Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
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
Illustration
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?
Solution
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
(i)
Contract (ii)
Portfolio(iii)
Contract (i) x (ii)
Portfolio (i) x (iii)
Ei
0.6
7
3.5
4.2
2.1
E2
0.4
4
2
1.6
0.8
EMV
5.8
2.9
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
Multiply following and write the answers in standard form. (a) 7 i ( -5 + 2 i ) (b) (1 - 5 i ) ( -9 + 2 i ) Solution (a) Thus all that we have to do is distribu
A certain bank pays 3.4% interest per year for a certificate of deposit, or CD. What is the total balance of an account after 18 months along with an initial deposit of $1,250?
how do you you find 40% if you 35 out of 40
I figured out the volume and the width, but I have no idea how to use that information to get the height and the length!
determine the square of the following numbers ... a.8 b.13 c.17 and d.80
solve a trader purchases coffee at the rate of Rs. 350 per kg and mixes it with chicory bought at the rate of Rs.750 per kg in the ratio 5:2.If he sells the mixture at the rate of
Give a Definition of Perimeter and Area? Perimeter is the distance around a flat (2-dimensional) shape. Area is the amount of space taken up by a flat (2-dimensional) shape. is
Two angles are supplementary. The evaluate of one is 30 more than twice the measure of the other. Determine the measure of the larger angle. a. 130° b. 20° c. 50° d. 70
Q. What is a Negative Number? Ans. Negative numbers are very important in mathematics. We say that positive and negative numbers are opposites of one another. Here
Use the graph of y = x2 - 6x to answer the following: a) Without solving the equation (or factoring), determine the solutions to the equation x 2 - 6x = 0 usi
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd