Exhibit 14.9 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. $\begin{array}{|c|c|c|c|c|c|} \hline & \mathrm{A} & \mathrm{B} & \mathrm{C} & \mathrm{D} & E \\ \hline 1 & & \begin{array}{|ll} & \text { Payoff } \\ \text { Matrix } & \\ \end{array} & & & \\ \hline 2 & & & & & \\ \hline 3 & & \text { Economy } & & & \\ \hline 4 & \text { Investment } & \text { Decline } & \text { Expand } & & \text { Choice } \\ \hline 5 & \mathrm{~W} & 0 & 80 & & \\ \hline 6 & \mathrm{X} & \begin{array}{l} 3 \\ 0 \\ \end{array} & 70 & & \\ \hline 7 & \mathrm{Y} & \begin{array}{l} 5 \\ 0 \\ \end{array} & 35 & & \\ \hline 8 & z & \begin{array}{l} 2 \\ 0 \\ \end{array} & 20 & & \\ \hline & \text { Payoffs } & & & & \\ \hline \end{array}$ -Refer to Exhibit 14.9.What formula should go in cell D5 and get copied to D6:D8 to implement the maximax decision rule?

The answer of Exhibit 14.9 The following questions are based on...

Exhibit 14.9 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. $\begin{array}{|c|c|c|c|c|c|} \hline & \mathrm{A} & \mathrm{B} & \mathrm{C} & \mathrm{D} & E \\ \hline 1 & & \begin{array}{|ll} & \text { Payoff } \\ \text { Matrix } & \\ \end{array} & & & \\ \hline 2 & & & & & \\ \hline 3 & & \text { Economy } & & & \\ \hline 4 & \text { Investment } & \text { Decline } & \text { Expand } & & \text { Choice } \\ \hline 5 & \mathrm{~W} & 0 & 80 & & \\ \hline 6 & \mathrm{X} & \begin{array}{l} 3 \\ 0 \\ \end{array} & 70 & & \\ \hline 7 & \mathrm{Y} & \begin{array}{l} 5 \\ 0 \\ \end{array} & 35 & & \\ \hline 8 & z & \begin{array}{l} 2 \\ 0 \\ \end{array} & 20 & & \\ \hline & \text { Payoffs } & & & & \\ \hline \end{array}$ -Refer to Exhibit 14.9.What decision should be made according to the minimax regret decision rule?

The answer of Exhibit 14.9 The following questions are based on...

Exam 14: Decision Analysis

Exhibit 14.13 The following questions use the information below. A student wants to buy a new car.She has three cars to choose from,A,B and C.The cars differ with respect to price,performance and looks.The student has developed the following AHP tables for price and summary.The other tables are not shown due to space limitations. -Refer to Exhibit 14.13.What formula should go in cell F11 and copied to cells F12:F13 of the Price worksheet to compute the Price Score?

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Question 41

Expected regret is also called

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Question 42

Exhibit 14.7 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. Alternative 1: Receive $82,000 with certainty Alternative 2: Receive $143,000 with probability p and lose $15,000 with probability 1 − p). -Refer to Exhibit 14.7.What is the decision maker's risk premium for this problem?

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Question 43

Decision models are applicable when

(Multiple Choice)

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Question 44

Exhibit 14.12 The following questions use the information below.A decision maker is faced with two alternatives. Alternative 1: Receive $40,000 with certainty Alternative 2: Receive $80,000 with probability p and lose $5,000 with probability 1 − p). 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 certainty equivalent for this problem?

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Question 45

Exhibit 14.9 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. E 1 Payoff Matrix 2 3 Economy 4 Investment Decline Expand Choice 5 0 80 6 3 0 70 7 5 0 35 8 z 2 0 20 Payoffs -Refer to Exhibit 14.9.What formula should go in cell D5 and get copied to D6:D8 to implement the maximax decision rule?

