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A city manager is considering three strategies for a $1,000 investment. The probable returns are estimated as follows:
Strategy 1: A profit of 5,000 with a probability of 0.20 and a loss of $1,000 with a probability of 0.80.
Strategy 2: A profit of $2,000 with a probability of 0.40, a profit of $500 with a probability of 0.30 and a loss of $1,000 with a probability of 0.30.
Strategy 3: A certain profit of $400.
1b. The city manager is going to pick only 1 strategy, and low variance is an important consideration for the manager. Based on variance, which of the three strategies would you definitely advise against? Provide specific (numeric) details to support your answer.
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