Use the below payoff table with four mortgage options to answer the following question(s).
-Which of the following decisions is chosen in a minimax strategy?
A)the decision corresponding to the maximum value of the largest cost
B)the decision corresponding to the maximum value of the smallest cost
C)the decision corresponding to the minimum value of the smallest cost
D)the decision corresponding to the minimum value of the largest cost

Question

Use the below payoff table with four mortgage options to answer the following question(s). 
-Which of the following decisions is chosen in a minimax strategy?
A)the decision corresponding to the maximum value of the largest cost 
B)the decision corresponding to the maximum value of the smallest cost 
C)the decision corresponding to the minimum value of the smallest cost 
D)the decision corresponding to the minimum value of the largest cost

Quizplus · Accepted Answer

In a minimax strategy, the decision chosen is the one that minimizes the maximum possible loss. Looking at the payoff table, the minimum value of the largest cost corresponds to the option of a 15 year fixed rate mortgage with a 20% down payment. Therefore, the best choice is option D - 15 year fixed rate mortgage with 20% down payment.

Use the Below Payoff Table with Four Mortgage Options to Answer