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Deck 19: Decision Analysis
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Consider the following decision table with rewards in $ millions. 
The opportunity loss for the combination "S3" and "d1" is ___.
A)9
B)5
C)3
D)0
E)-1
The opportunity loss for the combination "S3" and "d1" is ___.A)9
B)5
C)3
D)0
E)-1
Question
Question
Consider the following decision table with rewards in $ millions. 
Using the maximin criterion, the appropriate choice would be ___.
A)d1
B)d2
C)d3
D)d4
E)d5
Using the maximin criterion, the appropriate choice would be ___.A)d1
B)d2
C)d3
D)d4
E)d5
Question
Consider the following decision table with rewards in $ millions. 
Using the Hurwicz criterion with alpha = 0.1, the appropriate choice would be ___.
A)d1
B)d2
C)d3
D)d4
E)d5
Using the Hurwicz criterion with alpha = 0.1, the appropriate choice would be ___.A)d1
B)d2
C)d3
D)d4
E)d5
Question
Question
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Trey Whitmore, 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 maximax criterion, the appropriate alternative would be: ___.
A)lease new equipment
B)purchase new equipment
C)add third shift
D)do nothing
E)do everything
If Trey uses the maximax criterion, the appropriate alternative would be: ___.A)lease new equipment
B)purchase new equipment
C)add third shift
D)do nothing
E)do everything
Question
Question
Dianna Young is evaluating a plan to expand the product ion facilities of International Compressors Company which manufactures natural gas compressors.Dianna feels that the price of coal is a significant factor in her decision.Below are her estimates of payoffs from various expansion plans under different prices of coal.If Diana knows the price of coal in the future will be the same as it is today, what expansion plan should she select? 
A)No expansion
B)Small expansion
C)Medium expansion
D)Cannot determine from information
E)Large expansion
A)No expansion
B)Small expansion
C)Medium expansion
D)Cannot determine from information
E)Large expansion
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Consider the following decision table with rewards in $ millions. 
Using the Hurwicz criterion with alpha = 0.2, the appropriate choice would be ___.
A)d1
B)d2
C)d3
D)d4
E)d5
Using the Hurwicz criterion with alpha = 0.2, the appropriate choice would be ___.A)d1
B)d2
C)d3
D)d4
E)d5
Question
Consider the following decision table with rewards in $ millions. 
Using the maximax criterion, the appropriate choice would be ___.
A)d1
B)d2
C)d3
D)d4
E)d5
Using the maximax criterion, the appropriate choice would be ___.A)d1
B)d2
C)d3
D)d4
E)d5
Question
Consider the following decision table with rewards in $ millions. 
The opportunity loss for the combination "S2" and "d1" is ___.
A)9
B)5
C)3
D)0
E)-1
The opportunity loss for the combination "S2" and "d1" is ___.A)9
B)5
C)3
D)0
E)-1
Question
Question
Dianna Young 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.Below are her estimates of payoffs from various expansion plans under different prices of coal.If Diana knows the price of coal in the future will be higher, what expansion plan should she select? 
A)No expansion
B)Small expansion
C)Medium expansion
D)Cannot determine from information
E)Large expansion
A)No expansion
B)Small expansion
C)Medium expansion
D)Cannot determine from information
E)Large expansion
Question
Trey Whitmore, 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: ___.
A)lease new equipment
B)purchase new equipment
C)add third shift
D)do nothing
E)do everything
If Trey uses the Hurwicz criterion with alpha = 0.1, the appropriate alternative would be: ___.A)lease new equipment
B)purchase new equipment
C)add third shift
D)do nothing
E)do everything
Question
Melissa Rossi, Product Manager at National Consumers, Inc.(NCI), is evaluating alternatives for introducing a new brand of toothpaste with an improved formula to promote teeth whitening.She has identified four alternative markets, and has constructed the following table which shows NCI's rewards (in $1,000,000's)for various levels of acceptance by the markets and their probabilities: 
If Melissa uses the EMV criterion, the appropriate choice would be: ___.
A)Northeast only
B)Southeast only
C)National
D)None (don't introduce the new package)
If Melissa uses the EMV criterion, the appropriate choice would be: ___.A)Northeast only
B)Southeast only
C)National
D)None (don't introduce the new package)
Question
Ray Crawford is evaluating investment alternatives to invest $500,000 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 = 0.5, the appropriate choice is ___.
A)T-Bills
B)Stocks
C)Bonds
D)Mixture
E)none
If Ray uses the Hurwicz criterion with alpha = 0.5, the appropriate choice is ___.A)T-Bills
B)Stocks
C)Bonds
D)Mixture
E)none
Question
Melissa Rossi, Product Manager at National Consumers, Inc.(NCI), is evaluating alternatives for introducing a new brand of toothpaste with an improved formula to promote teeth whitening.She has identified four alternative markets, and has constructed the following table which shows NCI's rewards (in $1,000,000's)for various levels of acceptance by the markets and their probabilities: 
The EMV of introducing the new package in the "Northeast only" market is ___.
