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Maldaner_Wk01HW_Chapter 04

# Maldaner_Wk01HW_Chapter 04 - Rsponse Fly-By(A2 has the...

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Divo Maldaner - S.I. # 005897129 Question 4.9 You are considering three investimet alternatives for some spare cash: Boom Bust N1 N2 0.6 0.4 Old Rel. A1 2000 500 1250 1200 200 1400 Fly-By A2 6000 -5000 500 3600 -2000 1600 A2 Maximazes expected value Federally A3 1200 1200 1200 720 480 1200 Set a payoff table (Decision Matrix) for this problem, and show which alternative maximizes expected value. Decision Matrix 0.6 0.4 Expected Value Old Rel. A1 1200 200 1400 Fly-By A2 3600 -2000 1600 Federally A3 720 480 1200 Response: Evaluating the decision matrix above, Fly-By (A2) maximizes expected value = 1600 > 1400 > 1200\ Question 4.10 If you have no idea of the economic probalilities in Question 4.9, what would be your decision based on uncertainty using: a) Maximax Max Values Old Rel. A1 2000 500 2000 Fly-By A2 6000 -5000 6000 Federally A3 1200 1200 1200
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Unformatted text preview: Rsponse: Fly-By (A2) has the maximax value of the max values b) Maximin Max Values Old Rel. A1 2000 500 2000 Fly-By A2 6000-5000 6000 Federally A3 1200 1200 1200 Response: Federally (A3) has the minimum value of the max values c) Equally likely Median Values Old Rel. A1 2000 500 1250 Fly-By A2 6000-5000 500 Federally A3 1200 1200 1200 Response: Old Rel. (A1) has the max value of the medeans d) Minimax regret assumptions Select the Max value from each investimet Old Rel. A1 2000 500 Fly-By A2 6000-5000 Federally A3 1200 1200 Deduct the max value from each line and identify the Max values Old Rel. A1 4000 700 Fly-By A2 6200 Federally A3 4800 Response: Old Rel. (A1) carries the Minimax regret assumption....
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