Deck 16: Decision Making and Payoff Tables in Investment Scenarios

Question 1

You are trying to decide in which of the three companies you should invest. Refer to the following
Payoff Table.
If the probability of the Market rising in the next year is 0.60, which of the following statements are
Correct?
i. The Opportunity Loss for Company A is $1,860.
ii. The Opportunity Loss for Company B is $1,860.
iii. The Opportunity Loss for Company C is $1,540.

A) (i), (ii), and (iii) are all correct statements.
B) (i) is a correct statement but not (ii) or (iii).
C) (i) and (iii) are correct statements but not (ii).
D) (i) and (ii) are correct statements but not (iii).
E) (i), (ii), and (iii) are all false statements.

Answer 1

(i), (ii), and (iii) are all false statements.

Question 2

The states of nature are:

A) the choices available to the decision maker.
B) the uncontrollable future events.
C) a comparison of each combination of decision alternatives and the state of nature.

Answer 2

the uncontrollable future events.

Question 3

You are trying to decide in which of the three companies you should invest. Refer to the following
Payoff Table.
If the probability of the market declining in the next year is 0.4, which of the following statements
Are correct?
i. The Expected Opportunity Loss for Company A is $300.
ii. The Expected Opportunity Loss for Company B is $30.
iii. The Expected Opportunity Loss for Company C is $500.

A) (i), (ii), and (iii) are all correct statements.
B) (i) is a correct statement but not (ii) or (iii).
C) (ii) is a correct statement but not (i) or (iii).
D) (ii) and (iii) are correct statements but not (i).
E) (i), (ii), and (iii) are all false statements.

Answer 3

(i), (ii), and (iii) are all false statements.

Question 4

Suppose that the below represents the opportunity loss table for three stocks based on whether
The market rises or declines. If there is a 30% chance of the market rising and a 70% chance of it
Declining, what is the expected opportunity loss for stock C?

A) 490
B) 850
C) 240
D) 910
E) 370

Question 5

Consider the following decision table in which w, x, y, and z are decision alternatives and A and B
Are the two possible states of nature, with probabilities 0.40 and 0.60.
The expected value for decision W is ___________.

A) 40
B) 75
C) 80
D) 220
E) 30

Question 6

You are trying to decide in which of the three companies you should invest. Refer to the following
Payoff Table.
If the probability of the Market rising in the next year is 0.50, which of the following statements are
Correct?
i. The Expected Monetary Value for Company A is $1,450.
ii. The Expected Monetary Value for Company B is $1,960.
iii. The Expected Monetary Value for Company C is $1,500.

A) (i), (ii), and (iii) are all correct statements.
B) (i) is a correct statement but not (ii) or (iii).
C) (i) and (iii) are correct statements but not (ii).
D) (i) and (ii) are correct statements but not (iii).
E) (i), (ii), and (iii) are all false statements.

Question 7

I You are trying to decide in which of the three companies you should invest. Refer to the following
Payoff Table.
If the market rises in the next year, which of the following statements are correct?
i. The Opportunity Loss for Company A is $200.
ii. The Opportunity Loss for Company B is $200.
ii. The Opportunity Loss for Company C is $700.

A) (i), (ii), and (iii) are all correct statements.
B) (i) is a correct statement but not (ii) or (iii).
C) (ii) is a correct statement but not (i) or (iii).
D) (ii) and (iii) are correct statements but not (i).
E) (i), (ii), and (iii) are all false statements.

Question 8

Consider the following decision table in which w, x, y, and z are decision alternatives and A and B
Are the two possible states of nature, with probabilities 0.40 and 0.60.
The expected value for decision X is ___________.

A) 40
B) 75
C) 80
D) 220
E) 30

Question 9

You are trying to decide in which of the three companies you should invest. Refer to the following
Payoff Table.
If the market rises in the next year, which of the following statements are correct?
i. The Opportunity Loss for Company A is $200.
ii. The Opportunity Loss for Company B is $200.
iii. The Opportunity Loss for Company C is $200.