A)$50,000
B)$70,000
C)$90,000
D)$260,000
E)$300,000
The EMV of introducing the new package in the "Northeast only" market is ___.A)$50,000
B)$70,000
C)$90,000
D)$260,000
E)$300,000
Question
Ray Crawford is evaluating investment alternatives to invest $500,000 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)for various market conditions: 
If Ray uses the maximax criterion, the appropriate choice would be ___.
A)T-Bills
B)Stocks
C)Bonds
D)Mixture
E)none
If Ray uses the maximax criterion, the appropriate choice would be ___.A)T-Bills
B)Stocks
C)Bonds
D)Mixture
E)none
Question
Ray Crawford is evaluating investment alternatives to invest $500,000 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 EMV criterion, the appropriate choice is ___.
A)T-Bills
B)Stocks
C)Bonds
D)Mixture
E)Bank CD's
If Ray uses the EMV criterion, the appropriate choice is ___.A)T-Bills
B)Stocks
C)Bonds
D)Mixture
E)Bank CD's
Question
Ray Crawford is evaluating investment alternatives to invest $500,000 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 'Bear' and 'Mixture', the opportunity loss is ___.
A)0
B)5
C)13
D)33
E)-10
For the combination of 'Bear' and 'Mixture', the opportunity loss is ___.A)0
B)5
C)13
D)33
E)-10
Question
Ray Crawford is evaluating investment alternatives to invest $500,000 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 maximin criterion, the appropriate choice would be ___.
A)T-Bills
B)Stocks
C)Bonds
D)Mixture
E)none
If Ray uses the maximin criterion, the appropriate choice would be ___.A)T-Bills
B)Stocks
C)Bonds
D)Mixture
E)none
Question
Trey Whitmore, 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 = 0.4, the appropriate alternative would be: ___.
A)lease new equipment
B)purchase new equipment
C)add third shift
D)do nothing
E)do everything
If Trey uses the Hurwicz criterion with alpha = 0.4, the appropriate alternative would be: ___.A)lease new equipment
B)purchase new equipment
C)add third shift
D)do nothing
E)do everything
Question
Ray Crawford is evaluating investment alternatives to invest $500,000 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 'Stocks' and 'Bonds' choices, the indifference value of Hurwicz's alpha is ___.
A)0.82
B)0.71
C)0.65
D)0.33
E)0.50
For the 'Stocks' and 'Bonds' choices, the indifference value of Hurwicz's alpha is ___.A)0.82
B)0.71
C)0.65
D)0.33
E)0.50
Question
Ray Crawford is evaluating investment alternatives to invest $500,000 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: 
The EMV of investing in Stocks is ___.
A)$30,000
B)$63,000
C)$78,000
D)$81,000
E)$100,000
The EMV of investing in Stocks is ___.A)$30,000
B)$63,000
C)$78,000
D)$81,000
E)$100,000
Question
Trey Whitmore, 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: ___.
A)lease new equipment
B)purchase new equipment
C)add third shift
D)do nothing
E)do everything
If Trey uses the maximin criterion, the appropriate alternative would be: ___.A)lease new equipment
B)purchase new equipment
C)add third shift
D)do nothing
E)do everything
Question
Ray Crawford is evaluating investment alternatives to invest $500,000 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 ___.
A)T-Bills
B)Stocks
C)Bonds
D)Mixture
E)none
If Ray uses the Hurwicz criterion with alpha = 0.1, the appropriate choice is ___.A)T-Bills
B)Stocks
C)Bonds
D)Mixture
E)none
Question
Ray Crawford is evaluating investment alternatives to invest $500,000 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 = 0.9, the appropriate choice is ___.
A)T-Bills
B)Stocks
C)Bonds
D)Mixture
E)none
If Ray uses the Hurwicz criterion with alpha = 0.9, the appropriate choice is ___.A)T-Bills
B)Stocks
C)Bonds
D)Mixture
E)none
Question
Ray Crawford is evaluating investment alternatives to invest $500,000 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 ___.
A)0
B)5
C)7
D)8
E)-10
For the combination of 'T-Bills' and 'Neutral', the opportunity loss is ___.A)0
B)5
C)7
D)8
E)-10
Question
Trey Whitmore, 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)for the three possible levels of market demand: 
The opportunity loss for the combination "Purchase New Equipment" and "High" is ___.
A)0.0
B)0.5
C)2.5
D)3.0
E)3.5
The opportunity loss for the combination "Purchase New Equipment" and "High" is ___.A)0.0
B)0.5
C)2.5
D)3.0
E)3.5
Question
Ray Crawford is evaluating investment alternatives to invest $500,000 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 'T-Bills' and 'Bonds' choices, the indifference value of Hurwicz's alpha is ___.
A)0.8267
B)0.7134
C)0.6555
D)0.3333
E)0.5000
For the 'T-Bills' and 'Bonds' choices, the indifference value of Hurwicz's alpha is ___.A)0.8267
B)0.7134
C)0.6555
D)0.3333
E)0.5000
Question
Ray Crawford is evaluating investment alternatives to invest $500,000 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: 
The EMV of investing in Bonds is ___.
A)$30,000
B)$63,000
C)$78,000
D)$81,000
E)$100,000
The EMV of investing in Bonds is ___.A)$30,000
B)$63,000
C)$78,000
D)$81,000
E)$100,000
Question
Trey Whitmore, 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: 
The opportunity loss for the combination "Purchase New Equipment" and "Low" is ___.
