Q&A Hero

Q: Cody invests $1,800 per year from his summer wages at a 4% annual interest rate. He plans to take a European vacation at the end of 4 years when he graduates from college. How much will he have available to spend on his vacation? A. $7,787.52 B. $7,488.00 C. $6,912.00 D. $7,200.00 E. $7,643.70

Q: Marshall has received an inheritance and wants to invest a sum of money today that will yield $5,000 at the end of each of the next 10 years. Assuming he can earn an interest rate of 5% compounded annually, how much of his inheritance must he invest today? A. $50,000.00 B. $47,500.00 C. $45,125.00 D. $38,608.50 E. $100,000.00

Q: Patricia wants to invest a sum of money today that will yield $10,000 at the end of 6 years. Assuming she can earn an interest rate of 6% compounded annually, how much must she invest today? A. $7,050 B. $9,400 C. $6,000 D. $8,836 E. $8,306

Q: Jason has a loan that requires a single payment of $4,000 at the end of 3 years. The loan's interest rate is 6%, compounded semiannually. How much did Jason borrow? A. $3,358.40 B. $4,000.00 C. $3,660.40 D. $4,776.40 E. $3,350.00

Q: A company is considering investing in a project that is expected to return $350,000 four years from now. How much is the company willing to pay for this investment if the company requires a 12% return? A. $ 55,606 B. $137,681 C. $222,425 D. $265,764 E. $350,000

Q: Which interest rate column would you use from a present value or future value table for 8% interest compounded quarterly? A. 12% B. 6% C. 3% D. 2% E. 1%

Q: If we want to know the value of present-day assets at a future date, we can use: A. Present value computations B. Annuity computations C. Interest computations. D. Future value computations. E. Earnings computations.

Q: Interest may be defined as: A. Time. B. A borrower's payment to the owner of an asset for its use. C. The future value of a present amount. D. Always a liability. E. Always an asset.

Q: 7156 is the interest factor on the Future Value of an Annuity table; n = 6; i = 10%

Q: With deposits of $5,000 at the end of each year, you will have accumulated $38,578 at the end of the sixth year if the annual rate of interest is 10%.

Q: The present value of $5,000 per year for three years at 12% compounded annually is $12,009.

Q: A series of equal payments made or received at the end of each period is an ordinary annuity.

Q: An annuity is a series of equal payments occurring at equal intervals.

Q: 3605is the future value of $1 factor, 8%, 4 periods

Q: At an annual interest rate of 8% compounded annually, $5,300 will accumulate to a total of $7,210.65 in 5 years.

Q: The future value of $100 compounded semiannually for 3 years at 12% equals $140.49.

Q: The number of periods in a future value calculation may only be expressed in years.

Q: 5645 is the present value of 1 factor, 10%, 6 periods

Q: Sandra has a savings account that has accumulated to $50,000. She started with $28,225, and earned interest at 10% compounded annually. It took her five years to accumulate the $50,000.

Q: The present value of $2,000 to be received nine years from today at 8% interest compounded annually is $1,000.

Q: The present value factor for determining the present value of $6,300 to be received three years from today at 10% interest compounded semiannually is 0.7462.

Q: The number of periods in a present value calculation may only be expressed in years.

Q: Present and future value computations enable companies to measure or estimate the interest component of holding assets or liabilities over time.

Q: An interest rate is also called a discount rate.

Q: From the perspective of an account holder, a savings account is a liability with interest.

Q: Interest is the borrower's payment to the owner of an asset for its use.

Q: Alternatives 1 and 2 in the following payoff table represent the two possible manufacturing strategies that the EKA manufacturing company can adopt. The level of demand affects the success of both strategies. The states of nature (SI) represent the levels of demand for the company products. S1, S2, and S3 characterize high, medium, and low demand, respectively. The payoff values are in thousands of dollars. The management believes that weather conditions significantly affect the level of demand. 48 monthly sales reports are randomly selected. These monthly sales reports show 15 months with high demand, 28 months with medium demand, and 5 months with low demand. 12 of the 15 months with high demand had favorable weather conditions. 14 of the 28 months with medium demand had favorable weather conditions. Only 1 of the 5 months with low demand had favorable weather conditions. Construct the revised probability table for favorable weather conditions, and find the probability of high demand given that the weather conditions are favorable.