A) (i), (ii), and (iii) are all correct statements.
B) (i) is a correct statement but not (ii) or (iii).
C) (ii) is a correct statement but not (i) or (iii).
D) (i) and (ii) are correct statements but not (iii).
E) (i), (ii), and (iii) are all false statements.

Question 10

You are trying to decide in which of the three companies you should invest. Refer to the following
Payoff Table.
If the market declines in the next year, which of the following statements are correct?
i. The Opportunity Loss for Company A is $300.
ii. The Opportunity Loss for Company B is $30.
iii. The Opportunity Loss for Company C is $500.

A) (i), (ii), and (iii) are all correct statements.
B) (i) is a correct statement but not (ii) or (iii).
C) (ii) is a correct statement but not (i) or (iii).
D) (ii) and (iii) are correct statements but not (i).
E) (i), (ii), and (iii) are all false statements.

Question 11

An investor has a 35% chance of making $1000 and a 65% chance of making $10 000, what is the
Expected payoff for this investor?

A) $11 000
B) $6 850
C) $7 500
D) $10 000

Question 12

You are trying to decide in which of the three companies you should invest. Refer to the following
Payoff Table.
If the market declines in the next year, which of the following statements are correct?
i. The Opportunity Loss for Company A is $300.
ii. The Opportunity Loss for Company B is $0.
iii. The Opportunity Loss for Company C is $50.

A) (i), (ii), and (iii) are all correct statements.
B) (i) is a correct statement but not (ii) or (iii).
C) (ii) is a correct statement but not (i) or (iii).
D) (ii) and (iii) are correct statements but not (i).
E) (i), (ii), and (iii) are all false statements.

Question 13

A payoff table is needed to:

A) control for possible future events.
B) inform the decision maker of the choices available.
C) compare each combination of decision alternative and state of nature.
D) control for possible future events and inform the decision maker of the choices available.

Question 14

You are trying to decide in which of the three companies you should invest. Refer to the following
Payoff Table.
If the probability of the market declining in the next year is 0.4, which of the following statements
Are correct?
i. The Expected Opportunity Loss for Company A is $120.
ii. The Expected Opportunity Loss for Company B is $120.
iii. The Expected Opportunity Loss for Company C is $440.

A) (i), (ii), and (iii) are all correct statements.
B) (i) is a correct statement but not (ii) or (iii).
C) (ii) is a correct statement but not (i) or (iii).
D) (ii) and (iii) are correct statements but not (i).
E) (i), (ii), and (iii) are all false statements.

Question 15

Below is the payoff table for two stocks based on whether the market rises or declines. Which of
The following represents the opportunity loss table?

A)
B)
C)

Question 16

You are trying to decide in which of the three companies you should invest. Refer to the following
Payoff Table.
If the probability of the Market rising in the next year is 0.60, which of the following statements are
Correct?
i. The Expected Monetary Value for Company A is $1,860.
ii. The Expected Monetary Value for Company B is $1,860.
iii. The Expected Monetary Value for Company C is $1,860.

A) (i), (ii), and (iii) are all correct statements.
B) (i) is a correct statement but not (ii) or (iii).
C) (i) and (iii) are correct statements but not (ii).
D) (i) and (ii) are correct statements but not (iii).
E) (i), (ii), and (iii) are all false statements.

Question 17

Consider the following decision table in which w, x, y, and z are decision alternatives and A and B
Are the two possible states of nature, with probabilities 0.40 and 0.60.
The expected value for decision Z is ___________.

A) 110
B) 200
C) 170
D) 140
E) 150

Question 18

You are trying to decide in which of the three companies you should invest. Refer to the following
Payoff Table.
If the probability of the Market rising in the next year is 0.60, which of the following statements are
Correct?
i. The Expected Monetary Value for Company A is $1,860.
ii. The Expected Monetary Value for Company B is $1,860.
iii. The Expected Monetary Value for Company C is $1,540.

A) (i), (ii), and (iii) are all correct statements.
B) (i) is a correct statement but not (ii) or (iii).
C) (i) and (iii) are correct statements but not (ii).
D) (i) and (ii) are correct statements but not (iii).
E) (i), (ii), and (iii) are all false statements.

