Share
Explore BrainMass

Expected Value, Risk Measurement and Relative Risk

Hello,

I am looking to compare the work and formulas for the calculation of Expected Value, Absolute Risk Measurement, and Relative Risk for both projects. I have the answers, however, my textbook is horrible in explaining the work.

Project A
Probability Cash Flow
0.5 $200,000
0.5 $300,000

Project B
Probability Cash Flow
0.05 $0
0.80 $200,000
0.15 $400,000

Attachments

Solution Preview

I am looking to compare the work and formulas for the calculation of Expected Value, Absolute Risk Measurement, and Relative Risk for both projects.
Project A Project B
Probability Cash Flow Probability Cash Flow
0.50 $200,000 0.05 $0
0.50 $ 300,000 0.80 $ 200,000
0.15 $ 400,000

Solution:- Calculation of Expected value of each project
If X is a discrete random variable with probability mass function p(x), then the expected value becomes

Project A
Probability Cash flow Expected ...

Solution Summary

The solution related to expected value and other calculations of project A and B is posed.

$2.19