ECF1FM-3A-Villafranca, Dandie T...
ECF1FM-3A-Villafranca, Dandie T...
ECF1FM-3A-Villafranca, Dandie T...
Quiz 2
I. Identify the type of RISK. Write the letter of your answer before the number (20).
A. Human F. Financial
B. Operational G. Technical
C. Reputational H. Natural
D. Procedural I. Political
E. Project J. Structural
H. 1. Weather
D. 3. Dangerous Chemicals
A. 5. Natural Disasters
G. 6. Poor lighting
A. 7. Illness
F. 8. Loss of Customers
A. 9. Disease
A. 12. Injury
H. 15. Death
1. A company makes electronic gadgets. 10% in every 100 gadgets are faulty, but the
company doesn't know which ones are faulty until a buyer complains. Suppose the
company makes a ₱5,000 profit on the sale of one working gadget, but suffers a loss of
₱15,000 for every faulty gadget because they have to repair the unit. Can the company
expect a profit in the long term? (Compute for the Expected Value)
LET: P1=90% or 0.90 X1=P5,000
P2=10% or 0.10 X2= -P15,000
EV=0.90(5,000)+0.10(-P15,000)
=4500-1500
=P3,000
2. Mr. Diaz plans to invest ₱50,000 in stock market. After one year, he expects that his money
will grow to ₱80,000. But if inflation will continue to rise, he will lose all the money he invested.
Economic experts estimate that there is 15% chance that the inflation will continue to rise.
Should Mr. Diaz continue with this investment? (Compute for the Expected Value)
EV= 0.85(30,000)+0.15(-50,000)
=25,500-7,500
=18,000
3. Your manager asked you to assess the viability of future development projects and select
the most promising one. According to estimates,Project A, upon completion, shows a
probability of 0.4 to achieve a value of ₱2 million and a probability of 0.6 to achieve a
value of ₱500,000. Project B shows a probability of 0.3 to be valued at ₱3 million and a
probability of 0.7 to be valued at ₱200,000 upon completion.
Project A
LET: P1=0.4 X1=P2,000,000
P2=0.6 X2=P500,000
EV=0.4(2,000,000)+0.6(500,000) =800,000+300,000 =P1,100,000
Project B
LET P1=0.3 X1=3,000,000
P2=0.7 X2=200,000
EV=0.3(3,000,000)+ 0.7(200,000)
=900,000+140,000
=1,040,000