Question

Question 47 2.75 points Save Answer Exhibit 14.3 The following questions are based on the information below. An investor is considering 4 investments, A, B, C and leaving his money in the bank. The payoff from each investment is a function of the economic climate over the next 2 years. The economy can expand or decline. The following payoff matrix has been developed for the decision problem. The investor has estimated the probability of a declining economy at 70% and an expanding economy at 30%. A B с D E F G | Η Payoff Matrix Regret Matrix 3 Economy Economy 4 Investment Decline Expand EMV Investment Decline EOL 5 A -10 90 A 6 B 20 50 B с 40 45 с 8 Bank 15 20 Bank 9 10 Probability 0.7 0.3 Probability 0.7 0.3 Refer to Exhibit 14.3. What is the expected monetary value of Investment A? o a. 34. o b. 15. O c. 20. o d. 30.

93

Answer 1

47. Answer: c. 20

Expected Monetary Value (EMV) of Investment A = ( Payoff of A during Declining Economy x Probability of Declining Economy) + ( Payoff of A during Expanding Economy x Probability of Expanding Economy)

= (-10 x 0.7) + ( 90 x 0.3)

= -7 + 27

= 20

98. Answer: a. Phantom (dummy) arcs are added

To represent multiple arcs with a common start and finish nodes in AOA networks, phantom or dummy activity arcs are added.  Dummy activities have zero completion time and they represent precedence relationships that cannot be represented using the activities in an AOA network.

93. Answer: c. the start time for the project

Time zero represents the start time of a project.