Question 19

Consider the following decision table in which w, x, y, and z are decision alternatives and A and B
Are the two possible states of nature, with probabilities 0.40 and 0.60.
The expected value for decision Y is ___________.

A) 40
B) 28
C) 50
D) 22
E) 15

Question 20

You are trying to decide in which of the three companies you should invest. Refer to the following
Payoff Table.
If the probability of the Market rising in the next year is 0.50, which of the following statements are
Correct?
i. The Expected Monetary Value for Company A is $1,450.
ii. The Expected Monetary Value for Company B is $1,600.
iii. The Expected Monetary Value for Company C is $1,475.

A) (i), (ii), and (iii) are all correct statements.
B) (i) is a correct statement but not (ii) or (iii).
C) (i) and (iii) are correct statements but not (ii).
D) (i) and (ii) are correct statements but not (iii).
E) (i), (ii), and (iii) are all false statements.

Question 21

You are trying to decide in which of the three companies you should invest. Refer to the following
Payoff Table.
If the probability of the market declining in the next year is 0.5, which of the following statements
Are correct?
i. The Expected Opportunity Loss for Company A is $20.
ii. The Expected Opportunity Loss for Company B is $75.
iii. The Expected Opportunity Loss for Company C is $440.

A) (i), (ii), and (iii) are all correct statements.
B) (i) is a correct statement but not (ii) or (iii).
C) (ii) is a correct statement but not (i) or (iii).
D) (ii) and (iii) are correct statements but not (i).
E) (i), (ii), and (iii) are all false statements.

Question 22

The alternative which offers the lowest EOL is the same as the one which

A) offers the highest expected payoff.
B) maximizes the minimum gain.
C) minimizes the maximum loss.
D) maximizes the maximum gain.

Question 23

You are trying to decide in which of the three companies you should invest. Refer to the following
Payoff Table.
If the probability of the market declining in the next year is 0.4, which of the following statements
Are correct?
i. The Expected value of stock purchased under conditions of certainty is $1,980.
ii. The Expected value of perfect information is $120.
iii. The Expected value of perfect information is $180.

A) (i), (ii), and (iii) are all correct statements.
B) (i) is a correct statement but not (ii) or (iii).
C) (ii) is a correct statement but not (i) or (iii).
D) (iii) is a correct statement but not (i) or (ii).
E) (i) and (ii) are correct statements but not (iii).

Question 24

You are trying to decide in which of the three companies you should invest. Refer to the following
Payoff Table.
If the probability of the market declining in the next year is 0.4, which of the following statements
Are correct?
i. The Expected Opportunity Loss for Company A is $20.
ii. The Expected Opportunity Loss for Company B is $120.
iii. The Expected Opportunity Loss for Company C is $440.

A) (i), (ii), and (iii) are all correct statements.
B) (i) is a correct statement but not (ii) or (iii).
C) (ii) is a correct statement but not (i) or (iii).
D) (ii) and (iii) are correct statements but not (i).
E) (i), (ii), and (iii) are all false statements.

Question 25

You are trying to decide in which of the three companies you should invest. Refer to the following
Payoff Table.
If the probability of the market declining in the next year is 0.5, which of the following statements
Are correct?
i. The Expected value of stock purchased under conditions of certainty is $1,675.
ii. The Expected value of perfect information is $75.
iii. The Expected value of perfect information is $180.

A) (i), (ii), and (iii) are all correct statements.
B) (i) is a correct statement but not (ii) or (iii).
C) (ii) is a correct statement but not (i) or (iii).
D) (iii) is a correct statement but not (i) or (ii).
E) (i) and (ii) are correct statements but not (iii).

Question 26

You are trying to decide in which of the three companies you should invest. Refer to the following
Payoff Table.
If the probability of the market declining in the next year is 0.5, which of the following statements
Are correct?
i. The Expected value of stock purchased under conditions of certainty is $1,980.
ii. The Expected value of perfect information is $75.
iii. The Expected value of perfect information is $180.

