objectives

Question 1

decision trees

Answer 1

decision making tool
probability x profit or loss
success + failure = emv
emv - cost = decision

Question 2

advantages of decision trees

Answer 2

set out in a logical way
options compared at the same time
shows risk and reward
shows costs

Question 3

disadvantages of decision trees

Answer 3

economies of scale could influence probability
only an estimate
ignores qualitative factors
risk is not reduced if you do a decision tree