Exam 19: Decision Analysis

Ray Crofford is evaluating investment alternatives for the $100,000 which he inherited from his grandfather.His investment advisor has identified two alternatives and constructed the following tables which show (1)expected profits (in $10,000's)for various market conditions and their probabilities,and (2)the advisor's track record on predicting Bull and Bear markets. If the advisor predicts a Bull market the EMV of the Bonds alternative,using revised probabilities,is ________.

In a decision analysis problem,variables (such as benefits or rewards that result from investments in common stocks or corporate bonds and from a new product launch)which result from selecting a particular decision alternative are called posterior probabilities.

Consider the following decision table with rewards in $ millions. Using the Hurwicz criterion with alpha = 0.2,the appropriate choice would be ________.

Ray Crofford is evaluating investment alternatives for the $100,000 which he inherited from his grandfather.His investment advisor has identified two alternatives and constructed the following tables which show (1)expected profits (in $10,000's)for various market conditions and their probabilities,and (2)the advisor's track record on predicting Bull and Bear markets. If the advisor predicts a Bear market the revised probability of a Bear market,P (S2|F2),is ________.

Frank Forgione has the right to enter a contest where he has a 50% chance of winning $50,000 and a 50% chance of losing $0.It costs Frank nothing to enter the contest.If he is willing to give up his right to enter the contest for a sure payment of $25,000,he is ___.

Trey Leeman,Operations Manager at National Consumers,Inc.(NCI),is evaluating alternatives for increasing capacity at NCI's Fountain Hill plant.He has identified four alternatives,and has constructed the following payoff table which shows payoffs (in $1,000,000's)for the three possible levels of market demand. If Trey uses the maximin criterion,the appropriate alternative would be: _____________.

In a decision-making scenario,if it is not known which of the states of nature will occur but the probabilities of occurrence of the states are known the scenario is called decision-making under risk.

Ray Crofford is evaluating investment alternatives for the $100,000 which he inherited from his grandfather.His investment advisor has identified two alternatives and constructed the following tables which show (1)expected profits (in $10,000's)for various market conditions and their probabilities,and (2)the advisor's track record on predicting Bull and Bear markets. If the advisor predicts a Bear market the EMV of the Bonds alternative,using revised probabilities,is ________.

Ray Crofford is evaluating investment alternatives for the $100,000 which he inherited from his grandfather.His investment advisor has identified four alternatives and constructed the following table which shows expected profits (in $10,000's)for various market conditions and their probabilities. The EMV of investing in Mixture is ________.

Ray Crofford is evaluating investment alternatives to invest $100,000 which he inherited from his grandfather.His investment advisor has identified four alternatives and constructed the following payoff table which shows expected profits (in $10,000's)for various market conditions. For the combination of 'T-Bills' and 'Neutral',the opportunity loss is _________.

Ray Crofford is evaluating investment alternatives to invest $100,000 which he inherited from his grandfather.His investment advisor has identified four alternatives and constructed the following payoff table which shows expected profits (in $10,000's)for various market conditions. If Ray uses the maximax criterion,the appropriate choice would be ________.

Trey Leeman,Operations Manager at National Consumers,Inc.(NCI),is evaluating alternatives for increasing capacity at NCI's Fountain Hill plant.He has identified four alternatives,and has constructed the following payoff table which shows payoffs (in $1,000,000's)for the three possible levels of market demand. If Trey uses the Hurwicz criterion with alpha = 0.1,the appropriate alternative would be: _____________.

In a decision-making scenario,if the decision maker knows which state of nature will occur,the scenario is called decision-making under certainty.

Ray Crofford is evaluating investment alternatives for the $100,000 which he inherited from his grandfather.His investment advisor has identified four alternatives and constructed the following table which shows expected profits (in $10,000's)for various market conditions and their probabilities. The expected monetary payoff with perfect information is ________.

Ray Crofford is evaluating investment alternatives for the $100,000 which he inherited from his grandfather.His investment advisor has identified four alternatives and constructed the following table which shows expected profits (in $10,000's)for various market conditions and their probabilities. The EMV of investing in Bonds is ________.

In decision-making under risk,the expected monetary value without information is ____________.

Dianna Ivy is evaluating a plan to expand the production facilities of International Compressors Company which manufactures natural gas compressors.Dianna feels that the price of coal is a significant factor in her decision,but she cannot control it.For her decision,the different prices of coal represent the _____________.

Ray Crofford is evaluating investment alternatives for the $100,000 which he inherited from his grandfather.His investment advisor has identified four alternatives and constructed the following table which shows expected profits (in $10,000's)for various market conditions and their probabilities. If Ray uses the EMV criterion,the appropriate choice is ________.

Ray Crofford is evaluating investment alternatives to invest $100,000 which he inherited from his grandfather.His investment advisor has identified four alternatives and constructed the following payoff table which shows expected profits (in $10,000's)for various market conditions. If Ray uses the Hurwicz criterion with alpha = 0.1,the appropriate choice is ______.

In a decision-making under uncertainty scenario,the best decision alternative based on the strategy of minmax regret will always have zero regret.