Exam 15: Risk and Information

**Reference: Use the decision tree along with the given probabilities to answer the next six questions (49-54). Probability Event A = 30% Probability Event B = 70% Probability Event 1 = 58% Probability Event 2 = 42% Probability of Event A given that Event 1 occurs = 16% Probability of Event B given that Event 1 occurs = 84% Probability of Event A given that Event 2 occurs = 50% Probability of Event B given that Event 2 occurs = 50% -*If the cost of obtaining information to determine Event 1 and Event 2 is $5,what is the value of perfect information?

Adverse selection in auto insurance might refer to

**Reference: Use the decision tree along with the given probabilities to answer the next six questions (49-54). Probability Event A = 30% Probability Event B = 70% Probability Event 1 = 58% Probability Event 2 = 42% Probability of Event A given that Event 1 occurs = 16% Probability of Event B given that Event 1 occurs = 84% Probability of Event A given that Event 2 occurs = 50% Probability of Event B given that Event 2 occurs = 50% -*What is the expected value at node B?