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
Submit your working in (neat) handwritten form (do not type up your solutions). For the plots that you generate in Maple or Matlab, you can print them out and attach them at the en
how to add
Steps for Alternating Series Test Suppose that we have a series ∑a n and either a n = (-1) n b n or a n = (-1) n+1 b n where b n > 0 for all n. Then if, 1.
Hi,Is this free?
find the composition of the simple harmonic motion of the same period in the perpendicular directions
need answer to integers that equal 36
34+8-76=
Q. Mean and Standard Deviation? Ans. The normal distribution is totally described if we know the average and standard deviation. - the population mean of the distribu
How much greater is 0.0543 than 0.002? To ?nd out how much greater a number is, you required to subtract; 0.0543 - 0.002 = 0.0523. For subtract decimals and line the numbers up
what is 36 percent as a fraction in simplest form
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