Exhibit 14.2
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 14.2. What formula should go in cell F5 of the Regret Matrix above to compute the regret value?
A) =B$5-MAX(B$5:B$8)
B) =MAX(B$5:B$8)-MAX(B5)
C) =MAX(B$5:B$8)-MIN(B$5:B$8)
D) =MAX(B$5:B$8)-B5

Question

Exhibit 14.2
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 14.2. What formula should go in cell F5 of the Regret Matrix above to compute the regret value?
A) =B$5-MAX(B$5:B$8) 
B) =MAX(B$5:B$8)-MAX(B5) 
C) =MAX(B$5:B$8)-MIN(B$5:B$8) 
D) =MAX(B$5:B$8)-B5

Quizplus · Accepted Answer

The correct formula to compute the regret value in a decision matrix is to subtract the actual value of the decision (B5) from the maximum value of all possible decisions in the same scenario (MAX(B$5:B$8)). This reflects the "regret" of not choosing the best possible option.

Exhibit 14.2 The Following Questions Are Based on the Information Below