Exam 19: Decision Making

SCENARIO 19-6 A student wanted to find out the optimal strategy to study for a Business Statistics exam. He constructed the following payoff table based on the mean amount of time he needed to study every week for the course and the degree of difficulty of the exam. From the information that he gathered from students who had taken the course, he concluded that there was a 40% probability that the exam would be easy. 16 hours 8 hours 4 hours Easy Exam 40 60 80 Difficult Exam 100 50 0 -Referring to Scenario 19-6, what is the expected monetary value of spending 8 hours per week on average studying for the exam?

SCENARIO 19-6 A student wanted to find out the optimal strategy to study for a Business Statistics exam. He constructed the following payoff table based on the mean amount of time he needed to study every week for the course and the degree of difficulty of the exam. From the information that he gathered from students who had taken the course, he concluded that there was a 40% probability that the exam would be easy. 16 hours 8 hours 4 hours Easy Exam 40 60 80 Difficult Exam 100 50 0 -Referring to Scenario 19-6, what is the return-to-risk ratio of spending 8 hours per week on average studying for the exam?

SCENARIO 19-5 The following payoff table shows profits associated with a set of 2 alternatives under 3 possible events. $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\text { Action }$ Event A B 1 1000 1200 2 500 700 3 300 -200 Suppose that the probability of Event 1 is 0.2, Event 2 is 0.5, and Event 3 is 0.3. -Referring to Scenario 19-5, what is the standard deviation for Action A?

SCENARIO 19-6 A student wanted to find out the optimal strategy to study for a Business Statistics exam. He constructed the following payoff table based on the mean amount of time he needed to study every week for the course and the degree of difficulty of the exam. From the information that he gathered from students who had taken the course, he concluded that there was a 40% probability that the exam would be easy. 16 hours 8 hours 4 hours Easy Exam 40 60 80 Difficult Exam 100 50 0 -Referring to Scenario 19-6, what is the opportunity loss of spending 4 hours per week on average studying for the exam when the exam turns out to be easy?

Blossom's Flowers purchases roses for sale for Valentine's Day. The roses are purchased for $10 a dozen and are sold for $20 a dozen. Any roses not sold on Valentine's Day can be sold for $5 per Dozen. The owner will purchase 1 of 3 amounts of roses for Valentine's Day: 100, 200, or 400 dozen Roses. If the probability of selling 100 dozen roses is 0.2 and 200 dozen roses is 0.5, then the Probability of selling 400 dozen roses is

In portfolio analysis, the _______ is the reciprocal of the return to risk ratio.

SCENARIO 19-2 The following payoff matrix is given in dollars. $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Action }$ Event A B 1 400 700 2 200 500 Suppose the probability of Event 1 is 0.5 and Event 2 is 0.5. -Referring to Scenario 19-2, what is the best action using the maximax criterion?

SCENARIO 19-2 The following payoff matrix is given in dollars. $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Action }$ Event A B 1 400 700 2 200 500 Suppose the probability of Event 1 is 0.5 and Event 2 is 0.5. -Referring to Scenario 19-2, the coefficient of variation for Action A is

Opportunity loss is the difference between the lowest profit for an event and the actual profit obtained for an action taken.

Blossom's Flowers purchases roses for sale for Valentine's Day. The roses are purchased for $10 a dozen and are sold for $20 a dozen. Any roses not sold on Valentine's Day can be sold for $5 per Dozen. The owner will purchase 1 of 3 amounts of roses for Valentine's Day: 100, 200, or 400 dozen Roses. Given 0.2, 0.4, and 0.4 are the probabilities for the sale of 100, 200, or 400 dozen roses, Respectively, then the EVPI for buying roses is

SCENARIO 19-3 The following information is from 2 investment opportunities. A B Expected monetary value \ 900 \ 600 Standard deviation 100 50 -Referring to Scenario 19-3, what is the coefficient of variation for investment A?

SCENARIO 19-6 A student wanted to find out the optimal strategy to study for a Business Statistics exam. He constructed the following payoff table based on the mean amount of time he needed to study every week for the course and the degree of difficulty of the exam. From the information that he gathered from students who had taken the course, he concluded that there was a 40% probability that the exam would be easy. 16 hours 8 hours 4 hours Easy Exam 40 60 80 Difficult Exam 100 50 0 -Referring to Scenario 19-6, the optimal strategy using the expected opportunity loss criterion is to study 8 hours per week on average for the exam.

SCENARIO 19-2 The following payoff matrix is given in dollars. $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Action }$ Event A B 1 400 700 2 200 500 Suppose the probability of Event 1 is 0.5 and Event 2 is 0.5. -Referring to Scenario 19-2, what is the optimal action using the EOL criterion?

SCENARIO 19-2 The following payoff matrix is given in dollars. $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Action }$ Event A B 1 400 700 2 200 500 Suppose the probability of Event 1 is 0.5 and Event 2 is 0.5. -Referring to Scenario 19-2, the EOL for Action A is

SCENARIO 19-4 A stock portfolio has the following returns under the market conditions listed below. Bull 0.4 \ 200 Stable 0.3 \ 100 Bear 0.3 -\ 100 -Referring to Scenario 19-4, what is the coefficient of variation?

SCENARIO 19-2 The following payoff matrix is given in dollars. $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Action }$ Event A B 1 400 700 2 200 500 Suppose the probability of Event 1 is 0.5 and Event 2 is 0.5. -Referring to Scenario 19-2, the return to risk ratio for Action B is

SCENARIO 19-5 The following payoff table shows profits associated with a set of 2 alternatives under 3 possible events. $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\text { Action }$ Event A B 1 1000 1200 2 500 700 3 300 -200 Suppose that the probability of Event 1 is 0.2, Event 2 is 0.5, and Event 3 is 0.3. -Referring to Scenario 19-5, what is the opportunity loss for Action B with Event 1?

SCENARIO 19-1 The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature. States A1 A2 A3 1 12 -2 8 2 4 10 5 where: $\quad S 1$ is state of nature 1 $\quad$$A 1$ is action alternative 1 $\quad$$\quad$$\quad$$S 2$ is state of nature 2 $\quad$$A 2$ is action alternative 2 $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$A 3$ is action alternative 3 -Referring to Scenario 19-1, if the probability of S1 is 0.5, then the coefficient of variation for A2 is

SCENARIO 19-3 The following information is from 2 investment opportunities. A B Expected monetary value \ 900 \ 600 Standard deviation 100 50 -Referring to Scenario 19-3, which investment has the optimal coefficient of variation?

SCENARIO 19-6 A student wanted to find out the optimal strategy to study for a Business Statistics exam. He constructed the following payoff table based on the mean amount of time he needed to study every week for the course and the degree of difficulty of the exam. From the information that he gathered from students who had taken the course, he concluded that there was a 40% probability that the exam would be easy. 16 hours 8 hours 4 hours Easy Exam 40 60 80 Difficult Exam 100 50 0 -Referring to Scenario 19-6, the optimal strategy using the maximin criterion is to study 16 hours per week on average for the exam.