Risk And Information Assignment Example | Topics and Well Written Essays - 250 words

Risk And Information - Assignment ExampleAfter lively analysis using the expected value criterion method, it was evident that check Y (8000) was best fit to increase the revenues as compared to project X (6000). The expected return of project Y is greater than that of project X. It was therefore decided that the club should invest the cash on starting a bookshop origin because it tends to benefit the club more in terms of revenue increase. I am a jeopardize lover, thats why Ill opt for option Y which has spirited put on the line (high probabilities) but high returns.Risk preference-the endangerment preference of an individual can cause the change in the probabilities. Risk indisposed individuals will always prefer low probabilities (low risk but low returns) when making ratiocinations while risk loving individuals will go for high probabilities (high risk but high returns). Therefore, if an individual change his/her risk preferences the probabilities will change.Risk premiu m- this is the difference between the expected value of returns and the sure thing such that the decision maker is indifferent between the returns and the sure thing. The higher the variance of the returns the larger the risk premium therefore the higher the