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Question 46

Exhibit 14.1 The following questions are based on the information below. 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 formula should go in cell D5 to implement the maximin decision rule?

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Question 47

Suppose that EVPI=0.This means that

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Question 48

An investor is considering 2 investments,A,B,which can be made now.After these investments are made he can pursue choices C,D,E and F depending on whether he chose A or B originally.He has developed the following decision tree to aid in his selection process.What are the correct original and subsequent decisions based on an expected monetary value criteria?

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Question 49

Which of the following summarizes the final outcome for each decision alternative?

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Question 50

How are states of nature assigned probabilities?

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Question 51

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.Draw the decision tree for this problem.

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Question 52

In a graphical representation of decision trees the event nodes are represented by

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Question 53

Exhibit 14.1 The following questions are based on the information below. 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?

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Question 54

The minimum EOL in a decision problem will always

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Question 55

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

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Question 56

Exhibit 14.8 The following questions use the information below. A company needs to buy a new insurance policy.They have three policies to choose from,A,B and C.The policies differ with respect to price,coverage and ease of billing.The company has developed the following AHP tables for price and summary.The other tables are not shown due to space limitations. $Exhibit 14.8 The following questions use the information below. A company needs to buy a new insurance policy.They have three policies to choose from,A,B and C.The policies differ with respect to price,coverage and ease of billing.The company has developed the following AHP tables for price and summary.The other tables are not shown due to space limitations. \begin{array}{|c|c|c|c|c|c|c|c} \hline & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } & \text { F } & \text { G } \\ \hline 1 & & & & & & & \\ \hline 2 & & & & & & & \\ \hline 3 & & \text { Criterion } & \text { A } & \text { B } & \text { C } & & \\ \hline 4 & & \text { Price } & 0.648 & 0.230 & 0.122 & & 0.123 \\ \hline 5 & & \text { Coverage } & 0.213 & 0.701 & 0.085 & & 0.320 \\ \hline 7 & & \text { Billing } & 0.120 & 0.272 & 0.608 & & 0.557 \\ \hline 7 & & \text { Weighted Avg Score: } & 0.215 & 0.404 & 0.381 & & 1.000 \\ \hline & & \text { Summary } & & & & & \\ \hline \end{array} -Refer to Exhibit 14.8.What formula should go in cell C7 and get copied to D7:E7 of the Summary worksheet to compute the Weighted Average Score?$ A B C D E F G 1 2 3 Criterion A B C 4 Price 0.648 0.230 0.122 0.123 5 Coverage 0.213 0.701 0.085 0.320 7 Billing 0.120 0.272 0.608 0.557 7 Weighted Avg Score: 0.215 0.404 0.381 1.000 Summary -Refer to Exhibit 14.8.What formula should go in cell C7 and get copied to D7:E7 of the Summary worksheet to compute the Weighted Average Score?

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Question 57

Exhibit 14.9 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. E 1 Payoff Matrix 2 3 Economy 4 Investment Decline Expand Choice 5 0 80 6 3 0 70 7 5 0 35 8 z 2 0 20 Payoffs -Refer to Exhibit 14.9.What decision should be made according to the minimax regret decision rule?

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Question 58

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 be weak or strong.The investor has estimated the probability of a declining economy at 30% and an expanding economy at 70%.Draw the decision tree for this problem and determine the correct decision for this investor based on the expected monetary value criteria. Payoff Matrix Economy Investment Weak Strong A -30 120 B 20 60 C 30 35 D 15 30

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Question 59

Exhibit 14.5 The following questions are based on the information below. 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.What is the expected monetary value for the investor's problem?

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Question 60

Showing 41 - 60 of 116

Expected regret is also called

Decision models are applicable when

Suppose that EVPI=0.This means that

Which of the following summarizes the final outcome for each decision alternative?

How are states of nature assigned probabilities?

In a graphical representation of decision trees the event nodes are represented by

The minimum EOL in a decision problem will always

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

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