What is your expected outcome for attempting this venture

What is your expected outcome for attempting this venture

What is your expected outcome for attempting this venture

Decision Tree Assignment

Play now? Play later?
You can become a millionaire! That’s what the junk mail said. But then there was the fine print:

If you send in your entry before midnight tonight, then here are your chances:
0.1% that you win $1,000,000
75% that you win nothing
Otherwise, you must PAY $1,000

But wait, there’s more! If you don’t win the million AND you don’t have to pay on your first attempt,
then you can choose to play one more time. If you choose to play again, then here are your chances:
2% that you win $100,000
20% that you win $500
Otherwise, you must PAY $2,000

What is your expected outcome for attempting this venture? Solve this problem using
a decision tree and clearly show all calculations and the expected monetary value at each node.
Use maximization of expected value as your decision criterion.

Answer these questions:
1) Should you play at all? (5%) If you play, what is your expected (net) monetary value? (15%)
2) If you play and don’t win at all on the first try (but don’t lose money), should you try again? (5%) Why? (10%)
3) Clearly show the decision tree (40%) and expected net monetary value at each node (25%)

You must proofread your paper. But do not strictly rely on your computer’s spell-checker and grammar-checker; failure to do so indicates a lack of effort on your part and you can expect your grade to suffer accordingly. Papers with numerous misspelled words and grammatical mistakes will be penalized. Read over your paper – in silence and then aloud – before handing it in and make corrections as necessary. Often it is advantageous to have a friend proofread your paper for obvious errors. Handwritten corrections are preferable to uncorrected mistakes.

Use a standard 10 to 12 point (10 to 12 characters per inch) typeface. Smaller or compressed type and papers with small margins or single-spacing are hard to read. It is better to let your essay run over the recommended number of pages than to try to compress it into fewer pages.

Likewise, large type, large margins, large indentations, triple-spacing, increased leading (space between lines), increased kerning (space between letters), and any other such attempts at “padding” to increase the length of a paper are unacceptable, wasteful of trees, and will not fool your professor.

The paper must be neatly formatted, double-spaced with a one-inch margin on the top, bottom, and sides of each page. When submitting hard copy, be sure to use white paper and print out using dark ink. If it is hard to read your essay, it will also be hard to follow your argument.