Exam IIA-CIA-Part3 Topic 2 Question 442 Discussion
Actual exam question for IIA's IIA-CIA-Part3 exam
Question #: 442
Topic #: 2
Question #: 442
Topic #: 2
If the probability of hot weather, given a hot weather forecast, is 50%, how much would the vendor be willing to pay for the forecast?
Suggested Answer: B Vote an answer
If the weather is hot and coffee is served, the vendor earns US $1,900. If the vendor knows the weather will be hot, she would sell soft drinks and make U $2,500, a US $600 increase.
Thus, the vendor should be willing to pay up to U $600 for perfect information regarding hot weather. However, if the forecasts are only 50% accurate, the information is not perfect. Accordingly, the vendor should be willing to pay only U $300 the U $600 potential increase
in profits 50%) for the sometimes accurate forecasts.
Thus, the vendor should be willing to pay up to U $600 for perfect information regarding hot weather. However, if the forecasts are only 50% accurate, the information is not perfect. Accordingly, the vendor should be willing to pay only U $300 the U $600 potential increase
in profits 50%) for the sometimes accurate forecasts.
by Louise at Jan 04, 2026, 10:28 PM
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