Question 1

The amount invested is one of the required inputs in a portfolio optimization model.

Accepted Answer

A) True 
 B)False  False

Question 2

Exhibit 7-4You are given the following means, standard deviations, and correlations for the annual return on three stocks. The means are 0.08, 0.10, and 0.15. The standard deviations are 0.15, 0.20, and 0.30. The correlation between stocks 1 and 2 is 0.62, between stocks 1 and 3 is 0.32, and between stocks 2 and 3 is 0.43.
-[Part 2] Refer to Exhibit 7-4. Determine the minimum variance portfolio that yields an expected annual return of at least 0.12. How has the portfolio changed from your answer in Part 1?

Accepted Answer

The optimized portfolio is heavily weighted to Stock 3, which increases the standard deviation by 50%.

Question 3

Which of the following is not one of the common types of nonlinear models?

Accepted Answer

A) Pricing models. 
B) Advertising and response selection models. 
C) Network flow models. 
D) Portfolio optimization models. 
A) Pricing models. 
B) Advertising and response selection models. 
C) Network flow models. 
D) Portfolio optimization models. C

Question 4

A function is convex if a line drawn connecting two points on the curve never lies below the curve.

Accepted Answer

A) True 
 B)False

Question 5

In pricing models, elasticity of demand is an input with specifies the:

Accepted Answer

A) range of demand 
B) level of demand 
C) sensitivity of price to changes in demand 
D) sensitivity of demand to changes in price 
A) range of demand 
B) level of demand 
C) sensitivity of price to changes in demand 
D) sensitivity of demand to changes in price

Question 6

Which of the following is not one of the useful options within Solver's Multistart box?

Accepted Answer

A) Population size 
B) Error distribution 
C) Random seed 
D) Upper or lower bound constraints on all changing cells 
A) Population size 
B) Error distribution 
C) Random seed 
D) Upper or lower bound constraints on all changing cells

Question 7

Exhibit 7-4You are given the following means, standard deviations, and correlations for the annual return on three stocks. The means are 0.08, 0.10, and 0.15. The standard deviations are 0.15, 0.20, and 0.30. The correlation between stocks 1 and 2 is 0.62, between stocks 1 and 3 is 0.32, and between stocks 2 and 3 is 0.43.
-Refer to Exhibit 7-4. Suppose you set the weights in the portfolio to a maximum of 0.45 for each stock. Is it possible to achieve a 12% return? What is the portfolio standard deviation in that case?

Accepted Answer

Yes, the optimized portfolio w

Question 8

If a convex function is multiplied by a negative constant, the result:

Accepted Answer

A) is convex 
B) is concave 
C) could be either convex or concave, depending on the value of the constant 
D) is linear 
A) is convex 
B) is concave 
C) could be either convex or concave, depending on the value of the constant 
D) is linear

Question 9

Which of the following types of fit should be selected in Excel's Trendline function if a constant elasticity curve is to be used to model demand?

Accepted Answer

A) Exponential 
B) Logarithmic 
C) Polynomial 
D) Power 
A) Exponential 
B) Logarithmic 
C) Polynomial 
D) Power

Question 10

Solver can get stuck at a global optimum and never find the local optimum.

Accepted Answer

A) True 
 B)False

Question 11

In pricing models, two products are substitutes for each other if a larger price for one product tends to induce customers to demand less of the other.

Accepted Answer

A) True 
 B)False

Question 12

Exhibit 7-1A company manufactures two products. If it charges price p1 for product 1 and price p2 for product 2, it can sell quantities q1 = 55 − 3p1 + 2p2 and q2 = 75 + 2p1 − 2p2 for products 1 and 2, respectively. It costs the company $20 to produce a unit of product 1 and $65 to produce a unit of product 2.
-Refer to Exhibit 7-1. Suppose the company is required by regulation to charge the same price for both products. How many units of each product should the company produce in that case? What prices should it charge, to maximize profit?

