Question 1

What are the differences between an aggressive strategy and a conservative strategy?

Accepted Answer

An aggressive decision maker might seek

Question 2

Use the information below to answer the following question(s).
Below is a decision tree illustrating the R&D process for a new drug.
   
Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million.
  
-What is the value of mode obtained from the simulation results? [Hint: Choose the approximate value.]

Accepted Answer

A) $ 119.0 
B) $ 116.1 
C) $ 105.7 
D) $ 94.4 
A) $ 119.0 
B) $ 116.1 
C) $ 105.7 
D) $ 94.4

Question 3

Use the information below to answer the following question(s).
Below is a payoff table that lists four mortgage options:
  
-What is the best payoff rate for the 1-year ARM?

Accepted Answer

A) $ 49,618 
B) $ 43,650 
C) $ 38,560 
D) $ 66,645 
A) $ 49,618 
B) $ 43,650 
C) $ 38,560 
D) $ 66,645

Question 4

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

Accepted Answer

A) 1.18 
B) 0.38 
C) 0.54 
D) 0.43 
A) 1.18 
B) 0.38 
C) 0.54 
D) 0.43

Question 5

Use the information below to answer the following question(s).
Below is a decision tree illustrating the R&D process for a new drug.
   
Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million.
  
-What is the coefficient of variation obtained from the simulation results? [Hint: Choose the approximate value.]

Accepted Answer

A) 1.587 
B) 1.126 
C) 2.015 
D) 1.890 
A) 1.587 
B) 1.126 
C) 2.015 
D) 1.890

Question 6

Use the information below to answer the following question(s).
Below is a payoff table that lists four mortgage options:
  
-A(n)________ is also called a minimax regret strategy.

Accepted Answer

A) opportunity-loss strategy 
B) aggressive strategy 
C) conservative strategy 
D) average payoff strategy 
A) opportunity-loss strategy 
B) aggressive strategy 
C) conservative strategy 
D) average payoff strategy

Question 7

What are the three elements required to characterize decisions with uncertain consequences?

Accepted Answer

Many decisions involve a choice from amo

Question 8

The average payoff strategy weights the likelihood that the actual outcomes can occur.

Accepted Answer

A) True 
 B)False

Question 9

Use the information below to answer the following question(s).
Below is a decision tree illustrating the R&D process for a new drug.
   
Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million.
  
-What is the mean absolute deviation obtained from the simulation results? [Hint: Choose the approximate value.]

Accepted Answer

A) $ 119.0 
B) $ 116.1 
C) $ 105.7 
D) $ 94.4 
A) $ 119.0 
B) $ 116.1 
C) $ 105.7 
D) $ 94.4

Question 10

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.
-The expected value of perfect information (EVPI)is equal to the ________.

Accepted Answer

A) EMV with perfect information minus the EMV without any information 
B) EMV with perfect information divided by the EMV without any information 
C) sum of the EMV with information and the EMV without any information 
D) EMV without any information minus the EMV with perfect information 
A) EMV with perfect information minus the EMV without any information 
B) EMV with perfect information divided by the EMV without any information 
C) sum of the EMV with information and the EMV without any information 
D) EMV without any information minus the EMV with perfect information

Question 11

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 worst 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 12

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 3-year ARM?

Accepted Answer

A) $ 52,792 
B) $ 45,212 
C) $ 51,094 
D) $ 55,278 
A) $ 52,792 
B) $ 45,212 
C) $ 51,094 
D) $ 55,278

Question 13

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

Accepted Answer

A) U(x)= 1 + e-ˣ/ᴿ 
B) U(x)= 1× eˣ/ᴿ 
C) U(x)= 1/ eˣᴿ 
D) U(x)= 1 - e-ˣ/ᴿ 
A) U(x)= 1 + e-ˣ/ᴿ 
B) U(x)= 1× eˣ/ᴿ 
C) U(x)= 1/ eˣᴿ 
D) U(x)= 1 - e-ˣ/ᴿ

