Question 1

The value of perfect information is the difference between the monetary payoff with perfect information and the expected monetary payoff with no information.

Accepted Answer

A) True 
 B)False

Question 2

Consider the following decision table with rewards in $ millions.   The opportunity loss for the combination "S3" and "d1" is ___.

Accepted Answer

A) 9 
B) 5 
C) 3 
D) 0 
E) -1 
A) 9 
B) 5 
C) 3 
D) 0 
E) -1

Question 3

Ray Crawford is evaluating investment alternatives to invest $500,000 which he inherited from his grandfather.His investment advisor has identified four alternatives and constructed the following payoff table which shows expected profits (in $10,000's)for various market conditions:   If Ray uses the EMV criterion, the appropriate choice is ___.

Accepted Answer

A) T-Bills 
B) Stocks 
C) Bonds 
D) Mixture 
E) Bank CD's 
A) T-Bills 
B) Stocks 
C) Bonds 
D) Mixture 
E) Bank CD's

Question 4

The expected monetary payoff of perfect information is the value of perfect information.

Accepted Answer

A) True 
 B)False

Question 5

In a decision-making under uncertainty scenario, the decision maker attempts to develop a strategy based on payoffs since virtually no information is available about which state of nature will occur.

Accepted Answer

A) True 
 B)False

Question 6

In decision-making under risk, the expected monetary value without information is the largest of the expected monetary values for the various decision alternatives.

Accepted Answer

A) True 
 B)False

Question 7

Consider the following decision table with rewards in $ millions.   Using the Hurwicz criterion with alpha = 0.1, the appropriate choice would be ___.

Accepted Answer

A) d1 
B) d2 
C) d3 
D) d4 
E) d5 
A) d1 
B) d2 
C) d3 
D) d4 
E) d5

Question 8

In decision-making under risk, the expected monetary value without information is ___.

Accepted Answer

A) the weighted average of the best payoff for each state of nature 
B) the largest of the EMVs for the different decision alternatives 
C) never smaller than the expected monetary payoff with perfect information 
D) the average of the EMVs 
E) half the expected monetary value with information 
A) the weighted average of the best payoff for each state of nature 
B) the largest of the EMVs for the different decision alternatives 
C) never smaller than the expected monetary payoff with perfect information 
D) the average of the EMVs 
E) half the expected monetary value with information

Question 9

Ray Crawford is evaluating investment alternatives to invest $500,000 which he inherited from his grandfather.His investment advisor has identified four alternatives and constructed the following payoff table which shows expected profits (in $10,000's)for various market conditions:   For the 'Stocks' and 'Bonds' choices, the indifference value of Hurwicz's alpha is ___.

Accepted Answer

A) 0.82 
B) 0.71 
C) 0.65 
D) 0.33 
E) 0.50 
A) 0.82 
B) 0.71 
C) 0.65 
D) 0.33 
E) 0.50

Question 10

In decision-making under uncertainty, a pessimistic approach is the ___.

Accepted Answer

A) maximin criterion 
B) maximax criterion 
C) Hurwicz criterion 
D) minimax regret strategy 
E) maximin regret strategy 
A) maximin criterion 
B) maximax criterion 
C) Hurwicz criterion 
D) minimax regret strategy 
E) maximin regret strategy

Question 11

Ray Crawford is evaluating investment alternatives to invest $500,000 which he inherited from his grandfather.His investment advisor has identified four alternatives and constructed the following payoff table which shows expected profits (in $10,000's)for various market conditions:   The expected value of perfect information is ___.

Accepted Answer

A) $57,000 
B) $63,000 
C) $79,000 
D) $82,000 
E) $87,000 
A) $57,000 
B) $63,000 
C) $79,000 
D) $82,000 
E) $87,000

Question 12

Ray Crawford is evaluating investment alternatives for the $1000,000 which he inherited from his grandfather.His investment advisor has identified two alternatives and constructed the following tables which show (1)expected profits (in $10,000's)for various market conditions and their probabilities, and (2)the advisor's track record on predicting Bull and Bear markets:   If the advisor predicts a Bear market the EMV of the Bonds alternative, using revised probabilities, is ___.

