A local exporter is evaluating offering services to three different markets. To
ID: 3202757 • Letter: A
Question
A local exporter is evaluating offering services to three different markets. To do this you must choose one of the following economies: Canada, Mexico and Spain. The following table presents the potential economic benefits (in millions of American dollars) that this entrepreneur would have in his first year of operating in one of the places mentioned.
Find:
G) Using the rule of Mean-Variance-SECOND CASE, what decision would the
exporter? Explain your answer.
H) Using the coefficient of variation rule, what decision would the exporter take?
Explain your answer.
Prob.
Results
Prob.
Results
Prob
Results
0.05
18
0.05
5
0.03
10
0.2
19
0.3
10
0.15
12
0.5
20
0.3
15
0.1
14
0.2
21
0.3
20
0.15
16
0.05
22
0.05
25
0.3
45
Canada
Canada
Mexico
Mexico
Spain
Spain
Prob.
Results
Prob.
Results
Prob
Results
0.05
18
0.05
5
0.03
10
0.2
19
0.3
10
0.15
12
0.5
20
0.3
15
0.1
14
0.2
21
0.3
20
0.15
16
0.05
22
0.05
25
0.3
45
Canada
Canada
Mexico
Mexico
Spain
Spain
Explanation / Answer
Mean, variance and coefficient of variation calculations are shown in table below:
G) Using mean variance rule, Canada will be preferred as it has higher mean and lower variance.
H) Using coefficient of variation rule, again Canada will be preferred as it has lowest COV
Canada Canada Mexico Mexico Spain Spain Prob. Results Prob. Results Prob Results 0.05 18 0.05 5 0.03 10 0.2 19 0.3 10 0.15 12 0.5 20 0.3 15 0.1 14 0.2 21 0.3 20 0.15 16 0.05 22 0.05 25 0.3 45 Mean 20 15 19.4 Variance 0.8 25 212 COV 0.044721 0.333333 0.750744Related Questions
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