Exam 15: Introduction to Simulation Modeling

(A)Use @Risk with 100 replications,provide a summary statistics of portfolio return; namely,minimum,maximum,mean,and standard deviation. (B)Use your answers to (A)to estimate the probability that Mrs.Smart's portfolio's annual return will exceed 20%. (C)Use your answers to (A)to estimate the probability that Mrs.Smart's portfolio will lose money during the course of a year. (D)Suppose that the current price of each stock is as follows: stock 1: $16; stock 2: $18; stock 3: $20; and stock 4: $22.Mrs.Smart has just bought an option involving these four stocks.If the price of stock 1,six months from now are is $18 or more,the option enables Mrs.Smart to buy,if she desires,one share of each stock for $20 six months from now.Otherwise the option is worthless.For example,if the stock prices six months from now are: stock 1: $18; stock 2: $20; stock 3: $21; and stock 4: $24,then Mrs.Smart would exercise her option to buy stocks 3 and 4 and receive (21- 20)+ (24-20)= $5 in each cash flow.How much is this option worth if the risk-free rate is 8%?

(Essay)

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Question 61

The triangular distribution is sometimes used in simulation models because it is more flexible and intuitive than the normal distribution.

(True/False)

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Question 62

Suppose that the demand for cars is normally distributed with mean of 120 and standard deviation of 20.Use @Risk simulation add-in to determine the "best" order quantity; that is,the one that has the largest expected profit.Using the statistics and/or graphs from @Risk,discuss whether this order quantity would not be considered the "best" by the car dealer.

(Essay)

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Question 63

A correlation matrix must always have 1's along its diagonal (because a variable is always perfectly correlated with itself)and the correlations between variables elsewhere.

(True/False)

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Question 64

Different random numbers generated by the computer are probabilistically dependent.This implies that when we generate a random number in a particular cell,it has some effect on the values of any other random numbers generated in the spreadsheet.

(True/False)

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Question 65

We can think of the uniform distribution as:

(Multiple Choice)

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Question 66

The "random" numbers generated by the RAND function (or by any other package's random number generator)are not really random.

(True/False)

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Question 67

(A)Assume that the weight of each can in a six-pack has a 0,8 correlation with the weight of the other cans in the six-pack.What mean fill quantity (within 0.05 ounce)maximizes expected profit per sic-pack? (B)If the weights of the cans in the six-pack are probabilistically independent,what mean fill quantity (within 0.05 ounce)will maximize expected profit per six-pack? (C)How can you explain the difference in the answers for (A)and (B)?

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Question 68

A primary difference between standard spreadsheet models and simulation models is that at least one of the input variable cells in a simulation model contains random numbers.

(True/False)

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Question 69

One important special use of bounded distributions is when the only possible values are:

(Multiple Choice)

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Question 70

Excel's built-in functions,along with the RAND function,can be used to generate random numbers from many different types of probability distributions.

(True/False)

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Question 71

It is usually not too difficult to predict the shape of the output distribution from the shape(s)of the input distribution(s).

(True/False)

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Question 72

Suppose you run a simulation model several times with different order quantities.What can we infer about the the quantity that maximizes the output,the company's profit?

(Multiple Choice)

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Question 73

The "building blocks" of all spreadsheet simulation models are:

(Multiple Choice)

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Question 74

We typically choose between a symmetric and skewed distribution on the basis of practical modeling issues.

(True/False)

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Question 75

The binomial distribution is a discrete distribution that is applied to situations where n independent and identical "trials" occur,with each trial resulting in a "success" or "failure," and we want to generate the random number of successes in the n trials.

(True/False)

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Question 76

Sometimes it is convenient to treat a discrete probability distribution as continuous,and vice versa.

(True/False)

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Question 77

Obtain another set random numbers by pressing the F9 (recalculate)key.Do your results change significantly? Do the changes match your expectations? Explain your answer.

(Essay)

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Question 78

A probability distribution is continuous if its possible values are essentially some continuum.

(True/False)

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Question 79

A probability distribution is bounded if there are values A and B such that only one possible value can be less than A or greater than B.

(True/False)

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Question 80

Showing 61 - 80 of 81

The triangular distribution is sometimes used in simulation models because it is more flexible and intuitive than the normal distribution.

A correlation matrix must always have 1's along its diagonal (because a variable is always perfectly correlated with itself)and the correlations between variables elsewhere.

Different random numbers generated by the computer are probabilistically dependent.This implies that when we generate a random number in a particular cell,it has some effect on the values of any other random numbers generated in the spreadsheet.

We can think of the uniform distribution as:

The "random" numbers generated by the RAND function (or by any other package's random number generator)are not really random.

A primary difference between standard spreadsheet models and simulation models is that at least one of the input variable cells in a simulation model contains random numbers.

One important special use of bounded distributions is when the only possible values are:

Excel's built-in functions,along with the RAND function,can be used to generate random numbers from many different types of probability distributions.

It is usually not too difficult to predict the shape of the output distribution from the shape(s)of the input distribution(s).

Suppose you run a simulation model several times with different order quantities.What can we infer about the the quantity that maximizes the output,the company's profit?

The "building blocks" of all spreadsheet simulation models are:

We typically choose between a symmetric and skewed distribution on the basis of practical modeling issues.

The binomial distribution is a discrete distribution that is applied to situations where n independent and identical "trials" occur,with each trial resulting in a "success" or "failure," and we want to generate the random number of successes in the n trials.

Sometimes it is convenient to treat a discrete probability distribution as continuous,and vice versa.

Obtain another set random numbers by pressing the F9 (recalculate)key.Do your results change significantly? Do the changes match your expectations? Explain your answer.

A probability distribution is continuous if its possible values are essentially some continuum.

A probability distribution is bounded if there are values A and B such that only one possible value can be less than A or greater than B.

Introduction to Data Analysis and Decision Making

Describing the Distribution of a Single Variable

Finding Relationships Among Variables

Probability and Probability Distributions

Normal, binomial, poisson, and Exponential Distributions

Decision Making Under Uncertainty

Sampling and Sampling Distributions

Confidence Interval Estimation

Hypothesis Testing

Regression Analysis: Estimating Relationships

Regression Analysis: Statistical Inference

Time Series Analysis and Forecasting

Introduction to Optimization Modeling

Optimization Modeling: Applications

Simulation Models

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