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
Definition Assume that f(t) is a piecewise continuous function. The Laplace transform of f(t) is denoted L{ f (t )} and defined by, There is an optional notation for L
Game Theory It is used to find out the optimum strategy in a competitive condition,While two or more competitors are engaged in making decisions, this may occupy conflict of in
Example of Decimal to Fraction Conversion: Example: Convert 18.82 to a mixed number. Solution: Step 1: 18.82 is 18 and 82 hundredths. 18.82 = 18(8
Evaluate following limits. Solution In this part what we have to note (using Fact 2 above) is that in the limit the exponent of the exponential does this, Henc
what is the formula to find a sequence on a string of numbers?
find a30 given that the first few terms of an arithmetic sequence are given by 6,12,18...
Short Cuts for solving quadratic equations
compute the monthly payment on a 30 year level payment mortagagesasuming an annual mortgages principal of $400000
Jackie invested money in two different accounts, one of that earned 12% interest per year and another that earned 15% interest per year. The amount invested at 15% was 100 more tha
Determine the Measurements of Segments and Angles Postulate 1.5 (The Distance Postulate) There is a unique positive number corresponding to every pair of points. Pos
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