Q: Alternatives 1 and 2 in the following payoff table represent the two possible manufacturing strategies that the EKA manufacturing company can adopt. The level of demand affects the success of both strategies. The states of nature (SI) represent the levels of demand for the company products. s1, s2, and s3 characterize high, medium, and low demand, respectively. The payoff values are in thousands of dollars. The management believes that weather conditions significantly affect the level of demand. 48 monthly sales reports are randomly selected. These monthly sales reports show 15 months with high demand, 28 months with medium demand, and 5 months with low demand. 12 of the 15 months with high demand had favorable weather conditions. 14 of the 28 months with medium demand had favorable weather conditions. Only 1 of the 5 months with low demand had favorable weather conditions. What is the probability that weather conditions are poor, given that the demand is high? What is the probability that weather conditions are poor, given that the demand is medium? What is the probability that weather conditions are poor, given that the demand is low?

Q: Alternatives 1 and 2 in the following payoff table represent the two possible manufacturing strategies that the EKA manufacturing company can adopt. The level of demand affects the success of both strategies. The states of nature (SI) represent the levels of demand for the company products. s1, s2, and s3 characterize high, medium, and low demand, respectively. The payoff values are in thousands of dollars. Prior probabilities are .3 for s1; .6 for s2, and .1 for s3. What is the maximum amount that the company would be willing to pay for perfect information?

Q: The alternatives 1 and 2 in the following payoff table represent the two possible manufacturing strategies that the EKA manufacturing company can adopt. The level of demand affects the success of both strategies. The states of nature (SI) represent the levels of demand for the company products. s1, s2, and s3 characterize high, medium, and low demand, respectively. The payoff values are in thousands of dollars. Prior probabilities are .3 for s1; .6 for s2, and .1 for s3. Find the expected monetary value for each of the alternatives and determine the best alternative (course of action) for the EKA manufacturing company using the expected monetary value criterion.

Q: Alternatives 1 and 2 in the following payoff table represent the two possible manufacturing strategies that the EKA manufacturing company can adopt. The level of demand affects the success of both strategies. The states of nature (SI) represent the levels of demand for the company products. S1, S2, and S3 characterize high, medium, and low demand, respectively. The payoff values are in thousands of dollars. Determine the best alternative (course of action) for the EKA manufacturing company using the maximin criterion.

Q: Alternatives 1 and 2 in the following payoff table represent the two possible manufacturing strategies that the EKA manufacturing company can adopt. The level of demand affects the success of both strategies. The states of nature (SI) represent the levels of demand for the company products. S1, S2, and S3 characterize high, medium, and low demand, respectively. The payoff values are in thousands of dollars. Determine the best alternative (course of action) for the EKA manufacturing company using the maximax criterion.

Q: In utility theory, a(n)__________________ decision maker is an individual who will choose the decision alternative having the highest expected profit. A. high-risk B. low-risk C. risk-neutral D. posterior

Q: The _________ curve of an individual decision maker is a plot of their utilities versus the profits. A. utility B. maximax C. posterior D. preposterior

Q: The _____________ criterion is best used when a large number of similar decisions will be made. A. expected monetary value B. expected value of perfect information C. expected value of sample information D. expected net gain of sampling

Q: The expected net gain of sampling equals the ____________________ minus the cost of sampling. A. expected monetary value B. expected value of perfect information C. expected value of sampling information D. expected net gain of sampling

Q: When we assess the worth of sample information in a decision-making problem, we are performing a(n) _____________ analysis. A. utility B. maximax C. posterior D. preposterior

Q: In a decision-making situation, the maximum amount of money that should be spent to obtain perfect information is called the ______________________________. A. expected monetary value B. expected value of perfect information C. expected value of sample information D. expected net gain of sampling