A) (i), (ii), and (iii) are all correct statements.
B) (i) is a correct statement but not (ii) or (iii).
C) (ii) is a correct statement but not (i) or (iii).
D) (iii) is a correct statement but not (i) or (ii).
E) (i) and (ii) are correct statements but not (iii).

Question 27

You are trying to decide in which of the three companies you should invest. Refer to the following
Payoff Table.
If the probability of the market declining in the next year is 0.5, which of the following statements
Are correct?
i. The Expected Opportunity Loss for Company A is $120.
ii. The Expected Opportunity Loss for Company B is $75.
iii. The Expected Opportunity Loss for Company C is $200.

A) (i), (ii), and (iii) are all correct statements.
B) (i) is a correct statement but not (ii) or (iii).
C) (ii) is a correct statement but not (i) or (iii).
D) (ii) and (iii) are correct statements but not (i).
E) (i), (ii), and (iii) are all false statements.

Question 28

Given the following decision table in which x, y, and z are decision alternatives and A and B are
States of nature.
Which alternative would be chosen if using the maximin criterion?

A) A
B) B
C) x
D) y
E) z

Question 29

You are trying to decide in which of the three companies you should invest. Refer to the following
Payoff Table.
If the market declines in the next year, which of the following statements are correct?
i. The Opportunity Loss for Company A is $250.
ii. The Opportunity Loss for Company B is $150.
iii. The Opportunity Loss for Company C is $0.

A) (i), (ii), and (iii) are all correct statements.
B) (i) is a correct statement but not (ii) or (iii).
C) (ii) is a correct statement but not (i) or (iii).
D) (ii) and (iii) are correct statements but not (i).
E) (i), (ii), and (iii) are all false statements.

Question 30

You are trying to decide in which of the three companies you should invest. Refer to the following
Payoff Table.
If the market rises in the next year, which of the following statements are correct?
i. The Opportunity Loss for Company A is $200.
ii. The Opportunity Loss for Company B is $200.
iii. The Opportunity Loss for Company C is $700.

A) (i), (ii), and (iii) are all correct statements.
B) (i) is a correct statement but not (ii) or (iii).
C) (ii) is a correct statement but not (i) or (iii).
D) (ii) and (iii) are correct statements but not (i).
E) (i), (ii), and (iii) are all false statements.

Question 31

You are trying to decide in which of the three companies you should invest. Refer to the following
Payoff Table.
If the market rises in the next year, which of the following statements are correct?
i. The Opportunity Loss for Company A is $200.
ii. The Opportunity Loss for Company B is $0.
iii. The Opportunity Loss for Company C is $400.

A) (i), (ii), and (iii) are all correct statements.
B) (i) is a correct statement but not (ii) or (iii).
C) (ii) is a correct statement but not (i) or (iii).
D) (i) and (ii) are correct statements but not (iii).
E) (i), (ii), and (iii) are all false statements.

Question 32

You are trying to decide in which of the three companies you should invest. Refer to the following
Payoff Table.
If the probability of the Market rising in the next year is 0.50, which of the following statements are
Correct?
i. The Opportunity Loss for Company A is $1,460.
ii. The Opportunity Loss for Company B is $1,600.
iii. The Opportunity Loss for Company C is $1,475.

A) (i), (ii), and (iii) are all correct statements.
B) (i) is a correct statement but not (ii) or (iii).
C) (i) and (iii) are correct statements but not (ii).
D) (i) and (ii) are correct statements but not (iii).
E) (i), (ii), and (iii) are all false statements.

Question 33

You are trying to decide in which of the three companies you should invest. Refer to the following
Payoff Table.
If the market declines in the next year, which of the following statements are correct?
i. The Opportunity Loss for Company A is $250.
ii. The Opportunity Loss for Company B is $30.
iii. The Opportunity Loss for Company C is $500.

A) (i), (ii), and (iii) are all correct statements.
B) (i) is a correct statement but not (ii) or (iii).
C) (ii) is a correct statement but not (i) or (iii).
D) (ii) and (iii) are correct statements but not (i).
E) (i), (ii), and (iii) are all false statements.

