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
In multiplication and division we have 1) Suggested ways of conveying the meaning of multiplication and division to children. These operations have to be taught as an activit
E - L - P - S : Has the title of this section stumped you? Children, similarly, don't understand new symbols that are thrust upon them without giving them an adequate grounding. Y
1/sec A+tan A =1-sin A /cos A
What is a characteristic of operation
824 divided by 4
Q. How to Add Mixed Numbers? Ans. If you have to add mixed numbers, you might try this method first: First rewrite the mixed number as a whole number plus a fracti
A vertical post stands on a horizontal plane. The angle of elevation of the top is 60 o and that of a point x metre be the height of the post, then prove that x = 2 h/3 .
Example of Probability Illustration: It has been determined that the probability density function for the wait in line at a counter is specified by, In which t is the
Adding Rational Expressions with Common Denominators To add or subtract fractions or rational expressions with common denominators, all you do is add or subtract the numerators
Find the present value of an ordinary annuity which has payments of 2300 per year for 15 years at 6% compounded annually
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