A)0.5
B)1.5
C)2.5
D)3.0
E)3.5
The opportunity loss for the combination "Purchase New Equipment" and "Low" is ___.A)0.5
B)1.5
C)2.5
D)3.0
E)3.5
Question
Melissa Rossi, Product Manager at National Consumers, Inc.(NCI), is evaluating alternatives for introducing a new brand of toothpaste with an improved formula to promote teeth whitening.She has identified four alternative markets, and has constructed the following table which shows NCI's rewards (in $1,000,000's)for various levels of acceptance by the markets and their probabilities: 
The EMV of introducing the new package in the "National" market is ___.
A)$50,000
B)$70,000
C)$90,000
D)$260,000
E)$300,000
The EMV of introducing the new package in the "National" market is ___.A)$50,000
B)$70,000
C)$90,000
D)$260,000
E)$300,000
Question
Ray Crawford is evaluating investment alternatives for the $1000,000 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 ___.
A)$36,600
B)$24,600
C)$56,800
D)$48,200
E)$45,800
If the advisor predicts a Bear market the EMV of the Bonds alternative, using revised probabilities, is ___.A)$36,600
B)$24,600
C)$56,800
D)$48,200
E)$45,800
Question
Ray Crawford is evaluating investment alternatives to invest $500,000 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: 
The expected value of perfect information is ___.
A)$57,000
B)$63,000
C)$79,000
D)$82,000
E)$87,000
The expected value of perfect information is ___.A)$57,000
B)$63,000
C)$79,000
D)$82,000
E)$87,000
Question
Question
Ray Crawford is evaluating investment alternatives to invest $500,000 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 revised probability of a Bull market, P (S1|F1), is ___.
A)0.877
B)0.894
C)0.953
D)0.923
E)1.000
If the advisor predicts a Bull market, the revised probability of a Bull market, P (S1|F1), is ___.A)0.877
B)0.894
C)0.953
D)0.923
E)1.000
Question
Melissa Rossi, Product Manager at National Consumers, Inc.(NCI), is evaluating alternatives for introducing a new brand of toothpaste with an improved formula to promote teeth whitening.She has identified four alternative markets, and has constructed the following table which shows NCI's rewards (in $1,000,000's)for various levels of acceptance by the markets and their probabilities: 
The expected value of perfect information is ___.
A)$420,000
B)$570,000
C)$660,000
D)$720,000
E)$890,000
The expected value of perfect information is ___.A)$420,000
B)$570,000
C)$660,000
D)$720,000
E)$890,000
Question
Melissa Rossi, Product Manager at National Consumers, Inc.(NCI), is evaluating alternatives for introducing a new brand of toothpaste with an improved formula to promote teeth whitening.She has identified four alternative markets, and has constructed the following table which shows NCI's rewards (in $1,000,000's)for various levels of acceptance by the markets and their probabilities: 
The expected monetary payoff with perfect information is ___.
A)$570,000
B)$680,000
C)$760,000
D)$830,000
E)$980,000
The expected monetary payoff with perfect information is ___.A)$570,000
B)$680,000
C)$760,000
D)$830,000
E)$980,000
Question
Ray Crawford is evaluating investment alternatives for the $1000,000 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 Stocks alternative, using revised probabilities, is ___.
A)$132,300
B)-$73,900
C)$127,600
D)-$99,800
E)$100,000
If the advisor predicts a Bear market the EMV of the Stocks alternative, using revised probabilities, is ___.A)$132,300
B)-$73,900
C)$127,600
D)-$99,800
E)$100,000
Question
Question
Ray Crawford is evaluating investment alternatives to invest $500,000 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 ___.
A)0.524
B)0.636
C)0.784
D)0.812
E)0.000
If the advisor predicts a Bear market the revised probability of a Bear market, P (S2|F2), is ___.A)0.524
B)0.636
C)0.784
D)0.812
E)0.000
Question
Ray Crawford is evaluating investment alternatives for the $1000,000 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: 
The EMV of this investment opportunity with the advisor's prediction is ___.
A)$167,379
B)$174,200
C)$153,900
D)$136,700
E)$140,011
The EMV of this investment opportunity with the advisor's prediction is ___.A)$167,379
B)$174,200
C)$153,900
D)$136,700
E)$140,011
Question
Ray Crawford is evaluating investment alternatives for the $1000,000 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 ___.
A)$85,240
B)$25,710
C)$108,450
D)$75,480
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 ___.A)$85,240
B)$25,710
C)$108,450
D)$75,480
Question
Question
Question
Ray Crawford is evaluating investment alternatives for the $1000,000 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 Stocks alternative, using revised probabilities, is ___.
A)$168,900
B)$207,650
C)$157,300
D)$306,000
E)$134,650
If the advisor predicts a Bull market the EMV of the Stocks alternative, using revised probabilities, is ___.A)$168,900
B)$207,650
C)$157,300
D)$306,000
E)$134,650
Question
Ray Crawford is evaluating investment alternatives to invest $500,000 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: 
The EMV of investing in Mixture is ___.
