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Use the information in the following table to answer questions (i) and (iii). Table 3 Alternative A Alternative B Alternative C Outcome Probability Outcome Probability

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Use the information in the following table to answer questions (i) and (iii). Table 3 Alternative A Alternative B Alternative C Outcome Probability Outcome Probability Outcome Probability 4 0.2 5 0.1 6 0.4 6 0.3 6 0.3 7 0.3 8 0.4 7 0.2 8 0.2 10 0. 1 8 0.3 10 0.1 9 0. 1 (i) Use First Order Stochastic Dominance (FOSD) and Second Order Stochastic Dominance (SOSD) to rank the alternatives A, B and C. That is, which of the three alternatives is the most desirable and which one is least desirable? [6] (ii) Which condition or criterion, the FOSD or the SOSD, would you use if the cumulative distribution function (CDFs) were intersecting? Explain your answer. [3] (iii) Assuming a utility function given by: U(W) = VW , rank the alternatives A, B and C using the expected utility theory. [4]

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