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RMI 2302 Nyce Module 1 Solved 100% 2024
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RMI 2302 Nyce Module 1 Solved 100% 2024
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RMI 2302 Nyce Module 1 Solved 100% 2024A pay-off is a(n) __________ value in the sense that associated with each course of
action is a certain profit/loss. - ANSWER-conditional
According to the text, which of the following is a recommended method of evaluating the
best course of action in a multi-stage decision-making problem? - ANSWER-creating a
decision tree
Apple, Inc. has three choices of which new technologies to acquire for the development
of its new MacBook Pro display. Which of the following should Apple pursue?
Investment A
Probability / Outcome
.%
.%
.32 / -10%
Investment B
Probability / Outcome
.%
.%
.15 / -7.5%
Investment C
Probability / Outcome
.%
.%
.10 / -4% - ANSWER-Investment C
Sum of probability X outcome for each investment and pick the biggest one!
, Carly is involved in a three-car automobile accident. Which type of risk is this an
example of? - ANSWER-particular risk
Danger does not equal what? - ANSWER-Risk
decisions under risk. - ANSWER-The decision situations wherein the decision-maker
chooses to consider several possible outcomes and the probabilities of their occurrence
Determination of objectives - ANSWER-Post-Loss Objectives: Survival, Continuity of
Operations, Earnings Stability, Continued Growth, Social Responsibility
Evaluate the Risk - ANSWER-A. Loss Frequency (probability distributions)
B. Loss Severity
Maximum Possible Loss
Probable Maximum Loss
-Use of Statistics
Central Tendency
Measures of Variation
Law of Large Numbers
Evaluation and Review - ANSWER-In theory, the evaluation and review are the final
step in the risk management process.
Except in the rare case where an organization is newly created, every organization will
have a risk management program already in existence.
Expected loss formula - ANSWER-Sum of Probability X loss amount
Expected value formula - ANSWER-It is frequency * severity, or likelihood * outcome.
25% chance of 0% return
50% chance of 10% return
25% chance of a 20% return -- What is the expected return?
It is just .25 (25%) times 0 (the first outcome) = 0
then .50 (50%) times .10 ( 10% - the second outcome) = .05
then .25 times .20 = .05.
Then add them all together 0 + .05 + .05 = .10 or 10%. So the answer is the expected
outcome is a 10% return.
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