Accepted Answer

The optimized model with the added const

Question 13

If you try different starting values for the changing cells and obtain different solutions:

Accepted Answer

A) you can be confident there is no solution 
B) there must be a mistake in your objective function 
C) there must be a mistake in one of your constraints 
D) you can keep the best solution you have found and hope that it is indeed optimal 
A) you can be confident there is no solution 
B) there must be a mistake in your objective function 
C) there must be a mistake in one of your constraints 
D) you can keep the best solution you have found and hope that it is indeed optimal

Question 14

Exhibit 7-2A soda producer makes and sells two products, Classic Cola and Diet Cola. During the planning period, if the producer spends x1 dollars on promotion of Classic Cola, it can sell 100x10.5 cases of Classic Cola, and if it spends x2 dollars on promotion of Diet Cola, it can sell 10x20.75 cases of Diet Cola. Each case of Classic Cola sells for $12.00 and costs $0.95 to produce and ship to customers, while each case of Diet Cola sells for $12.50 and costs $1.00 to produce and ship to customers. A total of $7,500 is available for promotion during the planning period.
-Refer to Exhibit 7-2. Suppose the producer can double the promotional budget. Formulate and solve a nonlinear optimization model to help this soda producer identify the best promotional strategies for its two products in that case. Does the change in profit justify the budget increase? Does the proportional amount spent promoting the two products remain the same?

Accepted Answer

The optimized model below shows that the

Question 15

In advertising response models, a typical source of nonlinearity is a decreasing marginal effect, where each extra ad gains fewer exposures than the previous ad.

Accepted Answer

A) True 
 B)False

Question 16

As an objective, minimizing the sum of squared errors is equivalent to minimizing the

Accepted Answer

A) root mean square error 
B) weighted sum of squared errors 
C) sum of absolute errors 
D) maximum absolute error 
A) root mean square error 
B) weighted sum of squared errors 
C) sum of absolute errors 
D) maximum absolute error

Question 17

Exhibit 7-2A soda producer makes and sells two products, Classic Cola and Diet Cola. During the planning period, if the producer spends x1 dollars on promotion of Classic Cola, it can sell 100x10.5 cases of Classic Cola, and if it spends x2 dollars on promotion of Diet Cola, it can sell 10x20.75 cases of Diet Cola. Each case of Classic Cola sells for $12.00 and costs $0.95 to produce and ship to customers, while each case of Diet Cola sells for $12.50 and costs $1.00 to produce and ship to customers. A total of $7,500 is available for promotion during the planning period.
-Refer to Exhibit 7-2. Formulate and solve a nonlinear optimization model to help this soda producer identify the best promotional strategies for its two products.

Accepted Answer

The optimized model below show

Question 18

Exhibit 7-4You are given the following means, standard deviations, and correlations for the annual return on three stocks. The means are 0.08, 0.10, and 0.15. The standard deviations are 0.15, 0.20, and 0.30. The correlation between stocks 1 and 2 is 0.62, between stocks 1 and 3 is 0.32, and between stocks 2 and 3 is 0.43.
-[Part 1] Refer to Exhibit 7-4. Determine the minimum variance portfolio that yields an expected annual return of at least 0.10

Accepted Answer

The answer of Exhibit 7-4You are given the following means,...