Question 34

i. EVPI = Expected value under conditions of certainty-Optimal decision under conditions of
Uncertainty.
ii. Three regret strategies that are often used are Maximin, Maximax, and Minimax.
iii. Rankings of the decision alternatives are frequently not highly sensitive to changes in the applied
Probabilities within a plausible range.

A) (i), (ii), and (iii) are all correct statements.
B) (i) is a correct statement but not (ii) or (iii).
C) (i) and (iii) are correct statements but not (ii).
D) (ii) and (iii) are correct statements but not (i).
E) (i), (ii), and (iii) are all false statements.

Question 35

Given the following decision table in which x, y, and z are decision alternatives and A and B are
States of nature.
Which alternative would be chosen if using the maximax criterion?

A) A
B) B
C) x
D) y
E) z

Question 36

You are trying to decide in which of the three companies you should invest. Refer to the following
Payoff Table.
If the probability of the market declining in the next year is 0.4, which of the following statements
Are correct?
i. The Expected value of stock purchased under conditions of certainty is $1,980.
ii. The Expected value of stock purchased under conditions of certainty is $120.
iii. The Expected value of stock purchased under conditions of certainty is $440.

A) (i), (ii), and (iii) are all correct statements.
B) (i) is a correct statement but not (ii) or (iii).
C) (ii) is a correct statement but not (i) or (iii).
D) (iii) is a correct statement but not (i) or (ii).
E) (i), (ii), and (iii) are all false statements.

Question 37

You are trying to decide in which of the three companies you should invest. Refer to the following
Payoff Table.
If the probability of the market declining in the next year is 0.5, which of the following statements
Are correct?
i. The Expected value of stock purchased under conditions of certainty is $1,675.
ii. The Expected value of stock purchased under conditions of certainty is $2,200.
iii. The Expected value of stock purchased under conditions of certainty is $1,150.

A) (i), (ii), and (iii) are all correct statements.
B) (i) is a correct statement but not (ii) or (iii).
C) (ii) is a correct statement but not (i) or (iii).
D) (iii) is a correct statement but not (i) or (ii).
E) (i), (ii), and (iii) are all false statements.

Question 38

The maximin strategy:

A) minimizes the maximum gain.
B) maximizes the minimum gain.
C) minimizes the maximum regret.
D) maximizes the minimum regret.

Question 39

You are trying to decide in which of the three companies you should invest. Refer to the following
Payoff Table.
If the probability of the market declining in the next year is 0.5, which of the following statements
Are correct?
i. The Expected Opportunity Loss for Company A is $225.
ii. The Expected Opportunity Loss for Company B is $75.
iii. The Expected Opportunity Loss for Company C is $200.

A) (i), (ii), and (iii) are all correct statements.
B) (i) is a correct statement but not (ii) or (iii).
C) (ii) is a correct statement but not (i) or (iii).
D) (ii) and (iii) are correct statements but not (i).
E) (i), (ii), and (iii) are all false statements.

Question 40

For the below payoff table, if P(S1) = 0.3, P(S2) = 0.5 and P(S3) = 0.2, what decision would you recommend?

A) Go with Alternative A. It has an expected payoff of $63.
B) Go with Alternative B. It has an expected payoff of $72.
C) Go with Alternative C. It has an expected payoff of $63.

Question 41

Determine the expected value for the following payoff table.

A) $0
B) $200
C) $300
D) $410

Question 42

You have a decision to invest $10,000 in any of four different companies. You estimate the
Probabilities that the economy will be favorable or unfavorable and you estimate the percent
Returns over the next year.
Which company is chosen using the maximax criterion?

A) Company 1
B) Company 2
C) Company 3
D) Company 4

Question 43

You have a decision to invest $10,000 in any of four different companies. You estimate the
Probabilities that the economy will be favorable or unfavorable and you estimate the percent
Returns over the next year.
Based on the maximin criterion, what is the choice?

A) Company 1
B) Company 2
C) Company 3
D) Company 4

Question 44

Given the payoff table below, determine the expected value and size of warehouse that would be
Built, given a probability of 0.7 and 0.3 to the high and low demands, respectively.

