Question

For the energy investment of Exercise 22 and using both of the probabilities considered in that exercise, find the Expected Value of Perfect Information.
In exercise
An investment bank is thinking of investing in a start-up alternative energy company. They can become a major investor for $6M, a moderate investor for $3M, or a small investor for $1.5M. The worth of their investment in 12 months will depend on how the price of oil behaves between then and now. A financial analyst produces the following payoff table with the net worth of their investment (predicted worth - initial investment) as the payoff.


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  • CreatedMay 15, 2015
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