Heavy Snowfalls

1
Heavy Snowfalls

• Decision Hire someone to shovel snow (30) or
  buy a snow blower (575)?
• States of Nature Probabilities of snow fall

2
Heavy Snowfalls
(1) What is the expected cost of snow shoveling
in a given year?
(2) What is the expected number of snowfalls in a
given year?
Expected cost/year 3.37 x 30 101.10
3
Problem S2-20 Health care plans

• Which medical plan should be chosen?
• States of Nature

4
Problem S2-20 Health care plans

• Calculate Expected Medical Expenses

5
Problem S2-20 Health care plans

• Expected out-of-pocket cost based on 1,740
  medical expenses

6
Problem S2-20 Health care plans

• Expected out-of-pocket cost based on
  probability-weighted medical expenses