A) $8 million, small warehouse
B) $5 million, medium warehouse
C) $18.7 million, large warehouse
D) $12 million, medium warehouse
E) $22 million, large warehouse

Question 45

What is variation within a year, such as high sales at Christmas and Easter and low sales in January,
Called?

A) Secular trend
B) Seasonal variation
C) Cyclical variation
D) Episodic variation
E) Irregular variation

Question 46

You have a decision to invest $10,000 in any of four different companies. You estimate the
Probabilities that the economy will be favorable or unfavorable and you estimate the percent
Returns over the next year.
Based on expected opportunity loss, which company do you choose?

A) Company 1
B) Company 2
C) Company 3
D) Company 4

Question 47

You have a decision to invest $10,000 in any of four different companies. You estimate the
Probabilities that the economy will be favorable or unfavorable and you estimate the percent
Returns over the next year.
What is the expected value for Company 3?

A) 0%
B) 3%
C) -2%
D) 1.2%

Question 48

Determine the expected profit for the following distribution.

A) $0
B) $20
C) $30
D) $41

Question 49

If the exports ($ millions) for the period 1997 through 2001 were $878, $892, $864, $870, and $912
Respectively, what are these values called?

A) Moving average
B) Linear trend equation
C) Logarithmic trend equation
D) Time series
E) Secular Trend

Question 50

You have a decision to invest $10,000 in any of four different companies. You estimate the
Probabilities that the economy will be favorable or unfavorable and you estimate the percent
Returns over the next year.
What is the expected value for Company 1?

A) 9.20%
B) 9%
C) 9.6%
D) 9.4%

Question 51

Given the payoff table below, determine the profit and size of warehouse that would be built, using
The maximax criterion.

A) $8 million, small warehouse
B) $5 million, medium warehouse
C) $11 million, large warehouse
D) $15 million, medium warehouse
E) $22 million, large warehouse

Question 52

A decision tree:

A) uses a box to indicate the point at which a decision must be made.
B) is a picture of all the possible courses of action and the consequent possible outcomes.
C) contains branches going out from the box which indicate the alternatives under consideration.
D) is a picture of all the possible courses of action and the consequent possible outcomes, uses a box to indicate the point at which a decision must be made and contains branches

Question 53

You have a decision to invest $10,000 in any of four different companies. You estimate the
Probabilities that the economy will be favorable or unfavorable and you estimate the percent
Returns over the next year.
What is the expected value for Company 2?

A) 9.20%
B) 9%
C) 9.6%
D) 9.4%

Question 54

You have a decision to invest $10,000 in any of four different companies. You estimate the
Probabilities that the economy will be favorable or unfavorable and you estimate the percent
Returns over the next year.
What is the expected value for Company 4?

A) 5.20%
B) 5.4%
C) 5.6%
D) 9.4%

Question 55

Determine the expected opportunity loss for the following payoff table.

A) $0
B) $200
C) $300
D) $500

Question 56

You have a decision to invest $10,000 in any of four different companies. You estimate the
Probabilities that the economy will be favorable or unfavorable and you estimate the percent
Returns over the next year.
Based on expected value, what company do you choose?

A) Company 1
B) Company 2
C) Company 3
D) Company 4

Question 57

Since a ski resort does most of its business in the winter, what is the major source of variation in
Income due to?

A) Secular trend
B) Seasonal variation
C) Cyclical variation
D) Episodic variation
E) Irregular variation

Question 58

Economic periods of prosperity followed by recession are described as:

A) secular trend.
B) seasonal variation.
C) cyclical variation.
D) episodic variation.
E) irregular variation.

Question 59

The merchants in Morris, Manitoba suffered flood damage in May 1997. Stores were closed for
Remodeling nearly two months. What is this type of variation in sales called?

A) Secular trend
B) Seasonal variation
C) Cyclical variation
D) Episodic variation
E) Irregular variation

Question 60

Given the payoff table below, determine the profit and size of warehouse that would be built, using
The maximin criterion.

