Question

Which of the following is a requirement to be able to compute expected monetary value?

a) The probability of each state of nature is known.
b) Each state of nature is equally likely to occur.
c) The probability of each decision alternative is known.
d) Each decision alternative needs at least two states of nature.

Answer 1

the answer is: A) The probability of each state of nature is known

Step-by-step explanation:

In order to compute the expected monetary value you must first have the probability of the event or events happening (or you can call them states of nature). Then you should calculate the impact (possible gains or losses) for every event. Finally you multiply the probability by the impact, and the result is the expected monetary value.