Accepted Answer

A) $36,600 
B) $24,600 
C) $56,800 
D) $48,200 
E) $45,800 
A) $36,600 
B) $24,600 
C) $56,800 
D) $48,200 
E) $45,800

Question 13

Dianna Young is evaluating a plan to expand the product ion facilities of International Compressors Company which manufactures natural gas compressors.Dianna feels that the price of coal is a significant factor in her decision.Below are her estimates of payoffs from various expansion plans under different prices of coal.If Diana knows the price of coal in the future will be the same as it is today, what expansion plan should she select?

Accepted Answer

A) No expansion 
B) Small expansion 
C) Medium expansion 
D) Cannot determine from information 
E) Large expansion 
A) No expansion 
B) Small expansion 
C) Medium expansion 
D) Cannot determine from information 
E) Large expansion

Question 14

Ray Crawford is evaluating investment alternatives to invest $500,000 which he inherited from his grandfather.His investment advisor has identified two alternatives and constructed the following tables which show (1)expected profits (in $10,000's)for various market conditions and their probabilities, and (2)the advisor's track record on predicting Bull and Bear markets:   If the advisor predicts a Bull market, the revised probability of a Bull market, P (S1|F1), is ___.

Accepted Answer

A) 0.877 
B) 0.894 
C) 0.953 
D) 0.923 
E) 1.000 
A) 0.877 
B) 0.894 
C) 0.953 
D) 0.923 
E) 1.000

Question 15

Frank Willis has the right to enter a contest where he has a 50% chance of winning $50,000 and a 50% chance of losing $0.It costs Frank nothing to enter the contest.If he is willing to give up his right to enter the contest for a sure payment of $25,000, he is ___.

Accepted Answer

A) a risk avoider 
B) an optimist 
C) a risk taker 
D) risk neutral (an EMV'er) 
E) a gambler 
A) a risk avoider 
B) an optimist 
C) a risk taker 
D) risk neutral (an EMV'er) 
E) a gambler

Question 16

Ray Crawford is evaluating investment alternatives to invest $500,000 which he inherited from his grandfather.His investment advisor has identified four alternatives and constructed the following payoff table which shows expected profits (in $10,000's)for various market conditions:   The EMV of investing in Stocks is ___.

Accepted Answer

A) $30,000 
B) $63,000 
C) $78,000 
D) $81,000 
E) $100,000 
A) $30,000 
B) $63,000 
C) $78,000 
D) $81,000 
E) $100,000

Question 17

Ray Crawford is evaluating investment alternatives to invest $500,000 which he inherited from his grandfather.His investment advisor has identified four alternatives and constructed the following payoff table which shows expected profits (in $10,000's)for various market conditions:   The expected monetary payoff with perfect information is ___.

Accepted Answer

A) $128,000 
B) $137,000 
C) $144,000 
D) $151,000 
E) $127,000 
A) $128,000 
B) $137,000 
C) $144,000 
D) $151,000 
E) $127,000

Question 18

In a decision-making under uncertainty scenario, the decision maker chooses the decision alternative that has the minimum expected (i.e., probability-weighted)payoff among all the available alternatives.

Accepted Answer

A) True 
 B)False

Question 19

In a decision-making scenario, if it is not known which of the states of nature will occur and further if the probabilities of occurrence of the states are also unknown, the scenario is called decision-making under double risk.

Accepted Answer

A) True 
 B)False

Question 20

Dianna Young is evaluating a plan to expand the production facilities of International Compressors Company which manufactures natural gas compressors.Dianna feels that the price of coal is a significant factor in her decision.Below are her estimates of payoffs from various expansion plans under different prices of coal.If Diana knows the price of coal in the future will be higher, what expansion plan should she select?

Accepted Answer

A) No expansion 
B) Small expansion 
C) Medium expansion 
D) Cannot determine from information 
E) Large expansion 
A) No expansion 
B) Small expansion 
C) Medium expansion 
D) Cannot determine from information 
E) Large expansion

The value of perfect information is the difference between the monetary payoff with perfect information and the expected monetary payoff with no information.