Question 19

Exhibit 7-3A company has the following historical data on the number of ad exposures and the corresponding number of units sold of one of its products:
 $$\begin{array} { | c c } 
\hline \ { \text { Historical } } \
\hline \text { Ads } & \text { Units } \
\hline 0 & 3 \
\hline 20 & 18 \
\hline 40 & 34 \
\hline 60 & 46 \
\hline 80 & 56 \
\hline 100 & 65 \
\hline 120 & 72 \
\hline 140 & 78 \
\hline 160 & 82 \
\hline 180 & 85 \
\hline 200 & 90 \
\hline 220 & 90 \
\hline 240 & 93 \
\hline 260 & 94 \
\hline 280 & 95 \
\hline 300 & 101 \
\hline 320 & 98 \
\hline 340 & 100 \
\hline 360 & 98 \
\hline 380 & 101 \
\hline 400 & 105 \
\hline
\end{array}$$
-[Part 2] Refer to Exhibit 7-3. Formulate a nonlinear optimization model to find the parameters of a function of the form: f(x) = a(1 − e−bx) to model demand for its product as a function of ad exposures (x). In terms of fit, is this model better or worse than the model in Part 1? Explain your answer

Accepted Answer

The parameterized model is:
Th

Question 20

Exhibit 7-1A company manufactures two products. If it charges price p1 for product 1 and price p2 for product 2, it can sell quantities q1 = 55 − 3p1 + 2p2 and q2 = 75 + 2p1 − 2p2 for products 1 and 2, respectively. It costs the company $20 to produce a unit of product 1 and $65 to produce a unit of product 2.
-Refer to Exhibit 7-1. Suppose the company must produce a minimum of 20 units of each product. How many units of each product should the company produce in that case? What prices should it charge, to maximize profit?

Accepted Answer

The optimized model with an added produc

The amount invested is one of the required inputs in a portfolio optimization model.

Which of the following is not one of the common types of nonlinear models?

A function is convex if a line drawn connecting two points on the curve never lies below the curve.

In pricing models, elasticity of demand is an input with specifies the:

Which of the following is not one of the useful options within Solver's Multistart box?

If a convex function is multiplied by a negative constant, the result:

Which of the following types of fit should be selected in Excel's Trendline function if a constant elasticity curve is to be used to model demand?

Solver can get stuck at a global optimum and never find the local optimum.

In pricing models, two products are substitutes for each other if a larger price for one product tends to induce customers to demand less of the other.

If you try different starting values for the changing cells and obtain different solutions:

In advertising response models, a typical source of nonlinearity is a decreasing marginal effect, where each extra ad gains fewer exposures than the previous ad.

As an objective, minimizing the sum of squared errors is equivalent to minimizing the

Introduction to Modeling

Introduction to Spreadsheet Modeling

Introduction to Optimization Modeling

Linear Programming Models

Network Models

Optimization Models With Integer Variables

Evolutionary Solver: An Alternative Optimization Procedure

Decision Making Under Uncertainty

Introduction to Simulation Modeling

Simulation Models

Inventory and Supply Chain Models

Queuing Models

Regression and Forecasting Models

Filters

Exam 7: Nonlinear Optimization Models

The amount invested is one of the required inputs in a portfolio optimization model.

Which of the following is not one of the common types of nonlinear models?

A function is convex if a line drawn connecting two points on the curve never lies below the curve.

In pricing models, elasticity of demand is an input with specifies the:

Which of the following is not one of the useful options within Solver's Multistart box?

If a convex function is multiplied by a negative constant, the result:

Which of the following types of fit should be selected in Excel's Trendline function if a constant elasticity curve is to be used to model demand?

Solver can get stuck at a global optimum and never find the local optimum.

In pricing models, two products are substitutes for each other if a larger price for one product tends to induce customers to demand less of the other.

If you try different starting values for the changing cells and obtain different solutions:

In advertising response models, a typical source of nonlinearity is a decreasing marginal effect, where each extra ad gains fewer exposures than the previous ad.

As an objective, minimizing the sum of squared errors is equivalent to minimizing the

Introduction to Modeling

Introduction to Spreadsheet Modeling

Introduction to Optimization Modeling

Linear Programming Models

Network Models

Optimization Models With Integer Variables

Evolutionary Solver: An Alternative Optimization Procedure

Decision Making Under Uncertainty

Introduction to Simulation Modeling

Simulation Models

Inventory and Supply Chain Models

Queuing Models

Regression and Forecasting Models

Filters