Formula Maximax

5:

A) EXCEL

B) According to the formula maximax decision rule, investing in the mutual fund would be the best decision because if the market is good the investment will have a higher maturity rate.

C) According to the formula maximin decision rule, he should invest in the CD because he could invest at any time and it would not affect the maturity.

D) According to the formula minimax regret decision rule, he should invest in the CD because that by choosing this option, he would minimize his loss, or he would get the least regret.

E) According to the EMV decision rule, he should invest in the mutual fund because by seeing the same decision repeatedly, we will always select this.

F) For EOL, our opportunity loss would be 150 if we choose the same decision alternative

G) Philip should be willing to pay 150 to obtain a market forecast of 100%

9:

 A) According to maximax rule one wants to build large and hope the market demand is high.

B) According to maximin rule one wants to build small and the market demand can be low, medium, or high.

C) According to the minimax regret rule we would choose to build medium because that leaves us with the least regret.

D) According to EMV rule would suggest that for a given decision alternative indicates the average payoff would be 434.75 if we encounter the same decision problem repeatedly and we will always select this alternative

E) According to EOL our opportunity loss would be 171.75 if we chose the same decision alternative

10:

A) EXCEL:

B)  Here I turned to ex 9 and the EMV rule would give me that for a given decision alternative indicates the average payoff would be without the consultant assistance: 434.75

20: 

A) EXCEL

B) The third bid at the ref passes is showing that option three is the best one to pick; even though, at the beginning we could see that it was showing that option 1 was the best one to pick.

C)