A)$30,000
B)$63,000
C)$78,000
D)$81,000
E)$100,000
The EMV of investing in Mixture is ___.A)$30,000
B)$63,000
C)$78,000
D)$81,000
E)$100,000
Question
Question
Ray Crawford is evaluating investment alternatives to invest $500,000 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: 
The expected monetary payoff with perfect information is ___.
A)$128,000
B)$137,000
C)$144,000
D)$151,000
E)$127,000
The expected monetary payoff with perfect information is ___.A)$128,000
B)$137,000
C)$144,000
D)$151,000
E)$127,000
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Deck 19: Decision Analysis
1
In a decision-making scenario, if the decision maker knows which state of nature will occur, the scenario is called decision-making under certainty.
True
2
A risk-taker decision maker will bail out of a risky scenario only if the compensation to bail out is more than the expected monetary payoff from the risky scenario.
True
3
In a decision-making scenario, if it is not known which of the states of nature will occur and further if the probabilities of occurrence of the states are also unknown, the scenario is called decision-making under double risk.
False
4
In a decision-making under risk scenario, the expected monetary value of a decision alternative is the arithmetic average of the payoffs to the decision alternative in each state of the nature.
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5
In a decision-making under uncertainty scenario, the best decision alternative based on the strategy of minmax regret will always have zero regret.
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6
In a decision-making under uncertainty scenario, the decision maker attempts to develop a strategy based on payoffs since virtually no information is available about which state of nature will occur.
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7
The expected monetary payoff of perfect information is the value of perfect information.
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8
In a decision analysis problem, variables (such as investing in common stocks or corporate bonds)which are under the decision maker's control are called decision alternatives.
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9
The value of sample information is the ratio of the expected monetary value with information to the expected monetary value without information.
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10
In decision-making under risk, the expected monetary value without information is the largest of the expected monetary values for the various decision alternatives.
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11
In a decision-making under risk scenario, the expected monetary value of a decision alternative is the weighted average (using the probability of each state of nature as the weight)of the payoffs to the decision alternative in each state of the nature.
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12
The value of perfect information is the difference between the monetary payoff with perfect information and the expected monetary payoff with no information.
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13
In decision-making under risk, the expected monetary payoff of perfect information is the weighted average of the best payoff for each state of nature (using the probability of the state of nature as the weight).
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14
In a decision-making under uncertainty scenario, the decision maker chooses the decision alternative that has the minimum expected (i.e., probability-weighted)payoff among all the available alternatives.
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15
In a decision-making under uncertainty scenario using the strategy of minmax regret, all the entries in the opportunity loss table must be zero or positive.
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16
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.
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17
In a decision analysis problem, variables (such as general macroeconomic conditions)which are not under the decision maker's control are called prior probabilities.
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18
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.
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19
A risk-avoider decision maker will bail out of a risky scenario only if the compensation to bail out is more than the expected monetary payoff from the risky scenario.
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20
The concept of utility can be helpful to apply decision analysis techniques to situations which do not lend themselves to expected monetary value analysis.
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21
Dianna Young 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.She can estimate how much the company would make under various prices of coal.If Dianna is making her decision under certainty, then she knows the ___________.
A)profit possible under various prices of coal
B)whether the company will expand its production facilities
C)future price of coal
D)what decisions will be made at each point
E)future state of the economy
A)profit possible under various prices of coal
B)whether the company will expand its production facilities
C)future price of coal
D)what decisions will be made at each point
E)future state of the economy
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
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k this deck
22
In decision-making under uncertainty, an optimistic approach is the ___.
A)maximin criterion
B)maximax criterion
C)Hurwicz criterion
D)minimax regret strategy
E)maximin regret strategy
A)maximin criterion
B)maximax criterion
C)Hurwicz criterion
D)minimax regret strategy
E)maximin regret strategy
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
23
Dan Hein owns the mineral and drilling rights to a 1,000 hectare tract of land.If he drills a well and does not strike oil his net loss will be $500,000, but if he drills a well and strikes oil his net gain will be $1,000,000.If he does not drill, his loss is the cost of the mineral and drilling rights, which amount to $10,000.The probability of the state of nature "oil in the tract" is unknown.If Dan is an optimist, he would choose the ___.
A)maximin criterion
B)maximax criterion
C)Hurwicz criterion
D)minimax regret strategy
E)maximin regret strategy
A)maximin criterion
B)maximax criterion
C)Hurwicz criterion
D)minimax regret strategy
E)maximin regret strategy
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
24
Consider the following decision table with rewards in $ millions. The opportunity loss for the combination "S3" and "d1" is ___.
A)9
B)5
C)3
D)0
E)-1
The opportunity loss for the combination "S3" and "d1" is ___.A)9
B)5
C)3
D)0
E)-1
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
25
In decision-making under uncertainty, the approach that considers only the best and the worst payoffs for each decision alternative is the ___.
A)maximin criterion
B)maximax criterion
C)Hurwicz criterion
D)minimax regret strategy
E)maximin regret strategy
A)maximin criterion
B)maximax criterion
C)Hurwicz criterion
D)minimax regret strategy
E)maximin regret strategy
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
26
Consider the following decision table with rewards in $ millions. Using the maximin criterion, the appropriate choice would be ___.
