Explore BrainMass
Share

# Expected Value, Risk Measurement and Relative Risk

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

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

© BrainMass Inc. brainmass.com March 21, 2019, 5:20 pm ad1c9bdddf
https://brainmass.com/economics/economic-systems/expected-value-risk-measurement-relative-217451

#### 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