Q: The expected _____________ of a decision maker is based upon his/her attitude toward risk. A. maximax B. maximin C. utility D. risk theory

Q: The __________________ criterion is preferred by pessimistic decision makers. A. maximax B. maximin C. utility theory D. risk theory

Q: The __________________ criterion is preferred by optimistic decision makers. A. maximax B. maximin C. utility theory D. risk theory

Q: The _____________________ is the difference between the expected value of sampling and the cost of sampling. A. expected monetary value B. expected value of perfect information C. expected value of sample information D. expected net gain of sampling

Q: The _______________________is the difference between the expected payoff that would have been realized had the best alternative action been selected if we knew which state of nature would occur and the expected payoff under risk. A. expected monetary value B. expected value of perfect information C. expected value of sample information D. expected net gain of sampling

Q: The expected value criterion is used for decision making under _______________. A. risk B. utility C. certainty D. uncertainty

Q: When applying Bayes Theorem, the sample information is combined with prior probabilities to obtain ___________________ probabilities. A. utility B. maximax C. posterior D. preposterior

Q: A _______________________ is a diagram that assists the decision maker in analyzing a decision problem. A. Bayes Theorem curve B. decision tree C. utility curve D. maximax table

Q: A tire manufacturer needs to determine the amount of production for the coming month (high vs. low). The level of production largely depends on the level of demand. For this situation, the amount of production constitutes the ___________________ actions. A. alternative B. utility C. certainty D. uncertainty

Q: When making a decision in an environment of ________________, the decision maker knows which of the states of nature will actually occur. A. risk B. utility C. certainty D. uncertainty

Q: Decision makers in business organizations make most decisions in environments that involve some degree of ___________________. A. risk B. utility C. certainty D. uncertainty

Q: A corn farmer has categorized the weather into three possible levels. The weather conditions will affect the timing of the harvest and the associated payoff. In this situation, the weather conditions are called the ____________________. A. alternatives B. states of nature C. payoffs D. perfect information

Q: The ____________________criterion for choosing among alternative actions assumes that the state of nature with the best payoff will be experienced. A. maximin B. certainty C. maximax D. decision

Q: The ____________________criterion for choosing among alternative actions assumes that the state of nature with the worst payoff will be experienced. A. maximin B. certainty C. maximax D. decision

Q: The _____________criterion finds the worst-possible payoff for each alternative and then chooses the alternative that yields the maximum worst-possible payoff. A. maximin B. certainty C. maximax D. decision

Q: The _____________criterion finds the best-possible payoff for each alternative and then chooses the alternative that yields the maximum best-possible payoff. A. maximin B. certainty C. maximax D. decision

Q: __________________ statistics is an area of statistics that uses a theorem to update prior belief about a probability or population parameter to a posterior belief. A. Bayesian B. Utility theory C. Preposterior analysis D. Risk theory

Q: In utility analysis, a utility curve that shows a rapid increase in utility for initial amounts of money followed by a gradual leveling off for a larger amount of money is appropriate for a risk _________ decision maker. A. seeking B. averse C. neutral D. None of the other choices is correct.

Q: The utility curve given below represents the preferences of a _________________ decision maker. A. risk-averse B. risk-neutral C. risk-seeking D. None of the other choices is correct.

Q: The utility curve given below represents the preferences of a _________________ decision maker. A. risk-averse B. risk-neutral C. risk-seeking D. None of the other choices is correct.

Q: The utility curve given below represents the preferences of a _________________ decision maker. A. risk-averse B. risk-neutral C. risk-seeking D. None of the other choices is correct.

