### payoff table of maximization problem

Question 1 (2 points)

CASE 1 A payoff table of maximization problem is given

What choice should be made by the optimistic decision maker?

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Question 2 (2 points)

case 1 (continued)

What choice should be made by the conservative decision maker?

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Case 1 (continued)

What decision should be made under minimax regret?

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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?

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Case 1(continued)

What is EV (d1)?

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Case 1 (continued)

EV(d3) is

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EV(d2) is

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Case 1 continued

EVPI is

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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).

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.

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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.

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