A)d1
B)d2
C)d3
D)d4
E)d5
Using the maximin criterion, the appropriate choice would be ___.A)d1
B)d2
C)d3
D)d4
E)d5
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
27
Consider the following decision table with rewards in $ millions. Using the Hurwicz criterion with alpha = 0.1, the appropriate choice would be ___.
A)d1
B)d2
C)d3
D)d4
E)d5
Using the Hurwicz criterion with alpha = 0.1, the appropriate choice would be ___.A)d1
B)d2
C)d3
D)d4
E)d5
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
28
Dan Hein owns the mineral and drilling rights to a 1,000 hectare tract of land.If he drills a well and does not strike oil his net loss will be $500,000, but if he drills a well and strikes oil his net gain will be $1,000,000.If he does not drill, his loss is the cost of the mineral and drilling rights, which amount to $10,000.For Dan's decision problem, the variable "drill the well" is one of the ___.
A)payoffs
B)decision alternatives
C)states of nature
D)revised probabilities
E)prior probabilities
A)payoffs
B)decision alternatives
C)states of nature
D)revised probabilities
E)prior probabilities
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
29
Dianna Young 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 ___.
A)payoffs
B)decision alternatives
C)states of nature
D)revised probabilities
E)prior probabilities
A)payoffs
B)decision alternatives
C)states of nature
D)revised probabilities
E)prior probabilities
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
30
Trey Whitmore, 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 maximax criterion, the appropriate alternative would be: ___.
A)lease new equipment
B)purchase new equipment
C)add third shift
D)do nothing
E)do everything
If Trey uses the maximax criterion, the appropriate alternative would be: ___.A)lease new equipment
B)purchase new equipment
C)add third shift
D)do nothing
E)do everything
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
31
In a decision analysis problem, variables (such as investing in common stocks or corporate bonds)which are under the decision maker's control are called ___.
A)payoffs
B)decision alternatives
C)states of nature
D)revised probabilities
E)prior probabilities
A)payoffs
B)decision alternatives
C)states of nature
D)revised probabilities
E)prior probabilities
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
32
Dianna Young is evaluating a plan to expand the product ion facilities of International Compressors Company which manufactures natural gas compressors.Dianna feels that the price of coal is a significant factor in her decision.Below are her estimates of payoffs from various expansion plans under different prices of coal.If Diana knows the price of coal in the future will be the same as it is today, what expansion plan should she select?
A)No expansion
B)Small expansion
C)Medium expansion
D)Cannot determine from information
E)Large expansion
A)No expansion
B)Small expansion
C)Medium expansion
D)Cannot determine from information
E)Large expansion
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
33
Dan Hein owns the mineral and drilling rights to a 1,000 hectare tract of land.If he drills a well and does not strike oil his net loss will be $500,000, but if he drills a well and strikes oil his net gain will be $1,000,000.If he does not drill, his loss is the cost of the mineral and drilling rights, which amount to $10,000.The probability of the state of nature "oil in the tract" is unknown.If Dan is a pessimist, he would choose the ___.
A)maximin criterion
B)maximax criterion
C)Hurwicz criterion
D)minimax regret strategy
E)maximin regret strategy
A)maximin criterion
B)maximax criterion
C)Hurwicz criterion
D)minimax regret strategy
E)maximin regret strategy
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
34
In decision-making under uncertainty, a pessimistic approach is the ___.
A)maximin criterion
B)maximax criterion
C)Hurwicz criterion
D)minimax regret strategy
E)maximin regret strategy
A)maximin criterion
B)maximax criterion
C)Hurwicz criterion
D)minimax regret strategy
E)maximin regret strategy
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
35
Dan Hein owns the mineral and drilling rights to a 1,000 hectare tract of land.If he drills a well and does not strike oil his net loss will be $500,000, but if he drills a well and strikes oil his net gain will be $1,000,000.If he does not drill, his loss is the cost of the mineral and drilling rights, which amount to $10,000.For Dan's decision problem, the variable "oil in the tract" is one of the ___.
A)payoffs
B)decision alternatives
C)states of nature
D)revised probabilities
E)prior probabilities
A)payoffs
B)decision alternatives
C)states of nature
D)revised probabilities
E)prior probabilities
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
36
Consider the following decision table with rewards in $ millions. Using the Hurwicz criterion with alpha = 0.2, the appropriate choice would be ___.
A)d1
B)d2
C)d3
D)d4
E)d5
Using the Hurwicz criterion with alpha = 0.2, the appropriate choice would be ___.A)d1
B)d2
C)d3
D)d4
E)d5
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
37
Consider the following decision table with rewards in $ millions. Using the maximax criterion, the appropriate choice would be ___.
A)d1
B)d2
C)d3
D)d4
E)d5
Using the maximax criterion, the appropriate choice would be ___.A)d1
B)d2
C)d3
D)d4
E)d5
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
38
Consider the following decision table with rewards in $ millions. The opportunity loss for the combination "S2" and "d1" is ___.
