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
Kevin ran 6.8 miles yesterday and 10.4 miles presently. How many more miles did he run today? To ?nd out how many more miles he ran today, subtract yesterday's miles from today
Brian is a real estate agent. He forms a 2.5% commission on each sale. During the month of June he sold three houses. The houses sold for $153,000, $299,000, and $121,000. What was
Fundamental Theorem of Calculus, Part II Assume f(x) is a continuous function on [a,b] and also assume that F(x) is any anti- derivative for f(x). Hence, a ∫ b f(x) dx =
A group of 120 men had food for 200 days.After 5 days , 30 men die of disease.How long will the remaining food last
captial budgeting
base also called what
Calculate the slope of the line: Example: calculate the slope of the line whose equation is y = 2x + 3 and whose y-intercept is (0,3). Solution: y =
Equation of line joining(0,0)and point of intersection of X2+Y2+2XY=4 , 3x2+5y2-xy=7 is solution) The two equations above represent pair of straight lines. We can complete the sq
Q. Example of negative number? If you take an elevator 8 stories down , what would be the opposite of this? The opposite would be that you take the elevator 8 stories up .
Integration by Parts -Integration Techniques Let's start off along with this section with a couple of integrals that we should previously be able to do to get us started. Fir
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