Using the payoff table ($ million) is shown below for two possible actions, if the probabilities for future mortgage interest rates going up, staying about the same, and going down are 0.35, 0.50 and 0.15, respectively, the best decision according to the expected value approach is to build ________________________ .

A)the active retirement community if interest rates go down
B)the active retirement community
C)townhouses/condominiums if interest rates go down
D)townhouses/condominiums
E)either the active retirement community or townhouses/condominiums

Question

Using the payoff table ($ million) is shown below for two possible actions, if the probabilities for future mortgage interest rates going up, staying about the same, and going down are 0.35, 0.50 and 0.15, respectively, the best decision according to the expected value approach is to build ________________________ .

A)the active retirement community if interest rates go down 
B)the active retirement community 
C)townhouses/condominiums if interest rates go down 
D)townhouses/condominiums 
E)either the active retirement community or townhouses/condominiums

Quizplus · Accepted Answer

The Answer of Using the payoff table ($ million) is shown below for two possible actions, if the probabilities for future mortgage interest rates going up, staying about the same, and going down are 0.35, 0.50 and 0.15, respectively, the best decision according to the expected value approach is to build ________________________ .

A)the active retirement community if interest rates go down 
B)the active retirement community 
C)townhouses/condominiums if interest rates go down 
D)townhouses/condominiums 
E)either the active retirement community or townhouses/condominiums

Using the Payoff Table ($ Million) Is Shown Below for Two