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
1. A psychologist developed a test designed to help predict whether production-line workers in a large industry will perform satisfactorily. A test was administered to all new empl
For complex number z, the minimum value of |z| + |z - cosa - i sina|+|z - 2(cosa + i sina )| is..? Solution) |z| + |z-(e^ia)| + |z-2(e^ia)| we see.....oigin , e^ia , 2e^ia , f
The median - it is a statistical value which is usually located at the center of a given set of data that has been organized in the order of size or magnitude as illustrating,
Q. How to plot Line Graphs? Ans. Line graphs can be useful in analyzing data. They are particularly helpful when you are interpolating or extrapolating information from y
(a) Specify that the sum of the degrees of all vertices of a graph is double the number of edges in the graph. (b) Let G be a non directed gra
Define Euler Circuit and Euler Path. Which of the following graphs have an Euler circuit and Euler path.
As noted, Euler's method is little used in practice, as there are much better ways of solving initial value problems. By better, we mean, "able to achieve a result of the same prec
Find the value of p and q for which the system of equations represent coincident lines 2x +3y = 7, (p+q+1)x +(p+2q+2)y = 4(p+q)+1 Ans: a 1 = 2, b 1 = 3, c 1 = 7 a 2 =
All the integrals below are understood in the sense of the Lebesgue. (1) Prove the following equality which we used in class without proof. As-sume that f integrable over [3; 3]
In the given figure, ∠AEF=∠AFE and E is the mid-point of CA. Prove that BD/CD = BF/CE Ans: Draw CG ¦DF In ΔBDF CG ¦ DF ∴ BD/CD = BF/GF .............(1)
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