Exam 14: Decision Analysis

The following questions use the Decision Tree model and strategy table information below. -Refer to Exhibit 14.14. You want to conduct a risk analysis on P(G|A) and P(G|B). What Decision Tree model changes must you make to be able to use a strategy table?

The following questions use the Decision Tree model and strategy table information below. -Refer to Exhibit 14.14. Why does the strategy table, examining the risk associated with P(G|A) and P(G|B) never show "Sell A" or "Trade B for D" as selected options?

The category of decision rules that contains the maximax decision rule is the

An investor is considering 4 investments, A, B, C and leaving his money in the bank. The payoff from each investment is a function of the economic climate over the next 2 years. The economy can expand or decline. The following payoff matrix has been developed for the decision problem. -Refer to Exhibit 14.1. What decision should be made according to the maximax decision rule?

A convenience store chain is considering opening a new store at one of four locations. They have developed the following multi-criteria scoring model for this problem. What formulas must be placed in cells C13:F16 to compute the weighted scores for use in generating a Weighted Score radar chart?

The decision rule which determines the maximum payoff for each alternative and then selects the alternative associated with the largest payoff is the

The following questions use the information below. A decision maker is faced with two alternatives. The decision maker has determined that she is indifferent between the two alternatives when p = 0.45. -Refer to Exhibit 14.7. What is the expected value of Alternative 2 for this decision maker?

An investor is considering 4 investments, A, B, C and leaving his money in the bank. The payoff from each investment is a function of the economic climate over the next 2 years. The economy can expand or decline. The following payoff matrix has been developed for the decision problem. The investor has estimated the probability of a declining economy at 70% and an expanding economy at 30%. -Refer to Exhibit 14.3. What decision should be made according to the expected monetary value decision rule?

A company is planning a plant expansion. They can build a large or small plant. The payoffs for the plant depend on the level of consumer demand for the company's products. The company believes that there is an 69% chance that demand for their products will be high and a 31% chance that it will be low. The company can pay a market research firm to survey consumer attitudes towards the company's products. There is a 63% chance that the customers will like the products and a 37% chance that they won't. The payoff matrix and costs of the two plants are listed below. The company believes that if the survey is favorable there is a 92% chance that demand will be high for the products. If the survey is unfavorable there is only a 30% chance that the demand will be high. The following decision tree has been built for this problem. The company has computed that the expected monetary value of the best decision without sample information is 154.35 million. The company has developed the following conditional probability table for their decision problem. -Refer to Exhibit 14.6. What formula should go in cell C13 of the probability table?

What is the formula for the weighted average score for alternative j when using a multi-criteria scoring model?

Every nonprobabilistic method has a weakness for decision making. Which of the following is incorrect regarding a method and its weakness?

An investor is considering 4 investments, W, X, Y, and Z. The payoff from each investment is a function of the economic climate over the next 2 years. The economy can expand or decline. The following payoff matrix has been developed for the decision problem. The investor has estimated the probability of a declining economy at 80% and an expanding economy at 20%. -Refer to Exhibit 14.10. Complete the Regret Table according to the expected regret decision rule.

A decision maker is faced with two alternatives. The decision maker has determined that she is indifferent between the two alternatives when p = 0.7. -Refer to Exhibit 14.12. What is the decision maker's risk premium for this problem?

The following questions are based on the information below. An investor is considering 4 investments, W, X, Y, and Z. The payoff from each investment is a function of the economic climate over the next 2 years. The economy can expand or decline. The following payoff matrix has been developed for the investment decision problem. -Refer to Exhibit 14.9. The original payoff data is in the worksheet called "Payoffs". What formula should go in cell B5 of this Regret Matrix to compute the regret value?

The following questions are based on the information below. An investor is considering 4 investments, W, X, Y, and Z. The payoff from each investment is a function of the economic climate over the next 2 years. The economy can expand or decline. The following payoff matrix has been developed for the investment decision problem. -Refer to Exhibit 14.9. What decision should be made according to the maximin decision rule?

An investor is considering 4 investments, A, B, C and leaving his money in the bank. The payoff from each investment is a function of the economic climate over the next 2 years. The economy can expand or decline. The following payoff matrix has been developed for the decision problem. -Refer to Exhibit 14.1. What decision should be made according to the maximin decision rule?

The total worth, value or desirability of a decision alternative is called its

An investor is considering 4 investments, A, B, C and leaving his money in the bank. The payoff from each investment is a function of the economic climate over the next 2 years. The economy can expand or decline. The following payoff matrix has been developed for the decision problem. The investor has estimated the probability of a declining economy at 70% and an expanding economy at 30%. -Refer to Exhibit 14.3. What decision should be made according to the expected regret decision rule?

An investor is considering 2 investments, A, B, which can be purchased now for $10. There is a 40% chance that investment A will grow rapidly in value and a 60% chance that it will grow slowly. If A grows rapidly the investor can cash it in for $80 or trade it for investment C which has a 25% chance of growing to $100 and a 75% chance of reaching $80. If A grows slowly it is sold for $50. There is a 70% chance that investment B will grow rapidly in value and a 30% chance that it will grow slowly. If B grows rapidly the investor can cash it in for $100 or trade it for investment D which has a 20% chance of growing to $95 and an 80% chance of reaching $80. If B grows slowly it is sold for $45. What is the multistage decision for this investor and what is the EMV for this decision?

An investor is considering 4 investments, A, B, C, D. The payoff from each investment is a function of the economic climate over the next 2 years. The economy can expand or decline. The following decision tree has been developed for the problem. The investor has estimated the probability of a declining economy at 40% and an expanding economy at 60%. -Refer to Exhibit 14.5. How high can P(E) go before the investor's decision, based on expected monetary value criteria, changes?