Exhibit 14.1
The following questions are based on the information below.
An investor is considering 4 investments, A, B, C and leaving his money in the bank. The payoff from each investment is a function of the economic climate over the next 2 years. The economy can expand or decline. The following payoff matrix has been developed for the decision problem.
-Refer to Exhibit 14.1. What decision should be made according to the maximax decision rule?
A) A
B) B
C) C
D) Bank

Question

Exhibit 14.1
The following questions are based on the information below.
An investor is considering 4 investments, A, B, C and leaving his money in the bank. The payoff from each investment is a function of the economic climate over the next 2 years. The economy can expand or decline. The following payoff matrix has been developed for the decision problem. 
-Refer to Exhibit 14.1. What decision should be made according to the maximax decision rule?
A) A 
B) B 
C) C 
D) Bank

Quizplus · Accepted Answer

The maximax decision rule suggests choosing the decision alternative with the highest possible payoff in the best-case scenario. In this case, the highest possible payoffs are obtained by choosing investment A in both expansion and decline scenarios, making it the best choice according to the maximax decision rule.

Exhibit 14.1 The Following Questions Are Based on the Information Below