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
What is the largest number (in decimal) that can be made with 6 bits?
#stioquen..Store A is advertising a sale that will reduce prices on all merchandise by 15%. Store B is advertising a sale that will reduce prices on all merchandise by one over fiv
What is Angle Pairs in Parallel Lines ? Next, we introduce several angle pairs formed by transversals which are very important in our study of geometry. Alternate interior an
Calculate the area and perimeter of a parallelogram: Calculate the area and perimeter of a parallelogram with base (b) = 4´, height (h) = 3´, a = 5´ and b = 4´. Be sure to in
how many words can be formed from letters of word daughter such that word contain 2vowles and 3consonant
Illustration of Rank Correlation Coefficient Sometimes numerical data such refers to the quantifiable variables may be described after which a rank correlation coefficient may
Determine the derivative of the following function by using the definition of the derivative. f ( x ) = 2 x 2 -16x + 35 Solution Thus, all we actually have to do is to pl
Non Zero Sum Games Recently there was no satisfactory theory either to describe how people should play non-zero games or to explain how they actually play that game Nigel Ho
2x + 3x
Find a minimum cost spanning arborescence rooted at r for the digraph shown below, using the final algorithm shown in class. Please show your work, and also give a final diagram w
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