Expected value from this risk event
Submitted by keane234 on Mon, 08/18/2014 - 19:53
Hi, I don't understand why following question's answer is D. Can anyone tell me why it is D or is there any reference I can check?
Question;
Given the information in the following table, what is the expected value from this risk event? Probability Result
.4 -10,000
.3 -7,500
.2 -5,000
.1 +2,500
-10,000.
- 7,500.
+ 2,500.
-7,000.
Answer: D
Forums:
Sandy10001
Wed, 08/20/2014 - 19:58
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Unsure
Please clarify the question.
ruthkim
Wed, 08/20/2014 - 20:46
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Answer is D
This is an EMV (Expected Monetary Value) question. For this, all you do is sum up (or add together) the product of "Probability" x "Result" (or $ Impact of the Risk).
Therefore the answer is..
(0.4 x -10k) + (0.3 x -7.5k) + (0.2 x -5k) + (0.1 x 2.5k) = -7,000.
Frances Tessler
Wed, 08/20/2014 - 21:02
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P&I
I agree $7000