A)9
B)5
C)3
D)0
E)-1
The opportunity loss for the combination "S2" and "d1" is ___.A)9
B)5
C)3
D)0
E)-1
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
39
Dan Hein owns the mineral and drilling rights to a 1,000 hectare tract of land.If he drills a well and does not strike oil his net loss will be $500,000, but if he drills a well and strikes oil his net gain will be $1,000,000.If he does not drill, his loss is the cost of the mineral and drilling rights, which amount to $10,000.For Dan's decision problem, the variable "net loss of $500,000" is one of the ___.
A)payoffs
B)decision alternatives
C)states of nature
D)revised probabilities
E)prior probabilities
A)payoffs
B)decision alternatives
C)states of nature
D)revised probabilities
E)prior probabilities
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
40
Dianna Young 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.Below are her estimates of payoffs from various expansion plans under different prices of coal.If Diana knows the price of coal in the future will be higher, what expansion plan should she select?
A)No expansion
B)Small expansion
C)Medium expansion
D)Cannot determine from information
E)Large expansion
A)No expansion
B)Small expansion
C)Medium expansion
D)Cannot determine from information
E)Large expansion
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
41
Trey Whitmore, 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: ___.
A)lease new equipment
B)purchase new equipment
C)add third shift
D)do nothing
E)do everything
If Trey uses the Hurwicz criterion with alpha = 0.1, the appropriate alternative would be: ___.A)lease new equipment
B)purchase new equipment
C)add third shift
D)do nothing
E)do everything
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
42
Melissa Rossi, Product Manager at National Consumers, Inc.(NCI), is evaluating alternatives for introducing a new brand of toothpaste with an improved formula to promote teeth whitening.She has identified four alternative markets, and has constructed the following table which shows NCI's rewards (in $1,000,000's)for various levels of acceptance by the markets and their probabilities: If Melissa uses the EMV criterion, the appropriate choice would be: ___.
A)Northeast only
B)Southeast only
C)National
D)None (don't introduce the new package)
If Melissa uses the EMV criterion, the appropriate choice would be: ___.A)Northeast only
B)Southeast only
C)National
D)None (don't introduce the new package)
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
43
Ray Crawford is evaluating investment alternatives to invest $500,000 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 = 0.5, the appropriate choice is ___.
A)T-Bills
B)Stocks
C)Bonds
D)Mixture
E)none
If Ray uses the Hurwicz criterion with alpha = 0.5, the appropriate choice is ___.A)T-Bills
B)Stocks
C)Bonds
D)Mixture
E)none
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
44
Melissa Rossi, Product Manager at National Consumers, Inc.(NCI), is evaluating alternatives for introducing a new brand of toothpaste with an improved formula to promote teeth whitening.She has identified four alternative markets, and has constructed the following table which shows NCI's rewards (in $1,000,000's)for various levels of acceptance by the markets and their probabilities: The EMV of introducing the new package in the "Northeast only" market is ___.
A)$50,000
B)$70,000
C)$90,000
D)$260,000
E)$300,000
The EMV of introducing the new package in the "Northeast only" market is ___.A)$50,000
B)$70,000
C)$90,000
D)$260,000
E)$300,000
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
45
Ray Crawford is evaluating investment alternatives to invest $500,000 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)for various market conditions: If Ray uses the maximax criterion, the appropriate choice would be ___.
A)T-Bills
B)Stocks
C)Bonds
D)Mixture
E)none
If Ray uses the maximax criterion, the appropriate choice would be ___.A)T-Bills
B)Stocks
C)Bonds
D)Mixture
E)none
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
46
Ray Crawford is evaluating investment alternatives to invest $500,000 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 EMV criterion, the appropriate choice is ___.
A)T-Bills
B)Stocks
C)Bonds
D)Mixture
E)Bank CD's
If Ray uses the EMV criterion, the appropriate choice is ___.A)T-Bills
B)Stocks
C)Bonds
D)Mixture
E)Bank CD's
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
47
Ray Crawford is evaluating investment alternatives to invest $500,000 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 'Bear' and 'Mixture', the opportunity loss is ___.
A)0
B)5
C)13
D)33
E)-10
For the combination of 'Bear' and 'Mixture', the opportunity loss is ___.A)0
B)5
C)13
D)33
E)-10
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
48
Ray Crawford is evaluating investment alternatives to invest $500,000 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 maximin criterion, the appropriate choice would be ___.
A)T-Bills
B)Stocks
C)Bonds
D)Mixture
E)none
If Ray uses the maximin criterion, the appropriate choice would be ___.A)T-Bills
B)Stocks
C)Bonds
D)Mixture
E)none
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
49
Trey Whitmore, 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 = 0.4, the appropriate alternative would be: ___.
A)lease new equipment
B)purchase new equipment
C)add third shift
D)do nothing
E)do everything
If Trey uses the Hurwicz criterion with alpha = 0.4, the appropriate alternative would be: ___.A)lease new equipment
B)purchase new equipment
C)add third shift
D)do nothing
E)do everything
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
50
Ray Crawford is evaluating investment alternatives to invest $500,000 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 'Stocks' and 'Bonds' choices, the indifference value of Hurwicz's alpha is ___.