Consider the following decision table with rewards in $ millions. The opportunity loss for the combination "S₃" and "d₁" is ___.

The expected monetary payoff of perfect information is the value of perfect information.

In a decision-making under uncertainty scenario, the decision maker attempts to develop a strategy based on payoffs since virtually no information is available about which state of nature will occur.

In decision-making under risk, the expected monetary value without information is the largest of the expected monetary values for the various decision alternatives.

Consider the following decision table with rewards in $ millions. Using the Hurwicz criterion with alpha = 0.1, the appropriate choice would be ___.

In decision-making under risk, the expected monetary value without information is ___.

In decision-making under uncertainty, a pessimistic approach is the ___.

Frank Willis has the right to enter a contest where he has a 50% chance of winning $50,000 and a 50% chance of losing $0.It costs Frank nothing to enter the contest.If he is willing to give up his right to enter the contest for a sure payment of $25,000, he is ___.

In a decision-making under uncertainty scenario, the decision maker chooses the decision alternative that has the minimum expected (i.e., probability-weighted)payoff among all the available alternatives.

In a decision-making scenario, if it is not known which of the states of nature will occur and further if the probabilities of occurrence of the states are also unknown, the scenario is called decision-making under double risk.

Introduction to Statistics

Charts and Graphs

Descriptive Statistics

Probability

Discrete Distributions

Continuous Distributions

Sampling and Sampling Distributions

Statistical Inference: Estimation for Single Populations

Statistical Inference: Hypothesis Testing for Single Populations

Statistical Inferences About Two Populations

Analysis of Variance and Design of Experiments

Simple Regression Analysis and Correlation

Multiple Regression Analysis

Building Multiple Regression Models

Time-Series Forecasting and Index Numbers

Analysis of Categorical Data

Nonparametric Statistics

Statistical Quality Control

Filters

Exam 19: Decision Analysis

The value of perfect information is the difference between the monetary payoff with perfect information and the expected monetary payoff with no information.

Consider the following decision table with rewards in $ millions. The opportunity loss for the combination "S3" and "d1" is ___.

The expected monetary payoff of perfect information is the value of perfect information.

In a decision-making under uncertainty scenario, the decision maker attempts to develop a strategy based on payoffs since virtually no information is available about which state of nature will occur.

In decision-making under risk, the expected monetary value without information is the largest of the expected monetary values for the various decision alternatives.

Consider the following decision table with rewards in $ millions. Using the Hurwicz criterion with alpha = 0.1, the appropriate choice would be ___.

In decision-making under risk, the expected monetary value without information is ___.

In decision-making under uncertainty, a pessimistic approach is the ___.

Frank Willis has the right to enter a contest where he has a 50% chance of winning $50,000 and a 50% chance of losing $0.It costs Frank nothing to enter the contest.If he is willing to give up his right to enter the contest for a sure payment of $25,000, he is ___.

In a decision-making under uncertainty scenario, the decision maker chooses the decision alternative that has the minimum expected (i.e., probability-weighted)payoff among all the available alternatives.

In a decision-making scenario, if it is not known which of the states of nature will occur and further if the probabilities of occurrence of the states are also unknown, the scenario is called decision-making under double risk.

Introduction to Statistics

Charts and Graphs

Descriptive Statistics

Probability

Discrete Distributions

Continuous Distributions

Sampling and Sampling Distributions

Statistical Inference: Estimation for Single Populations

Statistical Inference: Hypothesis Testing for Single Populations

Statistical Inferences About Two Populations

Analysis of Variance and Design of Experiments

Simple Regression Analysis and Correlation

Multiple Regression Analysis

Building Multiple Regression Models

Time-Series Forecasting and Index Numbers

Analysis of Categorical Data

Nonparametric Statistics

Statistical Quality Control

Filters

Consider the following decision table with rewards in $ millions. The opportunity loss for the combination "S₃" and "d₁" is ___.