A4Answer b&c QUESTION B2A financial Analyst wants to evaluate the feasibility of his investment options. The followingpayoff table shows the profit ($Million) of each investment option under various futureeconomic environments:Payoff (profit) tableEconomic environmentInvestment optionGoodFairPoor258-15Y2015-1018510According to expert's predictions the probability of the economic environments are as below:0.40 for good economic environment, 0.50 for fair economic environment, and 0.10 for pooreconomic environment.swer all the questions ow by showing your workings where necessary.(а)Determine the best instment option using the following decision approach.Мaximin(ii)MimaxAnswer B and CHurwicz: when coefficien antimism a = 0.4(iv)ithout further calculation, what would be tnesision for the cases: a = 1 and(b)By using the payoff table above, construct an opportunity loss (regret) table.Determine the best option by using Minimax regret approach.Determine the best portfolio by using Expected Opportunity Loss approach.(c)Determine the portfolio which will give the best expected profits.Without further calculation, write down the expected value of perfect information(EVPI). Interpret the meaning of EVPI.

QUESTION B2 A financial Analyst wants to evaluate the feasibility of his investment options. The following payoff table shows the profit ($Million) of each investment option under various future economic environments: Payoff (profit) table Economic environment Investment option Good Fair Poor X 25 8 -15 Y 20 15 -10 18 5 10 According to expert's predictions the probability of the economic environments are as below: 0.40 for good economic environment, 0.50 for fair economic environment, and 0.10 for poor economic environment. swer all the questions ow by showing your workings where necessary. (a) Determine the best instment option using the following decision approach. (1) Маximin (ii) Ma imax Answer B and C Hurwicz: when coefficienm ntimism a = 0.4 (iv) ithout further calculation, what would be tun ision for the cases: a =1 and a = (b) By using the payoff table above, construct an opportunity loss (regret) table. Determine the best option by using Minimax regret approach. Determine the best portfolio by using Expected Opportunity Loss approach. (c) Determine the portfolio which will give the best expected profits. Without further calculation, write down the expected value of perfect information (EVPI). Interpret the meaning of EVPI.

QUESTION B2 A financial Analyst wants to evaluate the feasibility of his investment options. The following payoff table shows the profit ($Million) of each investment option under various future economic environments: Payoff (profit) table Economic environment Investment option Good Fair Poor X 25 8 -15 Y 20 15 -10 18 5 10 According to expert's predictions the probability of the economic environments are as below: 0.40 for good economic environment, 0.50 for fair economic environment, and 0.10 for poor economic environment. swer all the questions ow by showing your workings where necessary. (a) Determine the best instment option using the following decision approach. (1) Маximin (ii) Ma imax Answer B and C Hurwicz: when coefficienm ntimism a = 0.4 (iv) ithout further calculation, what would be tun ision for the cases: a =1 and a = (b) By using the payoff table above, construct an opportunity loss (regret) table. Determine the best option by using Minimax regret approach. Determine the best portfolio by using Expected Opportunity Loss approach. (c) Determine the portfolio which will give the best expected profits. Without further calculation, write down the expected value of perfect information (EVPI). Interpret the meaning of EVPI.

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter9: Decision Making Under Uncertainty

Section: Chapter Questions

Problem 30P

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