Question 1

Use the below information to answer the following question(s).
Below is a payoff table with three mortgage options:
  
-What is the expected opportunity loss for the 1-year ARM?

Accepted Answer

A) $ 7,979.60 
B) $ 3,959.40 
C) $ 6,853.50 
D) $ 8,621.40 
A) $ 7,979.60 
B) $ 3,959.40 
C) $ 6,853.50 
D) $ 8,621.40 D

Question 2

An outcome over which the decision maker has complete control is called an event node.

Accepted Answer

A) True 
 B)False  False

Question 3

Use the information below to answer the following question(s)
Misty Inc.launches a new range of perfumes for men and women.The probability of high consumer demand for the product is 0.6 and low consumer demand is 0.4.The probability of a favorable survey response given high consumer demand is 0.9 and the probability of a favorable survey response given low consumer demand is 0.2.
-Greg is indifferent between receiving $2,000 and taking a chance at $2,500 with probability 0.7 and losing $1200 with probability 0.5.What is the expected value of this gamble?

Accepted Answer

A) $ 1,150 
B) $ 1,800 
C) $ 1,460 
D) $ 2,045 
A) $ 1,150 
B) $ 1,800 
C) $ 1,460 
D) $ 2,045 A

Question 4

Use the information below to answer the following question(s).
Below are four options for an investment decision.
 $$\begin{array} { | l | l | l | l | } 
\hline \text { Decision/Event } & \text { Rates Rise } & \text { Rates Stable } & \text { Rates Fall } \
\hline \text { Bank CD } & 0.80 & 0.80 & 0.80 \
\hline \text { Bond fund } & - 0.75 & 0.86 & 1.50 \
\hline \text { Index fund } & 0 & 0.90 & 1.20 \
\hline \text { Growth fund } & - 0.30 & 0.70 & 1.40 \
\hline
\end{array}$$
-Identify the average utility for the growth fund decision.

Accepted Answer

A) 1.05 
B) 0.70 
C) 0.20 
D) 0.60 
A) 1.05 
B) 0.70 
C) 0.20 
D) 0.60

Question 5

Use the information below to answer the following question(s).
The payoff table given below lists four mortgage options:
   
The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1.
-Which of the following decisions has the largest expected payoff?

Accepted Answer

A) 1-year ARM 
B) 3-year ARM 
C) 5-year ARM 
D) 30-year fixed 
A) 1-year ARM 
B) 3-year ARM 
C) 5-year ARM 
D) 30-year fixed

Question 6

A payoff table is a matrix whose rows correspond to events and whose columns correspond to decisions.

Accepted Answer

A) True 
 B)False

Question 7

Use the information below to answer the following question(s).
Below is a payoff table that lists four mortgage options:
   
The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1.Answer the following questions by creating a decision tree.
-Which of the following is considered the best expected value decision?

Accepted Answer

A) 1-year ARM 
B) 3-year ARM 
C) 5-year ARM 
D) 30-year fixed 
A) 1-year ARM 
B) 3-year ARM 
C) 5-year ARM 
D) 30-year fixed

Question 8

Use the information below to answer the following question(s).
The payoff table given below lists four mortgage options:
   
The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1.
-What is the expected payoff for the 1-year ARM?

Accepted Answer

A) $ 53,082.00 
B) $ 16,951.00 
C) $ 56,938.00 
D) $ 18,979.30 
A) $ 53,082.00 
B) $ 16,951.00 
C) $ 56,938.00 
D) $ 18,979.30

Question 9

What is the expected value of perfect information?

Accepted Answer

The expected value of perfect informatio

Question 10

Use the information given below to answer the following question(s).
Below is a payoff table that lists three mortgage options:
  
-What is the maximum opportunity loss incurred for the 25-year fixed decision?

Accepted Answer

A) $ 8,626 
B) $ 13,716 
C) $ 14,369 
D) $ 10,581 
A) $ 8,626 
B) $ 13,716 
C) $ 14,369 
D) $ 10,581

Question 11

In a minimin strategy, the decision which minimizes the minimum payoff is chosen.

Accepted Answer

A) True 
 B)False

Question 12

Use the information below to answer the following question(s).
Below is a decision tree for the airline revenue management.
   
Create a one-way table and answer the following questions.
-What is the expected value of the ticket when a discount is offered on the full fare? [Hint: Choose the approximate value.]

Accepted Answer

A) $ 442.50 
B) $ 472.00 
C) $ 410.00 
D) $ 501.50 
A) $ 442.50 
B) $ 472.00 
C) $ 410.00 
D) $ 501.50

Question 13

What is the expected value of sample information?

Accepted Answer

The expected value of sample information

Question 14

Use the information below to answer the following question(s).
Below is a payoff table that lists four mortgage options:
  
-What is the average payoff for the 5-year ARM?

Accepted Answer

A) $ 49,514 
B) $ 52,015 
C) $ 53,395 
D) $ 51,641 
A) $ 49,514 
B) $ 52,015 
C) $ 53,395 
D) $ 51,641

Question 15

Use the information below to answer the following question(s)
Misty Inc.launches a new range of perfumes for men and women.The probability of high consumer demand for the product is 0.6 and low consumer demand is 0.4.The probability of a favorable survey response given high consumer demand is 0.9 and the probability of a favorable survey response given low consumer demand is 0.2.
-A children's welfare fundraiser involves selling one thousand $70 tickets to win a $20,000 grand prize.If the probability of winning is only 0.005, what is the expected payoff?

Accepted Answer

A) -$40 
B) -$50 
C) $30 
D) $60 
A) -$40 
B) -$50 
C) $30 
D) $60

Question 16

Use the information given below to answer the following question(s).
Below is a payoff table that lists three mortgage options:
  
-What is the maximum opportunity loss incurred for the 5-year ARM?

