The Difference Between the Expected Monetary Value with Additional Information

question 83

Short Answer

The difference between the expected monetary value with additional information (EMV')and the expected monetary value without additional information (EMV^*)is called the expected value of ____________________ information and is denoted EVSI.

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Definitions:

Probability Distribution

A mathematical function that describes the likelihood of obtaining the possible values that a random variable can assume.

Nominal Rate of Interest

The stated interest rate on a loan or financial asset, without adjustment for inflation or other factors.

Real Rate of Interest

The inflation-adjusted interest rate, which shows the actual cost of borrowing and the genuine return for lenders or investors.

Inflation Rate

The rate at which prices for all goods and services climb, resulting in a decrease in the ability to purchase.