Question: 19 Mickey Lawson is considering investing some money that he inherited. The following payoff table gives the profits that would be realized during the next year for each of three investment alternatives Mickey is considering:

State of Nature

Table: Decision Good Poor

Alternative Economy Economy

Stock Market 80,000 - 20,000

Bonds 30,000 20,000

CDs 23,000 23,000

Probability 0.5 0.5

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(a) What decision would maximize expected profits?

(b) What is the maximum amount that should be paid for a perfect forecast of the economy?