The expected monetary value method, Mathematics

The expected monetary value method

The expected pay off as profit associated with a described combination of act and event is acquired by multiplying the pay off for that act and event combination by the probability of occurrence of the described event. The expected monetary value or EMV of an act is the sum of all expected conditional profits associated along with that act


A manager has a choice among

i.        A risky contract promising of shs 7 million along with probability 0.6 and shs 4 million along with probability 0.4 and

ii.      A diversified portfolio consisting of two contracts along with independent outcomes each promising Shs 3.5 million along with probability 0.6 and shs 2 million along with probability 0.4

Could you arrive at the decision by using EMV method?


The conditional payoff table for the problem may be constructed as given below:

(Shillings in millions)

Event Ei

Probability (Ei)

Conditional pay offs decision

Expected pay off  decision



Contract (ii)


Contract (i) x (ii)

Portfolio (i) x (iii)




















By using the EMV method the manager must go in for the risky contract that will yield him a higher expected monetary value of shs 5.8 million

Posted Date: 2/19/2013 2:45:49 AM | Location : United States

Related Discussions:- The expected monetary value method, Assignment Help, Ask Question on The expected monetary value method, Get Answer, Expert's Help, The expected monetary value method Discussions

Write discussion on The expected monetary value method
Your posts are moderated
Related Questions
What are some of the interestingmodern developments in cruise control systems that contrast with comparatively basic old systems

Standard form of the line Let's begin this section off along a quick mathematical definition of a line. Any equation that can be written in the following form,

Concrete to Abstract :  Mathematics, like all human knowledge, grows out of our concrete experiences. Let us take the example of three-dimensional shapes. Think about how you came

I gave my niece a whole heap of beads and showed her how to divide it up into sets of 10 beads each. Then I showed her how she could lay out each set of I0 beads in a line, and cal

How did the teacher get 30 + 12 + 1.5 for the equation of volume of rectangular prism measuring L=14.4, W= 3, and H= 5? Formula given was V= Bh. My answer was x 3.

How does finding the unit rate help make smart decisions?

The unit circle will be parametrized by (cosw, sinw). Provide a point on it, the region cut out by circle, the x-axis, and the line from the origin to this point has covered area w

1. Consider the model Y t = β 0 + β 1 X t + ε t , where t = 1,..., n.  If the errors ε t are not correlated, then the OLS estimates of  β 0   and β

how many words can be formed from letters of word daughter such that each word contain 2vowles and 3consonant