Accepted Answer

A) $ 8,626 
B) $ 13,716 
C) $ 14,369 
D) $ 10,581 
A) $ 8,626 
B) $ 13,716 
C) $ 14,369 
D) $ 10,581

Question 17

Use the information below to answer the following question(s).
Below is a payoff table that lists four mortgage options:
  
-What is the worst payoff rate for the 5-year ARM?

Accepted Answer

A) $ 50,894 
B) $ 48,134 
C) $ 51,641 
D) $ 55,895 
A) $ 50,894 
B) $ 48,134 
C) $ 51,641 
D) $ 55,895

Question 18

For the average payoff strategy, the decision with the best average payoff is chosen.

Accepted Answer

A) True 
 B)False

Question 19

Use the information below to answer the following question(s)
Misty Inc.launches a new range of perfumes for men and women.The probability of high consumer demand for the product is 0.6 and low consumer demand is 0.4.The probability of a favorable survey response given high consumer demand is 0.9 and the probability of a favorable survey response given low consumer demand is 0.2.
-What is the likelihood for high demand knowing that the market report is favorable?

Accepted Answer

A) 84% 
B) 90% 
C) 87% 
D) 80% 
A) 84% 
B) 90% 
C) 87% 
D) 80%

Question 20

Use the below information to answer the following question(s).
Below is a payoff table with three mortgage options:
  
-What is the expected opportunity loss for the 30-year fixed decision?

Accepted Answer

A) $ 7,979.60 
B) $ 3,959.40 
C) $ 6,853.50 
D) $ 8,621.40 
A) $ 7,979.60 
B) $ 3,959.40 
C) $ 6,853.50 
D) $ 8,621.40

Use the below information to answer the following question(s). Below is a payoff table with three mortgage options: -What is the expected opportunity loss for the 1-year ARM?

An outcome over which the decision maker has complete control is called an event node.

Use the information below to answer the following question(s). The payoff table given below lists four mortgage options: The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1. -Which of the following decisions has the largest expected payoff?

A payoff table is a matrix whose rows correspond to events and whose columns correspond to decisions.

Use the information below to answer the following question(s). The payoff table given below lists four mortgage options: The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1. -What is the expected payoff for the 1-year ARM?

What is the expected value of perfect information?

Use the information given below to answer the following question(s). Below is a payoff table that lists three mortgage options: -What is the maximum opportunity loss incurred for the 25-year fixed decision?

In a minimin strategy, the decision which minimizes the minimum payoff is chosen.

What is the expected value of sample information?

Use the information below to answer the following question(s). Below is a payoff table that lists four mortgage options: -What is the average payoff for the 5-year ARM?

Use the information given below to answer the following question(s). Below is a payoff table that lists three mortgage options: -What is the maximum opportunity loss incurred for the 5-year ARM?

Use the information below to answer the following question(s). Below is a payoff table that lists four mortgage options: -What is the worst payoff rate for the 5-year ARM?

For the average payoff strategy, the decision with the best average payoff is chosen.

Use the below information to answer the following question(s). Below is a payoff table with three mortgage options: -What is the expected opportunity loss for the 30-year fixed decision?

Introduction to Business Analytics

Analytics on Spreadsheets

Visualizing and Exploring Data

Descriptive Statistical Measures

Probability Distributions and Data Modeling

Sampling and Estimation

Statistical Inference

Predictive Modeling and Analysis

Regression Analysis

Forecasting Techniques

Simulation and Risk Analysis

Introduction to Data Mining

Linear Optimization

Applications of Linear Optimization

Integer Optimization

Nonlinear and Non-Smooth Optimization

Optimization Models with Uncertainty

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Exam 18: Decision Analysis

Use the below information to answer the following question(s). Below is a payoff table with three mortgage options: -What is the expected opportunity loss for the 1-year ARM?

An outcome over which the decision maker has complete control is called an event node.

Use the information below to answer the following question(s). The payoff table given below lists four mortgage options: The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1. -Which of the following decisions has the largest expected payoff?

A payoff table is a matrix whose rows correspond to events and whose columns correspond to decisions.

Use the information below to answer the following question(s). The payoff table given below lists four mortgage options: The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1. -What is the expected payoff for the 1-year ARM?

What is the expected value of perfect information?

Use the information given below to answer the following question(s). Below is a payoff table that lists three mortgage options: -What is the maximum opportunity loss incurred for the 25-year fixed decision?

In a minimin strategy, the decision which minimizes the minimum payoff is chosen.

What is the expected value of sample information?

Use the information below to answer the following question(s). Below is a payoff table that lists four mortgage options: -What is the average payoff for the 5-year ARM?

Use the information given below to answer the following question(s). Below is a payoff table that lists three mortgage options: -What is the maximum opportunity loss incurred for the 5-year ARM?

Use the information below to answer the following question(s). Below is a payoff table that lists four mortgage options: -What is the worst payoff rate for the 5-year ARM?

For the average payoff strategy, the decision with the best average payoff is chosen.

Use the below information to answer the following question(s). Below is a payoff table with three mortgage options: -What is the expected opportunity loss for the 30-year fixed decision?

Introduction to Business Analytics

Analytics on Spreadsheets

Visualizing and Exploring Data

Descriptive Statistical Measures

Probability Distributions and Data Modeling

Sampling and Estimation

Statistical Inference

Predictive Modeling and Analysis

Regression Analysis

Forecasting Techniques

Simulation and Risk Analysis

Introduction to Data Mining

Linear Optimization

Applications of Linear Optimization

Integer Optimization

Nonlinear and Non-Smooth Optimization

Optimization Models with Uncertainty

Filters