Final answer:
The best decision when using the Expected Opportunity Loss (EOL) is the alternative with the smallest EOL value. This option minimizes the expected cost of making a wrong decision, given the probabilities of various outcomes.
Step-by-step explanation:
When using the Expected Opportunity Loss (EOL) as a decision criterion, the best decision is the alternative with the smallest EOL value. The EOL is a measure used in decision-making under uncertainty, which reflects the expected amount of loss associated with not choosing the best alternative. Essentially, it represents the average cost of being wrong, taking into consideration the probabilities of various states of nature occurring. The option with the smallest EOL minimizes the expected cost of a decision error.
If we base the decisions on the given information, we would consider the alternative with the smallest potential loss, which could indeed be the third investment due to its lowest probability of loss. However, it's important to calculate the exact EOL for each investment option using the probable losses and the probabilities of occurrence. The alternative that yields the smallest EOL would be the most optimal choice.
To calculate the EOL for each investment, a decision matrix would typically be used where each probable loss for each investment is weighted by its probability. The investment with the lowest cumulative expected loss would be the preferred option (the smallest EOL value).