Assignment:
Joanna is considering three possible jobs. The following table shows the possible incomes she might get in each job.
|
|
Outcome A
|
Outcome B
|
|
|
Probability
|
Earnings
|
Probability
|
Earnings
|
|
Job 1
|
0.5
|
25
|
0.5
|
40
|
|
Job 2
|
0.3
|
15
|
0.7
|
45
|
|
Job 3
|
0.3
|
25
|
0.7
|
30
|
For each job, calculate the expected value. the variance, and the standard deviation using excel spreadsheet.
1. What is the expected value of earnings for Job 1?
2. What is the variance for job2?
3. If Joanna is averse to risk, what can you predict her job choice?
4. If Joanna is neutral to risk, what can you predict her job choice?
5. If Joanna is preferring to risk, what can you predict her job choice?