A) $8 million, small warehouse
B) $5 million, medium warehouse
C) $22 million, large warehouse
D) $15 million, medium warehouse

Question 61

i. Long-term forecasts are usually from one year to more than 10 years into the future.
ii. A forecast is considered necessary in order to have the raw materials, production facilities, and
Staff available to meet estimated future demands.
iii. Many business and economic time series have a recurring seasonal pattern.

A) (i), (ii), and (iii) are all correct statements.
B) (i) and (ii) are correct statements but not (iii).
C) (i) and (iii) are correct statements but not (ii).
D) (ii) and (iii) are correct statements but not (i).
E) (i), (ii), and (iii) are all false statements.

Question 62

i. Many business and economic time series have a recurring seasonal pattern.
ii. One component of a time series is cyclical variation. An example of cyclical variation is the
Business cycle that consists of periods of prosperity followed by periods of recession, depression,
And recovery.
iii. Episodic and residual variations can be projected into the future.

A) (i), (ii), and (iii) are all correct statements.
B) (i) and (ii) are correct statements but not (iii).
C) (i) and (iii) are correct statements but not (ii).
D) (ii) and (iii) are correct statements but not (i).
E) (i), (ii), and (iii) are all false statements.

Question 63

The events on Sept 11, 2001 exerted an impact on the economy that could be classified as:

A) secular trend.
B) episodic variation.
C) residual variation.
D) seasonal variation.
E) cyclical variation.

Question 64

i. One component of a time series is the secular trend that is the smooth movement of a series over
A short period of time, such as a few months or quarters.
ii. Many business and economic time series have a recurring seasonal pattern.
iii. One component of a time series is cyclical variation. An example of cyclical variation is the
Business cycle that consists of periods of prosperity followed by periods of recession, depression,
And recovery.

A) (i), (ii), and (iii) are all correct statements.
B) (i) and (ii) are correct statements but not (iii).
C) (i) and (iii) are correct statements but not (ii).
D) (ii) and (iii) are correct statements but not (i).
E) (i), (ii), and (iii) are all false statements.

Question 65

For a three-year moving average, how many values will be lost at the beginning and end of the time
Series?

A) 0 at the start and 2 at the end
B) 3 at the start and 0 at the end
C) 1 at the start and 1 at the end
D) 0 at the start and 3 at the end
E) 2 at the start and 0 at the end

Question 66

i. The moving average method merely smooths out the fluctuations in the data.
ii. To apply the moving average method to a time series, the data should follow a linear trend and
Have a definite rhythmic pattern of fluctuations that repeat (say, every three years).
iii. Sales, production and other economic and business series usually have periods of oscillation that
Are of equal length or identical amplitudes.

A) (i), (ii), and (iii) are all correct statements.
B) (i) and (ii) are correct statements but not (iii).
C) (i) and (iii) are correct statements but not (ii).
D) (ii) and (iii) are correct statements but not (i).
E) (i), (ii), and (iii) are all false statements.

Question 67

i. A time series is a collection of data recorded over a period of time, usually monthly, quarterly, or
Yearly.
ii. Episodic and residual variations can be projected into the future.
iii. A forecast is considered necessary in order to have the raw materials, production facilities, and
Staff available to meet estimated future demands.

A) (i), (ii), and (iii) are all correct statements.
B) (i) and (ii) are correct statements but not (iii).
C) (i) and (iii) are correct statements but not (ii).
D) (ii) and (iii) are correct statements but not (i).
E) (i), (ii), and (iii) are all false statements.

Question 68

Which one of the following is not a component of a time series?

A) Secular trend
B) Moving average
C) Seasonal variation
D) Irregular variation
E) Cyclical variation

Question 69

i. A time series is a collection of data recorded over a period of time, usually monthly, quarterly, or
Yearly.
ii. Long-term forecasts are usually from one year to more than 10 years into the future.
iii. A forecast is considered necessary in order to have the raw materials, production facilities, and
Staff available to meet estimated future demands.

A) (i), (ii), and (iii) are all correct statements.
B) (i) and (ii) are correct statements but not (iii).
C) (i) and (iii) are correct statements but not (ii).
D) (ii) and (iii) are correct statements but not (i).
E) (i), (ii), and (iii) are all false statements.