A)0.82
B)0.71
C)0.65
D)0.33
E)0.50
For the 'Stocks' and 'Bonds' choices, the indifference value of Hurwicz's alpha is ___.A)0.82
B)0.71
C)0.65
D)0.33
E)0.50
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
51
Ray Crawford is evaluating investment alternatives to invest $500,000 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: The EMV of investing in Stocks is ___.
A)$30,000
B)$63,000
C)$78,000
D)$81,000
E)$100,000
The EMV of investing in Stocks is ___.A)$30,000
B)$63,000
C)$78,000
D)$81,000
E)$100,000
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
52
Trey Whitmore, 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: ___.
A)lease new equipment
B)purchase new equipment
C)add third shift
D)do nothing
E)do everything
If Trey uses the maximin criterion, the appropriate alternative would be: ___.A)lease new equipment
B)purchase new equipment
C)add third shift
D)do nothing
E)do everything
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
53
Ray Crawford is evaluating investment alternatives to invest $500,000 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 ___.
A)T-Bills
B)Stocks
C)Bonds
D)Mixture
E)none
If Ray uses the Hurwicz criterion with alpha = 0.1, the appropriate choice is ___.A)T-Bills
B)Stocks
C)Bonds
D)Mixture
E)none
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
54
Ray Crawford is evaluating investment alternatives to invest $500,000 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 = 0.9, the appropriate choice is ___.
A)T-Bills
B)Stocks
C)Bonds
D)Mixture
E)none
If Ray uses the Hurwicz criterion with alpha = 0.9, the appropriate choice is ___.A)T-Bills
B)Stocks
C)Bonds
D)Mixture
E)none
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
55
Ray Crawford is evaluating investment alternatives to invest $500,000 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 ___.
A)0
B)5
C)7
D)8
E)-10
For the combination of 'T-Bills' and 'Neutral', the opportunity loss is ___.A)0
B)5
C)7
D)8
E)-10
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
56
Trey Whitmore, 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)for the three possible levels of market demand: The opportunity loss for the combination "Purchase New Equipment" and "High" is ___.
A)0.0
B)0.5
C)2.5
D)3.0
E)3.5
The opportunity loss for the combination "Purchase New Equipment" and "High" is ___.A)0.0
B)0.5
C)2.5
D)3.0
E)3.5
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
57
Ray Crawford is evaluating investment alternatives to invest $500,000 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 'T-Bills' and 'Bonds' choices, the indifference value of Hurwicz's alpha is ___.
A)0.8267
B)0.7134
C)0.6555
D)0.3333
E)0.5000
For the 'T-Bills' and 'Bonds' choices, the indifference value of Hurwicz's alpha is ___.A)0.8267
B)0.7134
C)0.6555
D)0.3333
E)0.5000
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
58
Ray Crawford is evaluating investment alternatives to invest $500,000 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: The EMV of investing in Bonds is ___.
A)$30,000
B)$63,000
C)$78,000
D)$81,000
E)$100,000
The EMV of investing in Bonds is ___.A)$30,000
B)$63,000
C)$78,000
D)$81,000
E)$100,000
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
59
Trey Whitmore, 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: The opportunity loss for the combination "Purchase New Equipment" and "Low" is ___.
A)0.5
B)1.5
C)2.5
D)3.0
E)3.5
The opportunity loss for the combination "Purchase New Equipment" and "Low" is ___.A)0.5
B)1.5
C)2.5
D)3.0
E)3.5
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
60
Melissa Rossi, Product Manager at National Consumers, Inc.(NCI), is evaluating alternatives for introducing a new brand of toothpaste with an improved formula to promote teeth whitening.She has identified four alternative markets, and has constructed the following table which shows NCI's rewards (in $1,000,000's)for various levels of acceptance by the markets and their probabilities: The EMV of introducing the new package in the "National" market is ___.
A)$50,000
B)$70,000
C)$90,000
D)$260,000
E)$300,000
The EMV of introducing the new package in the "National" market is ___.A)$50,000
B)$70,000
C)$90,000
D)$260,000
E)$300,000
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
61
Ray Crawford is evaluating investment alternatives for the $1000,000 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 ___.
A)$36,600
B)$24,600
C)$56,800
D)$48,200
E)$45,800
If the advisor predicts a Bear market the EMV of the Bonds alternative, using revised probabilities, is ___.A)$36,600
B)$24,600
C)$56,800
D)$48,200
E)$45,800
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
62
Ray Crawford is evaluating investment alternatives to invest $500,000 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: The expected value of perfect information is ___.
A)$57,000
B)$63,000
C)$79,000
D)$82,000
E)$87,000
The expected value of perfect information is ___.A)$57,000
B)$63,000
C)$79,000
D)$82,000
E)$87,000
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
63
The expected monetary value without information is $60, and the expected monetary payoff with perfect information is $120.The expected value of perfect information is __.
A)$60
B)$2
C)$180
D)$0.50
E)$120
A)$60
B)$2
C)$180
D)$0.50
E)$120
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
64
Ray Crawford is evaluating investment alternatives to invest $500,000 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 revised probability of a Bull market, P (S1|F1), is ___.
