Portfolio

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PROJA.DIAMOND.MAKWANA.xlsx
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QUESTIONS 1-4

E U
B 44 -29
N 24 -11
S 18 4
Prior P 0.28 0.72
IF FAV 0.71 0.29
IF UNFAV 0.2 0.8
P OF FAV 0.4
P OF UNFAV 0.6
QUESTION1 OPTIMISTIC APPROACH
OPTIMISTIC MAX
B 44
N 24
S 18
MAXIMAX 44 B
QUESTION2 CONSERVATIVE APPROACH
CONSERVATIVE MIN
B -29
N -11
S 4
MAXIMIN 4 S
QUESTION3 MINIMAX REGRET APPROACH
REGRET TABLE:
E U
B 0 33
N 20 15
S 26 0
P 0.28 0.72
MAX
B 33
N 20
S 26
MINIMAX 20 N
QUESTION4 EXPECTED OPPORTUNITY LOSS (EOL)
EOL USING THE REGRET TABLE ABOVE:
B 23.76
N 16.4
S 7.28
LEAST EOL 7.28 S

QUESTIONS 5-8

QUESTION5
EV(B) -8.56
QUESTION6
EV(N) -1.2
QUESTION7
EV(S) 7.92
QUESTION8
BEST EMV 7.92 S

QUESTIONS 9-12

QUESTION9
EVwPI 15.2
QUESTION10
EVPI 7.28
QUESTION 11
EV(B): X P(X) X*P(X) E 44 P + 44P U -29 1-P -29+29P ANS -29+73P EV(N): X P(X) X*P(X) E 24 P + 24P U -11 1-P -11+11P ANS -11+35P EV(S): X P(X) X*P(X) E 18 P + 18P U 4 1-P 4-4P ANS 4+14P
EV(B) = EV(N) -29+73p = -11+35p 73P-35P = -11+29 38P = 18 P = 18/38 = 0.474 EV(B) = EV(S) -29+73p = 4+14p 73P-14P = 4+29 59P = 33 P = 33/59 = 0.559 EV(N) = EV(S) -11+35p = 4+14p 35P-14P = 4+11 21P = 15 P = 15/21 = 0.714
QUESTION 12
BEST DECISION S S B B TEST PTS |---0.1---|--0.3----|---0.6----|---0.9---| CUTOFF PTS 0 0.474 0.559 0.714 1

QUESTIONS 13-18

QUESTION 13
1st place EV > 2nd place EV 18*(0.28) + 4*(0.72) > -1.2 18*E + 2.88 > -1.2 18*E > -1.2 – 2.88 E > -4.08/18 E > -0.227
QUESTION 14
1st place EV > 2nd place EV 18*(0.28) + 4*(0.72) > -1.2 5.04 + 4*U > -1.2 4*U > -1.2 – 5.04 U > -6.24/4 U > -1.56
QUESTION 15 : LEAVE IT BLANK
QUESTION 16
EMV
B CIRCLE E 22.83
U
SQUARE N CIRCLE E 13.85
FAV DECISION EMV U
B 22.83
S CIRCLE E 13.94
U
CIRCLE RESCH B CIRCLE E -14.4
EMV 13.212 U
EVwSI
SQUARE N CIRCLE E -4
DECISION SQUARE UNFAV DECISION EMV U
RESCH EMV 13.212 S 6.8
S CIRCLE E 6.8
U
B CIRCLE E -8.56
U
SQUARE N CIRCLE E -1.2
NO RESCH DECISION EMV U
7.92 S 7.92
BEST EMV S CIRCLE E 7.92
U
QUESTION 17
EVwSI 13.212
QUESTION 18
EVSI 5.292

QUESTIONS 19-21

QUESTION 19 THE EFFICIENCY RATING OF THE SAMPLE INFORMATION (E)
E 72.6923076923
SEEK ADDITIONAL RESEARCH : YES
QUESTION 20 RISK PROFILE
RESULT RESULT PROBABILITY PROBABILITY FINAL PAYOFF
RESECH DEMAND FAV/UNFAV E(BEAR)/U(BULL) PROBABILITY
FAV E 0.4 0.71 0.284 44
FAV U 0.4 0.29 0.116 -29
UNFAV E 0.6 0.2 0.12 18
UNFAV U 0.6 0.8 0.48 4
QUESTION 21
EVSI NET EVSI ($ IN THOUSANDS) E CHANCE:BIG PROFIT CHANCE:LOSS
5.292 4.292 72.6923076923 28.40% 11.60%
SHOULD WE PURSUE SI? I THINK WE SHOULD PURSUE SI SINCE THE CHANCES OF PROFIT ARE QUITE HIGH COMPARED TO CHANCES OF LOSS.