In the next year, Allen should make decision whether to invest $10,000 in stock market or in certificate of deposit (CD) at interest rate of 9%. If market is good, Allen thinks that he could get 14% return on his money. With fair market, he expects to get 8% return. If market is bad, he will most probably get no return at all-in other words, return would be 0%. Allen evaluates that probability of good market is 0.4, probability of fair market is 0.4, and probability of bad market is 0.2, and he wants to maximize his long-run average return.
(a) Create the decision table for this problem.
(b) What is the best decision?