Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Becker Question: Expected Value
- This topic has 3 replies, 2 voices, and was last updated 5 years ago by John Moffat.
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- June 2, 2019 at 11:36 pm #518453
Q. Which two of the following statements about expected values are true?
1) EV is of limited use for decisions regarding outcomes which will be repeated often
2) Using EV in decision-making can lead to the worst possible outcome being ignored
3) The reliability of EV calculations is heavily influenced by the accuracy of the probabilities assigned to outcomes.
4) Expected values take account of the risk associated with a decisionAnswer is 3 and 4.
My question is why false no.2? Confuse to choose 3 & 4 as well.
Thanks Teacher Moffat.May.
June 3, 2019 at 8:21 am #5184962 is not true because all outcomes are part of the calculation.
3 is true because if the probabilities are wrong then the EV will be different.
If you have typed the question correctly then the answer is wrong because 4 is not true – EV’s do not take account of the risk.
June 3, 2019 at 10:40 am #518525Teacher Moffat,
How about number 1 because there should be two correct answer?Thanks.
May
June 3, 2019 at 12:57 pm #518537Number 1 is wrong because it is useful when outcomes are repeated often (it is not as useful when outcomes are not repeated.
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