Tutorial 5 - Decision Analysis (Part 2) Original

By using the definition evpiexpected value with

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Unformatted text preview: s question about the return of Fund A in a good economy. It could be higher or lower than $10,000. What value for this would cause a person to be indifferent between Fund A and Fund B (i.e., the EMV(Fund A) and EMV (Fund B) would be the same)? Let X = Payoff for Fund A in a good economy EMV (Fund A) = EMV (Fund B) X (0.2) + 2,000(0.3) + (-5,000)(0.5) = 2,400 0.2X = 4,300 X = 21,500...
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