Assignment
A local exporter is evaluating to offer its services to three different markets. You must choose one of the following economies: Canada, Mexico and Spain. The following table presents the possible economic benefits (in millions of American dollars) that this entrepreneur would have in his first year of operating in one of the mentioned places.
|
Canada
|
Mexico
|
Spain
|
|
Prob.
|
Results
|
Prob.
|
Results
|
Prob.
|
Results
|
|
0.05
|
18
|
0.05
|
5
|
0.3
|
10
|
|
0.2
|
19
|
0.3
|
10
|
0.15
|
12
|
|
0.5
|
20
|
0.3
|
15
|
0.1
|
14
|
|
0.2
|
21
|
0.3
|
20
|
0.15
|
16
|
|
0.05
|
22
|
0.05
|
25
|
0.3
|
45
|
Find:
a) Obtain the expected value of each decision n.
b) Calculate the standard deviation for each decision n.
c) Calculate the coefficient of variation n for each decision.
d) If the individual were "risk neutral", what decision would he take? Explain your answer.
e) If the individual was "adverse to the risk", what decision would he take? Explain your answer.
f) If the individual were "risk-taker", what decision would he take? Explain your answer.
g) Using the Media-Variance-SECOND CASE rule, which decision would take the exporter? Explain your answer.
h) Using the Coefficient of Variation rule, what decision would the exporter make? Explain your answer.