A complete BU 407 Unit 2 expected value comparison: two capital options priced across three composite market states, folded back, with the value of perfect information stated. Searches like "bu 407 unit 2 assignment example", "bu407 unit 2 sample" and "bu 407 unit 2 example" land here.
What a finished BU 407 Unit 2 expected value comparison looks like
The finished comparison is a diagram with a written argument attached to it. The tree is drawn first, decision nodes as squares and chance nodes as circles, every branch labeled with its state, its probability and the cash consequence at the end of it. A table repeats the same figures for readers who cannot follow a hand drawn diagram, since a tree scanned at low resolution is a common reason a marker misses the work. The rollback appears one node at a time, with the expected value written beside each chance node and the losing branch struck through at each decision node. A short passage computes what a flawless prediction of the state would be worth, and the recommendation names the option, its expected figure and the spread of outcomes hiding behind that figure.
How a BU 407 Unit 2 example is structured
The tree is drawn before any number is folded, because a diagram built during the arithmetic tends to grow the branches the arithmetic wants and quietly drop the rest. Probabilities are attached to states rather than to options, which is the distinction that keeps one market from being optimistic for a branch and pessimistic for its rival. Rollback runs strictly from the right, since a value taken at an early node before its successors are priced is not an expected value at all. Expected figures are written on the diagram at the point they are computed, so a marker can follow the sequence without redoing it. The information question comes after the winner is in view but before it is defended, because knowing what certainty would be worth often changes whether the writer wants to buy a study. Risk closes the document.
Decision and chance nodes drawn apart
Squares and circles stay distinct on the diagram, since a chance node treated as a choice produces a rollback that cannot come out right.
Probabilities belong to states, not options
One market likelihood applies across every branch it touches, which stops an alternative being priced against a friendlier world than its rival faces.
Rollback shown node by node
Each expected figure is written where it is computed and each rejected branch is struck through, so the sequence stays legible to a reader.
The tree repeated as a table
A plain table carries the same probabilities and payoffs, because a hand drawn diagram often reproduces badly in whatever file the classroom accepts.
What certainty would be worth
One passage prices a perfect forecast against the current expected value, which is the figure deciding whether further study is affordable at all.
Spread reported with the winner
The recommendation states the range of outcomes behind the chosen branch, since two options can share an expected value and differ entirely in risk.
Where marks go in BU 407 Unit 2
Trees lose marks quietly, because a folded diagram with an error in it still looks finished. Probabilities that do not sum to one across a chance node are the first thing a marker checks and the commonest defect here. Rollback started at the left produces figures that are averages of nothing. Options compared on expected value alone, with no line about the spread underneath, ignore the reason this unit teaches trees rather than a single forecast. Sunk amounts folded into branch payoffs distort every comparison above them. Recommendations restating the largest number, without saying what the firm accepts by taking it, leave the judgment criterion empty. Real project costs or bid figures from an employer are not available for the case, and a probability invented and then reported as a market fact is worse.
Get a BU 407 Unit 2 example written to your instructions
Send us the Unit 2 instructions and your BU 407 rubric, together with any probabilities the scenario fixes. We write a custom example that draws the tree before folding it, keeps probabilities attached to states, rolls back from the right and prices perfect information. First custom sample free, returned in 24 to 48 hours.
BU 407 Unit 2 questions, answered
Where do the probabilities come from?
From the scenario in most sections, and where the assignment leaves them open, from a stated assumption you can defend. Say which it is. A likelihood drawn from a published market report belongs with a citation; one you chose belongs with a sentence of reasoning and a note that the case is composite. What no assignment wants is a figure presented as fact with no origin.
Does the tree have to be drawn by hand?
Sections differ, and either a drawing tool or a neat hand sketch is usually accepted so long as it reproduces cleanly. What matters is that a marker can read the labels: state, probability and payoff on every branch, with the node types distinguishable. If your file compresses the image, put the table version underneath it so nothing is lost in the submission.
What if the two options come out almost equal?
Then the interesting work begins. Near ties are where sensitivity belongs: say how far a probability would have to move before the winner changes, and how far a payoff would. A recommendation admitting the margin is thin and naming the number to watch reads as stronger than one asserting a clear victory the arithmetic does not support.