A chance fork with payoffs given for each branch is assigned a value based on:
A) the highest-payoff branch.
B) the lowest-payoff branch.
C) an average of the highest- and lowest-payoff branches.
D) an evenly weighted average of all payoff branches.
E) a probability weighted average of all payoff branches.

Question

Quizplus · Accepted Answer

The best choice is a probability weighted average of all payoff branches because it takes into account the likelihood of each branch occurring and therefore represents a more accurate expected value for the chance fork.

A Chance Fork with Payoffs Given for Each Branch Is