Question

a decision tree branch has an expected monetary value of 112. the probability of success is .8 with an outcome value of 150. what is the outcome value of failure?

Answer 1

Let X be the monetary value

Given,

expected monetary value of 112

i.e E(X) = 112

Probability of success is 0.8 Outcome value 150 i,e

P(X=150) = 0.8

Let XF be the outcome value of failure;

Since Probability of success is 0.8; Probability of faliure = 1 - Probability of success =1-0.8=0.2

P(XF) = 0.2

the outcome value of failure = -40