Q: A pharmaceutical company manufacturing flu test kits wants to determine the probability of a teenager not having the flu when the test results indicate that they do. It is estimated that the probability of positive test for flu among potential users of the kit is 10 percent. According to the company laboratory test results, 1 out of 100 noninfected teenagers tested as having the flu (false positive). On the other hand, 1 out of 200 teenagers with the flu tested as not having the active virus (false negative). A teenager has just used the flu test kit manufactured by the company, and the results showed she does not have the flu. What is the probability that she does have the flu? A. 1% B. 0.9% C. 0.05% D. 8.3% E. 0.056%

Q: A pharmaceutical company manufacturing flu test kits wants to determine the probability of a teenager not having the flu when the test results indicate that they do. It is estimated that the probability of a positive test for flu among potential users of the kit is 10 percent. According to the company laboratory test results, 1 out of 100 noninfected teenagers tested as having the flu (false positive). On the other hand, 1 out of 200 teenagers with the flu tested as not having the active virus (false negative). A teenager has just used the flu test kit manufactured by the company, and the results showed she has the flu. What is the probability that she does not have the flu? A. 90% B. 0.9% C. 8.3% D. 91.7% E. 10.85%

Q: An automobile insurance company is in the process of reviewing its policies. The company is considering increasing the premium charged to drivers under 25. According to company records, 35 percent of the insured drivers are under the age of 25. Company records also show that 280 of the 700 insured drivers under the age of 25 have been involved in at least one automobile accident. On the other hand, only 130 of the 1300 insured drivers 25 years or older have been involved in at least one automobile accident. What is the probability that an insured driver of any age will be involved in an accident? A. 35% B. 20.5% C. 65% D. 68.3% E. 79.5%

Q: An automobile insurance company is in the process of reviewing its policies. The company is considering increasing the premium charged to drivers under 25. According to company records, 35 percent of the insured drivers are under the age of 25. The company records also show that 280 of the 700 insured drivers under the age of 25 have been involved in at least one automobile accident. On the other hand, only 130 of the 1,300 insured drivers 25 years or older have been involved in at least one automobile accident. An accident has just been reported. What is the probability that the insured driver is under the age of 25? A. 35% B. 20.5% C. 14% D. 68.3% E. 40%

Q: Alternatives 1 and 2 in the following payoff table represent the two possible manufacturing strategies that the EKA manufacturing company can adopt. The level of demand affects the success of both strategies. The states of nature (SI) represent the levels of demand for the company products. S1, S2, and S3 characterize high, medium, and low demand, with probabilities of .3, .6, and .1, respectively. The payoff values are in thousands of dollars. The management believes that the weather conditions significantly affect the level of demand. 48 monthly sales reports are randomly selected. These monthly sales reports show 15 months with high demand, 28 months with medium demand, and 5 months with low demand. 12 of the 15 months with high demand had favorable weather conditions. 14 of the 28 months with medium demand had favorable weather conditions. Only 1 of the 5 months with low demand had favorable weather conditions. What is the maximum amount that the company would be willing to pay for perfect information? A. $95,000 B. $112,000 C. $7,000 D. $24,000 E. $17,000

Q: Alternatives 1 and 2 in the following payoff table represent the two possible manufacturing strategies that the EKA manufacturing company can adopt. The level of demand affects the success of both strategies. The states of nature (SI) represent the levels of demand for the company products. S1, S2, and S3 characterize high, medium, and low demand, with probabilities of .3, .6, and .1, respectively. The payoff values are in thousands of dollars. The management believes that weather conditions significantly affect the level of demand. 48 monthly sales reports are randomly selected. These monthly sales reports show 15 months with high demand, 28 months with medium demand, and 5 months with low demand. 12 of the 15 months with high demand had favorable weather conditions. 14 of the 28 months with medium demand had favorable weather conditions. Only 1 of the 5 months with low demand had favorable weather conditions. The estimated probabilities of poor weather conditions given different levels of demand are presented below. What is the probability of high demand given that the weather conditions are poor? A. .06 B. .44 C. .1371 D. .12 E. .1818

