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
Standardization of Variables - Before we use the general distribution curve to determine probabilities of the continuous variables, we require standardizing the original units
What are the key features of Greek Mathematics? How does the emphasis on proof affect the development of Greek Mathematics?
Example: If c ≠ 0 , evaluate the subsequent integral. Solution Remember that you require converting improper integrals to limits as given, Here, do the integ
A number of the form x + iy, where x and y are real and natural numbers and is called as a complex number. It is normally given by z. i.e. z = x + iy, x is called as the real part
Division of complex number Now, we gave this formula a long with the comment that it will be convenient while it came to dividing complex numbers so let's look at a couple of e
Circle Well, let's recall just what a circle is. A circle is all the points which are the similar distance, r - called the radius, from a point, ( h, k ) - called the center. I
Example of Probability: Example: By using a die, what is the probability of rolling two 3s in a row? Solution: From the previous example, there is a 1/6 chance of
i would like answers to these questions i will give you as soon as possible
Write a program to find the area under the curve y = f(x) between x = a and x = b, integrate y = f(x) between the limits of a and b. The area under a curve between two points can b
I have some sample simulation and modeling practice questions using isee Stella software.
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