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SRA 231 (10)
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Lecture

# PP-6.docx

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Department
Security & Rsk Analy
Course
SRA 231
Professor
N/ A
Semester
Spring

Description
PP6Expected Value Practice ProblemsAccompanies Unit 1Lesson 8NameMatthew CurtisDate 21014Problem 1Im trying to decide whether or not to attempt a repair on my old car or whether to have a dealer fix it Based on the options below determine the Probability Reward for each option by doing an expected value calculation No decision table is needed Note that for any given decision the probabilities of all outcomes must add up to 100 Calculate the EV for each DecisionChooseDecision A If I fix it there are three possible outcomes1I succeed in fixing the carburetor I estimate the cost at 1502I increase the cost by requiring the carburetor to be rebuiltI estimate this cost at 400 150 for my attempt and an additional250 which is the dealer cost to rebuild3I ruin the carburetor requiring a replacement I estimate the cost at 600 150 for my attempt plus 450 for replacement I am fairly confident in my ability so I rate my chances for the above outcomes as 50 for outcome 1 30 for outcome 2 and 20 for outcome 3 Do the Probability Reward Calculations1 Fix carburetor150 05752 Damage carburetor400 031203 Ruin carburetor60002120Total cost of Decision A If I fix it315Decision B On the other hand if the dealer fixes it Ill be out some amount of money an
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