A)0.877
B)0.894
C)0.953
D)0.923
E)1.000
If the advisor predicts a Bull market, the revised probability of a Bull market, P (S1|F1), is ___.A)0.877
B)0.894
C)0.953
D)0.923
E)1.000
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
65
Melissa Rossi, Product Manager at National Consumers, Inc.(NCI), is evaluating alternatives for introducing a new brand of toothpaste with an improved formula to promote teeth whitening.She has identified four alternative markets, and has constructed the following table which shows NCI's rewards (in $1,000,000's)for various levels of acceptance by the markets and their probabilities: The expected value of perfect information is ___.
A)$420,000
B)$570,000
C)$660,000
D)$720,000
E)$890,000
The expected value of perfect information is ___.A)$420,000
B)$570,000
C)$660,000
D)$720,000
E)$890,000
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66
Melissa Rossi, Product Manager at National Consumers, Inc.(NCI), is evaluating alternatives for introducing a new brand of toothpaste with an improved formula to promote teeth whitening.She has identified four alternative markets, and has constructed the following table which shows NCI's rewards (in $1,000,000's)for various levels of acceptance by the markets and their probabilities: The expected monetary payoff with perfect information is ___.
A)$570,000
B)$680,000
C)$760,000
D)$830,000
E)$980,000
The expected monetary payoff with perfect information is ___.A)$570,000
B)$680,000
C)$760,000
D)$830,000
E)$980,000
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67
Ray Crawford is evaluating investment alternatives for the $1000,000 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 Stocks alternative, using revised probabilities, is ___.
A)$132,300
B)-$73,900
C)$127,600
D)-$99,800
E)$100,000
If the advisor predicts a Bear market the EMV of the Stocks alternative, using revised probabilities, is ___.A)$132,300
B)-$73,900
C)$127,600
D)-$99,800
E)$100,000
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68
Frank Willis 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 ___.
A)a risk avoider
B)an optimist
C)a risk taker
D)risk neutral (an EMV'er)
E)a gambler
A)a risk avoider
B)an optimist
C)a risk taker
D)risk neutral (an EMV'er)
E)a gambler
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69
Ray Crawford is evaluating investment alternatives to invest $500,000 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 ___.
A)0.524
B)0.636
C)0.784
D)0.812
E)0.000
If the advisor predicts a Bear market the revised probability of a Bear market, P (S2|F2), is ___.A)0.524
B)0.636
C)0.784
D)0.812
E)0.000
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70
Ray Crawford is evaluating investment alternatives for the $1000,000 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: The EMV of this investment opportunity with the advisor's prediction is ___.
A)$167,379
B)$174,200
C)$153,900
D)$136,700
E)$140,011
The EMV of this investment opportunity with the advisor's prediction is ___.A)$167,379
B)$174,200
C)$153,900
D)$136,700
E)$140,011
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71
Ray Crawford is evaluating investment alternatives for the $1000,000 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 ___.
A)$85,240
B)$25,710
C)$108,450
D)$75,480
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 ___.A)$85,240
B)$25,710
C)$108,450
D)$75,480
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72
Frank Willis 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 $10,000, he is ___.
A)a risk avoider
B)an optimist
C)a risk taker
D)risk neutral (an EMV'er)
E)a gambler
A)a risk avoider
B)an optimist
C)a risk taker
D)risk neutral (an EMV'er)
E)a gambler
Unlock Deck
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Unlock Deck
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73
In decision-making under risk, the expected monetary value without information is ___.
A)the weighted average of the best payoff for each state of nature
B)the largest of the EMVs for the different decision alternatives
C)never smaller than the expected monetary payoff with perfect information
D)the average of the EMVs
E)half the expected monetary value with information
A)the weighted average of the best payoff for each state of nature
B)the largest of the EMVs for the different decision alternatives
C)never smaller than the expected monetary payoff with perfect information
D)the average of the EMVs
E)half the expected monetary value with information
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74
Ray Crawford is evaluating investment alternatives for the $1000,000 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 Stocks alternative, using revised probabilities, is ___.
A)$168,900
B)$207,650
C)$157,300
D)$306,000
E)$134,650
If the advisor predicts a Bull market the EMV of the Stocks alternative, using revised probabilities, is ___.A)$168,900
B)$207,650
C)$157,300
D)$306,000
E)$134,650
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75
Ray Crawford is evaluating investment alternatives to invest $500,000 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: The EMV of investing in Mixture is ___.
A)$30,000
B)$63,000
C)$78,000
D)$81,000
E)$100,000
The EMV of investing in Mixture is ___.A)$30,000
B)$63,000
C)$78,000
D)$81,000
E)$100,000
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76
The expected monetary value without information is $2,500, and the expected monetary payoff with perfect information is $5,000.The expected value of perfect information is ___.
A)$7,500
B)$2,500
C)$1,500
D)$2,000
E)$1,250
A)$7,500
B)$2,500
C)$1,500
D)$2,000
E)$1,250
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77
Ray Crawford is evaluating investment alternatives to invest $500,000 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: The expected monetary payoff with perfect information is ___.
A)$128,000
B)$137,000
C)$144,000
D)$151,000
E)$127,000
The expected monetary payoff with perfect information is ___.A)$128,000
B)$137,000
C)$144,000
D)$151,000
E)$127,000
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
Unlock Deck
k this deck
Unlock Deck
Unlock for access to all 77 flashcards in this deck.
