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5. [5 marks] Suppose you have the following payoff table. Alternatives States of Nature A (0.5)...

5. [5 marks] Suppose you have the following payoff table.

Alternatives

States of Nature

A (0.5)

B (0.5)

1

$650,000

$450,000

2

$200,000

$475,000

3

$300,000

$250,000


Draw a decision tree. Include the expected monetary values and prior probabilities for each state of nature. Show all of your work. Make sure each branch is appropriately labelled. Based on your expected monetary values, which alternative do you choose (answer in a single sentence)?

Math   Statistics-And-Probability   
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