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
A retired couple has up to $30000 to invest in fixed-income securities. Their broker recommends investing in two bonds: one a AAA bond yielding 8%; the other a B+ bond paying 12%.
#a invests Rs 15000IN COMPANY PAYING 10%WHEN Rs100 SHARE IS SOLD AT A PREMIUM OF Rs 20 after a yearASOLD SHARES AT Rs80 EACHAND INVESTEDPROCEEDS IN Rs75SHARES SELLING AT Rs 100 WZI
project assignment of page no.19 question no.2
Explain Histogramsin details? Another way to display frequencies is by using a histogram. The following is an example of a histogram using the data from the previous example:
draw the graph of following pair of linear equation:-2y=4x-6
The distance around a square photograph is 12.8 centimeters. What is the langth of each side of the fotograph?
How do you find the second minimum spanning tree of a graph? Find the second minimum spanning tree of the following graph. Ans: The second minimum spanning tree is acq
PLAY AND LEARN : Children can learn many basic mathematical concepts through games. They enjoy Mathematical concepts can be playing within familiar contexts. Their games also gen
Which of those territories never was a Venitian possesion? Cyprus Morea Crete Sicily
Changing The Base Of The Index For comparison reasons if two series have different base years, this is difficult to compare them directly. In such cases, it is essential to ch
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