A venture capitalist is deciding among two investment opportunities. Opportunity A will provide him $4 million profit with 73% probability if it stays at base level i.e. same. But if it’s a wild success, he can sell the venture for a sure amount of $5 million or continue with the venture (that will surely put him on risk once again) where he can earn $1 million profit with probability “a” and win $15 million profit otherwise. On the other hand, if he choose to grab opportunity B, there is a “b” percent chance of winning $10 million profit and he can earn $2 million otherwise. Determine the strategy region for him. What will be the two critical points of the region where he will be indifferent among the two decision alternatives?
Contingency Table
A contingency table can be defined as the visual representation of the relationship between two or more categorical variables that can be evaluated and registered. It is a categorical version of the scatterplot, which is used to investigate the linear relationship between two variables. A contingency table is indeed a type of frequency distribution table that displays two variables at the same time.
Binomial Distribution
Binomial is an algebraic expression of the sum or the difference of two terms. Before knowing about binomial distribution, we must know about the binomial theorem.
A venture capitalist is deciding among two investment opportunities. Opportunity A will provide him $4 million profit with 73% probability if it stays at base level i.e. same. But if it’s a wild success, he can sell the venture for a sure amount of $5 million or continue with the venture (that will surely put him on risk once again) where he can earn $1 million profit with probability “a” and win $15 million profit otherwise. On the other hand, if he choose to grab opportunity B, there is a “b” percent chance of winning $10 million profit and he can earn $2 million otherwise. Determine the strategy region for him. What will be the two critical points of the region where he will be indifferent among the two decision alternatives?
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