📢 Too many exams? Don’t know which one suits you best? Book Your Free Expert 👉 call Now!
  • google app store apple app store
    • ✖

      Question

      Suppose X has income of Rs.500. He wants to maximise his

      expected benefit Z1/2 where Z is his money earned. He has two options, 1. Do not invest 2. Investment full amount in company A with payoff of 1500 with 50% probability and Rs.0 with 50% probability. What is the maximum expected benefit out of the two options?
      A 19.36 Correct Answer Incorrect Answer
      B 22.36 Correct Answer Incorrect Answer
      C 38.73 Correct Answer Incorrect Answer
      D 44.72 Correct Answer Incorrect Answer

      Solution

      Expected benefits = Z1/2 When he does not invest, EB= (500)1/2 = 22.36 When he does invest in A, EB = ½ (1500)1/2 + ½ (0)1/2 = ½ (38.73) = 19.36 So, Max EB = 22.36

      Practice Next
      More Research Questions
      ask-question