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Pane 2- Debbie Gibson is considering three investment options for a small inheritance that she has just received - stocks, bonds, and money market. The return on her investment will depend on the performance of the economy, which can be strong, average, or weak. The returns for each possible combination are shown in the following table: Investment Strong Average Weak Stocks 12% 6% -10% Bonds 7% 4% 1% Money market 4% 3% 2% Assume that Debbie will choose only one of the investment options. a) Which investment should Debbie choose if she uses the maximax criterion? b) Which investment should Debbie choose if she uses the maximin criterion? c) Which investment should Debbie choose if she uses the equally likely criterion? d) Which investment should Debbie choose if she uses the criterion of realism with a = 0.52 e) Which investment should Debbic choose if she uses the minimax regret criterion? Page 2 of 2 405 words LE Filme Home insert Draw Page Layou Arial v 10 ' ' == ab & Wrap Text Paste yv a.A Merge & Center $ E11 4 Xv fx B D E F G H K L M N 1 2 PAYOFFS 3 Alternatives 4 Stocks 5 Bonds 6 Money Market Outcomes (a) MaxImax (b) Maximin (c) Equally Likely Strong Average Weak Maximum Choice Minimum Choice Average Choice (d) Hurwicz Realism Choice Outcomes Minimax Strong Average Woak Maximum Choice 8 9 REGRET 10 Alternatives 11 Stocks 12 Bonds 13 Money Market 14 15 10 17 18 19 20 21 22 23 24

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