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
If α, β are the zeros of the polynomial x 2 +8x +6 frame a Quadratic polynomial whose zeros are a) 1/α and 1/β b) 1+ β/α , 1+ α/β. Ans. P(x) = x 2 +8x +6 α + β = -8
Test of homogeneity This is concerned along with the proposition that several populations are homogenous along with respect to some characteristic of interest for example; one
The Definition- The definition of the Laplace transforms. We will also calculate a couple Laplace transforms by using the definition. Laplace Transforms- As the earlier secti
Proof of Limit Comparison Test As 0 Now, as we know that for large enough n the quotient a n /b n should be close to c and thus there must be a positive integer
Draw a line segment AB of length 4.4cm. Taking A as centre, draw a circle of radius. 2cm and taking B as centre, draw another circle of radius 2.2cm. Construct tangents to each cir
Here we know x can only be 1 or -1. so if it is 1 ans is 2. if x is -1, for n even ans will be 2 if x is -1 and n is odd ans will ne -2. so we can see evenfor negative x also an
in a veggie mix the ratio of cups of carrots to cups of broccolie is 4 to 5 if you made this party mix larger how many cups of carrots would be needed to mix with fo cups of brocco
in triangle abc ab=ac and d is a point on side ac such that bc*bc=ac*cd. prove that bc=bd
Optimization is required in situations that frequently arise in finance and other areas. Organizations would like to maximize their profits or minimize thei
Parallel to the line specified by 10 y + 3x= -2 In this case the new line is to be parallel to the line given by 10 y ? 3x ? -2 and so it have to have the similar slope as this
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