Question 70

i. The moving average method averages out cyclical (C) and irregular (I) components.
ii. To apply the moving average method to a time series, the data should follow a linear trend and
Have a definite rhythmic pattern of fluctuations that repeat (say, every three years).
iii. Sales, production and other economic and business series usually have periods of oscillation that
Are of equal length or identical amplitudes.

A) (i), (ii), and (iii) are all correct statements.
B) (i) and (ii) are correct statements but not (iii).
C) (i) and (iii) are correct statements but not (ii).
D) (ii) and (iii) are correct statements but not (i).
E) (i), (ii), and (iii) are all false statements.

Question 71

How can you describe the moving average method?

A) Useful in smoothing out a time series.
B) Used in measuring seasonal fluctuations.
C) A technique which does not result in a trend line equation.
D) A method for identifying a trend.
E) A method for identifying a trend, but does not result in a trend line equation, is useful in smoothing out a time series and measuring seasonal fluctuations.

Question 72

i. A forecast is considered necessary in order to have the raw materials, production facilities, and
Staff available to meet estimated future demands.
ii. One component of a time series is the secular trend that is the smooth movement of a series over
A short period of time, such as a few months or quarters.
iii. Many business and economic time series have a recurring seasonal pattern.

A) (i), (ii), and (iii) are all correct statements.
B) (i) and (ii) are correct statements but not (iii).
C) (i) and (iii) are correct statements but not (ii).
D) (ii) and (iii) are correct statements but not (i).
E) (i), (ii), and (iii) are all false statements.

Question 73

What time series component was exemplified during the 1980's when the World economy enjoyed a
Period of prosperity?

A) Irregular
B) Cyclical
C) Trend
D) Seasonal
E) Episodic

Question 74

What is the correct order of events in a typical business cycle?

A) Prosperity, recession, depression, and recovery
B) Depression, recovery, recession, and prosperity
C) Recovery, depression, prosperity, and recession
D) Recession, recovery, prosperity, and depression
E) Recession, depression, and regression

Question 75

i. Long-term forecasts are usually from one year to more than 10 years into the future.
ii. A forecast is considered necessary in order to have the raw materials, production facilities, and
Staff available to meet estimated future demands.
iii. One component of a time series is the secular trend that is the smooth movement of a series
Over a short period of time, such as a few months or quarters.

A) (i), (ii), and (iii) are all correct statements.
B) (i) and (ii) are correct statements but not (iii).
C) (i) and (iii) are correct statements but not (ii).
D) (ii) and (iii) are correct statements but not (i).
E) (i), (ii), and (iii) are all false statements.

Question 76

What is the long-term behavior of a variable over an extended period of time called?

A) Secular trend
B) Seasonal variation
C) Cyclical variation
D) Irregular or variation
E) Episodic variation

Question 77

i. The moving average method merely smooths out the fluctuations in the data.
ii. The moving average method averages out cyclical (C) and irregular (I) components.
iii. To apply the moving average method to a time series, the data should follow a linear trend and
Have a definite rhythmic pattern of fluctuations that repeat (say, every three years).

A) (i), (ii), and (iii) are all correct statements.
B) (i) and (ii) are correct statements but not (iii).
C) (i) and (iii) are correct statements but not (ii).
D) (ii) and (iii) are correct statements but not (i).
E) (i), (ii), and (iii) are all false statements.

Question 78

A time series is a collection of data that:

A) records past performance.
B) records future performance.
C) has seasonality removed.
D) has irregular variation removed.
E) is limited to yearly data.

Question 79

For an annual time series extending from 1993 through 2001, how many years would be lost in a
five-year moving average?

A) 2 at the start and 1 at the end
B) 1 at the start and 1 at the end
C) 2 at the start and 0 at the end
D) 0 at the start and 2 at the end
E) 2 at the start and 2 at the end

Question 80

Why are long range predictions considered essential to managing a firm?

A) To develop plans for possible new plants.
B) To have raw materials available for future demand
C) To develop plans for future financing.
D) To have enough staff for future needs.
E) To develop plans for possible new plants and future financing, to have raw materials available for future demands and to have enough staff for future needs.