Exam 16: Decision Making and Payoff Tables in Investment Scenarios

i. A time series is a collection of data recorded over a period of time, usually monthly, quarterly, or Yearly. ii. Episodic and residual variations can be projected into the future. iii. A forecast is considered necessary in order to have the raw materials, production facilities, and Staff available to meet estimated future demands.

i. In the linear trend equation, t is any value that corresponds with a time period, i.e., month or Quarter. ii. A straight-line trend equation is used to represent the time series when it is believed that the data Is increasing (or decreasing) by equal amounts, on the average, from one period to another. iii. If the past data approximates a straight line, the equation used is = a + bt, where a is the y- Intercept and b is the slope of the line.

i. A typical monthly seasonal index of 107.0 indicates that sales (or whatever the variable is) are 107 Percent above the annual average. ii. The ratio-to-moving average method removes the time series trend component, resulting in 12 Numbers that are called specific seasonals. iii. The total of the four typical quarterly indexes should equal 100.0.

In the calculation of 4-quarter seasonal indices the total of the quarterly means will be:

The maximin strategy:

You have a decision to invest $10,000 in any of four different companies. You estimate the Probabilities that the economy will be favorable or unfavorable and you estimate the percent Returns over the next year. What is the expected value for Company 3?

i. The cyclical component of a time series is described in terms relative to the seasonal index. ii. The irregular component of a time series is the easiest to measure. iii. The ratio-to-moving average method removes the time series trend component, resulting in 12 Numbers that are called specific seasonals.

Economic periods of prosperity followed by recession are described as:

You are trying to decide in which of the three companies you should invest. Refer to the following Payoff Table. If the probability of the market declining in the next year is 0.5, which of the following statements Are correct? i. The Expected Opportunity Loss for Company A is $225. ii. The Expected Opportunity Loss for Company B is $75. iii. The Expected Opportunity Loss for Company C is $200.

i. In a time series analysis, the letter "a" in the linear trend equation, is the value of when t = 0. ii. In the linear trend equation, the letter "b" is the average change in t for each change of one unit (either increase or decrease) in y. iii. In the linear trend equation, t is any value that corresponds with a time period, (i.e. month or Quarter.

You are trying to decide in which of the three companies you should invest. Refer to the following Payoff Table. If the probability of the market declining in the next year is 0.5, which of the following statements Are correct? i. The Expected value of stock purchased under conditions of certainty is $1,980. ii. The Expected value of perfect information is $75. iii. The Expected value of perfect information is $180.

A plastics manufacturing performed a quarterly time series analysis for demands over the last five Years (periods 1 through 20). The analysis resulted in the following trend equation and seasonal Indexes: = 920.0 + 22.6 t Based on the seasonal indexes, which quarter is expect to have 25% less demand than predicted By the trend line?

You are trying to decide in which of the three companies you should invest. Refer to the following Payoff Table. If the market rises in the next year, which of the following statements are correct? i. The Opportunity Loss for Company A is $200. ii. The Opportunity Loss for Company B is $200. iii. The Opportunity Loss for Company C is $700.

What is the forecast for year 9?

You are trying to decide in which of the three companies you should invest. Refer to the following Payoff Table. If the market declines in the next year, which of the following statements are correct? i. The Opportunity Loss for Company A is $300. ii. The Opportunity Loss for Company B is $30. iii. The Opportunity Loss for Company C is $500.

What is a disadvantage of estimating a trend line equation by "eye-balling" the best fitting line to a Scatter diagram?

i. The ratio-to-moving-average method eliminates the seasonal, cyclical and irregular components From the original data (y). ii. The cyclical component of a time series is described in terms relative to the seasonal index. iii. The irregular component of a time series is the easiest to measure.

i. For a quarterly time series, the initial step, using the ratio-to-moving average method, is to remove The seasonal components from the time series using a 3-month centered moving average. ii. In the ratio-to-moving-average procedure, using the median or modified mean eliminates trend. iii. In the final step, using the ratio-to-moving-average method on quarterly data, the total of the Modified means should theoretically be equal to 400 because the average of should be 100.

The Westberg Electric Company sells electric motors. The monthly trend equation, based on four Years of monthly data, is Y' = 4.4 + 0.5t. The seasonal factor for the month of June is 105. Determine The seasonally adjusted forecast for June of the fifth year.

How will data which increases (or decreases) by equal percents appear when plotted on graph Paper having an arithmetic scale?