I need help with the blank ones please. Thank you Christaker is considering transitioning...

70.2K

Verified Solution

Question

Finance

imageimageI need help with the blank ones please. Thank you

Christaker is considering transitioning to a new job next year. He will either keep his current job which pays a net income of $70,000 or switch to a new job. If he changes jobs, his net income will vary depending on the state of the economy. He estimates that the economy will be strong with 20% chance ($90,000 net income), Average with 40% chance ($77,000 net income), or Weak with 40% chance ($56,000 net income). Part A 1. What is the best expected value for Christaker and the corresponding decision using the Expected Monetary Value approach? $ 71200 Change job om 2. What is the expected value of perfect information (EVPI)? $ Part B Christaker can hire Sandeep, a mathematical economist, to provide information regarding the state of the economy next year. Sandeep will either predict a Good or Bad economy, with probabilities 0.4 and 0.6 respectively. If Sandeep predicts a Good economy, there is a 0.32 chance of a Strong economy, and a 0.62 chance of an Average economy. If Sandeep's prediction is Bad, then the economy has a 0.5 chance of being Weak and 0.36 chance of being Average. 1. If Sandeep predicts Good economy, what is the expected value of the optimal decision? $ 79900 2. If Sandeep predicts Bad economy, what is the expected value of the optimal decision? $ 3. What is the expected value with the sample information (EVwSI) provided by Sandeep? $ 4. What is the expected value of the sample information (EVSI) provided by Sandeep? $ 5. If cost of hiring Sandeep is $2010, what is the best course of action for Christaker? Hire Sandeep; cost is less than EVSI OM 6. What is the efficiency of the sample information? Round % to 1 decimal place. %

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students