Q: Alternatives 1 and 2 in the following payoff table represent the two possible manufacturing strategies that the EKA manufacturing company can adopt. The level of demand affects the success of both strategies. The states of nature (SI) represent the levels of demand for the company products. S1, S2, and S3 characterize high, medium, and low demand, with probabilities of .3, .6, and .1, respectively. The payoff values are in thousands of dollars. The management believes that weather conditions significantly affect the level of demand. 48 monthly sales reports are randomly selected. These monthly sales reports show 15 months with high demand, 28 months with medium demand, and 5 months with low demand. 12 of the 15 months with high demand had favorable weather conditions. 14 of the 28 months with medium demand had favorable weather conditions. Only 1 of the 5 months with low demand had favorable weather conditions. What is the probability that weather conditions are poor, given that the demand is high? A. .2 B. .5 C. .8 D. .25 E. .75

Q: Alternatives 1 and 2 in the following payoff table represent the two possible manufacturing strategies that the EKA manufacturing company can adopt. The level of demand affects the success of both strategies. The states of nature (SI) represent the levels of demand for the company products. S1, S2, and S3 characterize high, medium, and low demand, with probabilities of .3, .6, and .1, respectively. The payoff values are in thousands of dollars. Find the expected monetary value for each of the alternatives and determine the best alternative (course of action) for the EKA manufacturing company using the expected monetary value criterion. A. EMV1 = $98,000, EMV2 = $95,000, choose strategy 1 B. EMV1 = $88,000, EMV2 = $95,000, choose strategy 2 C. EMV1 = $88,000, EMV2 = $85,000, choose strategy 1 D. EMV1 = $66,667, EMV2 = $76,667, choose strategy 2 E. EMV1 = $120,000, EMV2 = $110,000, choose strategy 1

Q: Alternatives 1 and 2 in the following payoff table represent the two possible manufacturing strategies that the EKA manufacturing company can adopt. The level of demand affects the success of both strategies. The states of nature (Si) represent the levels of demand for the company products. S1, S2, and S3 characterize high, medium, and low demand, respectively. The payoff values are in thousands of dollars. The best alternative (course of action) for the EKA manufacturing company using the maximin criterion is strategy _____ and the best possible payoff is __________. A. 1, $50,000 B. 2, $120,000 C. 1, $100,000 D. 1, $70,000 E. 2, $80,000

Q: The expected net gain of sampling equals the expected ______________ minus the cost of sampling. A. payoff of sampling B. payoff of no sampling C. value of sample information D. value of perfect information E. utility

Q: When we assess the worth of sample information in a decision-making problem, we are performing a A. prior analysis. B. preposterior analysis. C. posterior analysis. D. payoff analysis. E. utility analysis.

Q: The _____________________ criterion is attractive to those decision makers who exhibit a neutral approach toward decision choices involving risk. A. expected utility B. expected value C. maximin D. maximax E. decision theory

Q: A person's utility is determined by the preferences he/she exhibits for decision choices involving __________. A. certainty B. uncertainty C. risk D. Bayes' Theorem

Q: Maximax is a criterion used when making decisions under __________________. A. certainty B. uncertainty C. risk D. alternatives

Q: The expected value criterion is used for decision making under __________________. A. certainty B. uncertainty C. risk D. alternatives

Q: The _______________________is the difference between the expected payoff of sampling and the expected payoff based on expected monetary criterion and prior probabilities. A. maximax criterion B. maximin criterion C. expected utility D. expected value of perfect information E. expected value of sample information

Q: The ______________ is the difference between the expected payoff that would be realized if the best alternative action were selected if we knew which state of nature would occur and the expected payoff under risk. A. maximax criterion B. maximin criterion C. expected utility D. expected value of perfect information E. expected value of sample information

Q: When making a decision in an environment of ________________, the likelihood of each state of nature can be estimated. A. certainty B. uncertainty C. risk D. alternatives

Q: When making a decision in an environment of ________________, the decision maker knows which of the states of nature will actually occur. A. certainty B. uncertainty C. risk D. optimism

Q: If the decision maker has no knowledge about the likelihood of any of the states of nature occurring, then it can be stated that the decision maker is operating in an environment of A. certainty. B. uncertainty. C. risk. D. optimism.

Q: Maximin is a criterion used when making decisions under _____________. A. uncertainty B. certainty C. risk D. alternatives