the following payoff table: Investment Improve Steady Decline Stocks $10,000 $6,000 ($1,000) Bonds 9,000 6,500 2,000 Money market 7,000 4,500 3,000 (a) Which alternative should CWD choose under the maximax criterion? (1 mark) (b) Which option should CWD choose under the maximin criterion? (1 mark) (c) Which option should CWD choose under the LaPlace criterion? (2 marks) (d) Which option should CWD choose with the Hurwicz criterion with = 0.2? (2 marks) (e) Using a minimax regret approach, what alternative should CWD choose? (4 marks) (f) After reading about economic predictions, CWD has assigned the probability that the economy will improve , or be steady or decline at 20%, 50% and 30 %. Using expected monetary values, what option should be chosen and what is that optimal expected value? (4 marks) (g) What is the most that CWD should be willing to pay for additional information? Use Expected Regret (3 marks) (h) Use the alternative method to verify EVPI (3 marks)