A) COnstruct an excel sheet to compute the expected value (costs) to determine w
ID: 3150816 • Letter: A
Question
A) COnstruct an excel sheet to compute the expected value (costs) to determine whether or not Katherine should purchase insurance. No Accident (.80) Accident (.20) Purchase Insurance $700 $700 Don't Purchase Insurance $0 $40,000 B) What is the expected value with perfect information? C) What is the expected value without perfect information? D) Given B and C, was is the EVPI? E) To improve the process of decision making, additional information is supplied, as to the conditional probabilities of an or no accident given that Sam buys insurance. Calculate by spreadsheet the revised probabilities of ACCIDENT and NO ACCIDENT Prior Probability Conditional Probability No Accident .80 .50 Accident .20 .35 F) Given the revised probability, determine the expected value of sample information G) If the fee for additional information is $4,000, should you buy the additional information? I need help with F and G
Explanation / Answer
INformation you prvide in part E is not clear, words are ambiguous.
No Accident Accident EMV Purchase Insurence $700 $700 $700 Don't purchase Insurance $0 $40,000 $800 Probability 0.80 0.20 EMV(PI) = 700*0.80+700*0.20=$700 EMV(Don’t PI)= 0*.80+40000*0.20=$800 So Kathrine should purchase Insurance. EVPI=EVwPI-EVwoPI =700-140=$560 EVwoPI= EMV= $700 EVwPI=0*.80+700*.20=$140Related Questions
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