Home Work Assignment – Chapter 3

Show your decision process by drawing the

decision tree with calculated EMVs for all nodes.

(a) What decision would maximize expected profit?

Show your work.

(b) What is the maximum amount that should be

paid for a perfect forecast of the economy?

Show your work.

(a) Develop an opportunity loss table. The table

should include a column showing the

maximum loss for each alternative.

(b) What is the minimax regret decision?

(a) Develop an opportunity loss table. The table

should include a column showing the

maximum loss for each alternative.

(b) What is the minimax regret? What is the

minimax regret decision?

(a) What is the maximum expected profit? What

decision would maximize the expected profit?

Show your work.

(b) What is the maximum amount that should be

paid for a perfect forecast of the economy?

Show your work.