Question 14

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 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 15

Use the information below to answer the following question(s).
Below are four options for an investment decision.
 $$\begin{array} { | l | l | l | l | } 
\hline \text { Decision/Event } & \text { Rates Rise } & \text { Rates Stable } & \text { Rates Fall } \
\hline \text { Bank CD } & 0.80 & 0.80 & 0.80 \
\hline \text { Bond fund } & - 0.75 & 0.86 & 1.50 \
\hline \text { Index fund } & 0 & 0.90 & 1.20 \
\hline \text { Growth fund } & - 0.30 & 0.70 & 1.40 \
\hline
\end{array}$$
-If the payoff is $2200 and R is equal to $500, what is the utility function?

Accepted Answer

A) 0.9877 
B) 0.6819 
C) 0.7645 
D) 0.4502 
A) 0.9877 
B) 0.6819 
C) 0.7645 
D) 0.4502

Question 16

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.
-If the probability of selling the full-fare ticket is 0.80, what is the expected value of the ticket?

Accepted Answer

A) $ 442.50 
B) $ 472.00 
C) $ 501.50 
D) $ 531.00 
A) $ 442.50 
B) $ 472.00 
C) $ 501.50 
D) $ 531.00

Question 17

Use the information below to answer the following question(s).
Below is a decision tree illustrating the R&D process for a new drug.
   
Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million.
  
-What is the value of standard deviation obtained from the simulation results? [Hint: Choose the approximate value.]

Accepted Answer

A) $ 119.0 
B) $ 116.1 
C) $ 105.7 
D) $ 94.4 
A) $ 119.0 
B) $ 116.1 
C) $ 105.7 
D) $ 94.4

Question 18

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

Accepted Answer

A) 1.05 
B) 0.70 
C) 0.60 
D) 0.45 
A) 1.05 
B) 0.70 
C) 0.60 
D) 0.45

Question 19

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

Accepted Answer

A) bank CD 
B) bond fund 
C) index fund 
D) growth fund 
A) bank CD 
B) bond fund 
C) index fund 
D) growth fund

Question 20

Use the information below to answer the following question(s).
Below is a payoff table that lists four mortgage options:
  
-Which of the following decisions has the best average 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

What are the differences between an aggressive strategy and a conservative strategy?

Use the information below to answer the following question(s). Below is a payoff table that lists four mortgage options: -What is the best payoff rate for the 1-year ARM?

Use the information below to answer the following question(s). Below is a payoff table that lists four mortgage options: -A(n)________ is also called a minimax regret strategy.

What are the three elements required to characterize decisions with uncertain consequences?

The average payoff strategy weights the likelihood that the actual outcomes can occur.

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. -The expected value of perfect information (EVPI)is equal to the ________.

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 3-year ARM?

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 is considered the best expected value decision?

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. -If the probability of selling the full-fare ticket is 0.80, what is the expected value of the ticket?

Use the information below to answer the following question(s). Below is a payoff table that lists four mortgage options: -Which of the following decisions has the best average payoff?

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

What are the differences between an aggressive strategy and a conservative strategy?

Use the information below to answer the following question(s). Below is a payoff table that lists four mortgage options: -What is the best payoff rate for the 1-year ARM?

Use the information below to answer the following question(s). Below is a payoff table that lists four mortgage options: -A(n)________ is also called a minimax regret strategy.

What are the three elements required to characterize decisions with uncertain consequences?

The average payoff strategy weights the likelihood that the actual outcomes can occur.

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. -The expected value of perfect information (EVPI)is equal to the ________.

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 3-year ARM?

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 is considered the best expected value decision?

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. -If the probability of selling the full-fare ticket is 0.80, what is the expected value of the ticket?

Use the information below to answer the following question(s). Below is a payoff table that lists four mortgage options: -Which of the following decisions has the best average payoff?

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