Question 1 (2 points)

CASE 1 A payoff table of maximization problem is given       

	State of Nature
Decision	s1	s2	s3
d1	250	750	500
d2	300	-250	1200
d3	500	500	600

 What choice should be made by the optimistic decision maker?

Question 1 options:

	d2
	d1
	d3
	d1 and d3

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Question 2 (2 points)

case 1 (continued)

What choice should be made by the conservative decision maker?

Question 2 options:

	d1
	d2
	d3
	d1 and d2

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Question 3 (2 points)

Case 1 (continued)

What decision should be made under minimax regret?

Question 3 options:

	d1
	d2
	d3
	d2 and d3

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Question 4 (2 points)

case 1(continued)

If the probabilities of s1, s2, and s3  are .2, .5, and .3, respectively, then what choice should be made under expected value?

Question 4 options:

	d1
	d2
	d3
	non of these alternatives is correct

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Question 5 (2 points)

Case 1(continued)

 What is EV (d1)?

Question 5 options:

	EV(d1)=360
	EV(d1)=-75
	EV(d1)=575
	15

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Question 6 (2 points)

Case 1 (continued)

 EV(d3) is

Question 6 options:

	300
	250
	575
	530

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Question 7 (2 points)

  EV(d2) is

Question 7 options:

	295
	575
	600
	530

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Question 8 (2 points)

 Case 1 continued

 EVPI is 

Question 8 options:

	200
	260
	180
	130

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Question 9 (2 points)

 Case 2

Moving averages often are used to identify movements in stock prices. Daily closing prices (in dollars per share) for IBM for August 24, 2005, through September 16, 2005, follow (Compustat, February 26, 2006).

Day	Price ($)	Day	Price ($)
August 24	81.32	September 7	80.98
August 25	81.10	September 8	80.80
August 26	80.38	September 9	81.44
August 29	81.34	September 12	81.48
August 30	80.54	September 13	80.75
August 31	80.62	September 14	80.48
September 1	79.54	September 15	80.01
September 2	79.46	September 16	80.33
September 6	81.02

 Use a three-day  moving average to smooth the time series. Forecast the closing price for the next trading day using manual calculations and Excel.Please, find MSE using Excel.

Question 9 options:

	Forecast for the next trading day is 80.55MSE is .45
	Forecast for the next trading day is 80.31 MSE is .42
	Forecast for the next trading day is 80.27 MSE is .50
	non of these alternatives is correct

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Question 10 (2 points)

Case 2 (continued)

Use exponential smoothing with a smoothing constant of α=.6 to smooth the time series. Forecast the closing price for the next trading day. Use manualy calculations and Excel. Find MSE. Please use Excel.

Question 10 options:

	Forecast for the next trading day is 80.21MSE is .52
	Forecast for the next trading day is 80.31MSE is .55
	Forecast for the next trading day is 80.31MSE is .42 (0.416)
	Non of these alternatives is correct

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