BUS 227 Test 1 | Course Paper

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Using an empirical distribution precludes sampling values outside the range of the

actual data.

The Risk Solver Platform ________ feature allows you to determine the influence that

each uncertain model input has individually on an output variable based on its

correlation with the output variable.

A) trend chart

B) sensitivity chart

C) overlay chart

D) box-whisker chart

Below is the profit model spreadsheet for the Lazarus Shoe Company producing their

latest model of shoes for the month of January.

Calculate the total profit.

A) $600,000

B) $1,436,000

C) $836,000

D) $1,786,000

Below is a spreadsheet for a hotel overbooking model.

Assume that each reservation has a constant probability p = 0.04 of being cancelled.

Answer the question(s) using the Risk Solver Platform.

With respect to B14, what should the number of trials correspond to in the Parameters

section of the Binomial dialog?

A) reservation limit

B) customer demand

C) reservations made

D) customer arrivals

Below is a spreadsheet for Trance Electronics.

Suppose that the project manager of Trance Electronics has identified the following

uncertain variables in the model and the distributions and parameters that describe

them, as follows: Market size: normal with mean of 20,000,000 units and standard

deviation of 4,000,000 units. R&D costs: uniform between $600,000,000 and

$800,000,000.

Clinical trial costs: lognormal with mean of $150,000,000 and standard deviation

$30,000,000. Annual market growth factor: triangular with minimum = 2%,

maximum = 6%, and most likely = 3%.

Annual market share growth rate: triangular with minimum = 15%, maximum =

25%, and most likely = 20%.

The number of trials per simulation is equal to 10,000 at a Sim. Random Seed of 2. Run

the simulation and answer the following questions using the Risk Solver Platform.

What is the coefficient of variation obtained from the simulation results of the net

present value?

A) 1.78392

B) -2.23958

C) -1.36659

D) 2.87645

Shirley Templeton is a real estate agent for Paralol Realty. Shirley is given the

responsibility to manage potential customers for 5 of the Realty’s bungalows. These 5

bungalows are situated in close proximity. In order to make traveling easier, Shirley

decides to move to a location closer to the 5 bungalows. The table below gives the

location (X and Y coordinates) of the 5 bungalows along with the number of trips she

would have to make to each bungalow. Create a nonlinear model based on the data

given in the table below noting that the objective is to reduce the weighted distance

between Shirley’s accommodation and the 5 bungalows.

According to the model, what is the total weighted distance that Shirley would travel

between the bungalows?

A) 4151.29

B) 1529.39

C) 3152.08

D) 4305.30

Below is a decision tree illustrating the R&D process for a new drug.

Let us assume that if market is large, payoff is lognormally distributed with a mean of

$4,900 million and a standard deviation of $1,000 million; if market is medium, payoff

is lognormally distributed with a mean of $2,500 million and a standard deviation of

$500 million; and if market is small, payoff is normally distributed with a mean of

$1,800 million and standard deviation of $200 million. Let us also assume that the cost

of clinical trials is uncertain and estimates are modeled with a triangular distribution

with a minimum of -$ 700 million, a most likely value of – $550 million, and a

maximum of -$500 million. Use 10,000 trials and a random seed of 1.

What is the coefficient of variation obtained from the simulation results? [Hint: Choose

the approximate value.]

A) 1.587

B) 1.122

C) 2.015

D) 1.890

Following is an extract from the Employee Payroll Database of HFR Informatics Inc.

What is the relative frequency of Female employees?

A) 0.65

B) 0.75

C) 0.25

D) 0.35

Which of the following values of the coefficients of variation of stocks represents the

least risky stock?

A) 1.0

B) 0.005

C) 0.5

D) 0.045

The formula for a 100(1 – Î±)% confidence interval for the mean Î¼ when the

population standard deviation is unknown is __________.

A) xi – /(Ïƒ / âˆš )

B) tÎ±/2n-1(s / âˆš )

C) zÎ±/2 (Ïƒ/ âˆš )

Which of the following is a parameter in the Normal Distribution Dialog of the Risk

Solver Platform?

A) maximum value

B) minimum value

C) most likely value

D) mean

John and Mike were offered mints. What is the probability that at least John or Mike

would respond favorably? (Hint: Use the classical definition).

A)1/8

B)1/2

C) 3/4

D) 3/8

Sujito Electronix makes headphones for $22 and sells them for $32. Sujito has sold at

least 50 headphones on average per week in the past, though the actual demand is

unknown. Sujito has also often run short of supply in the past. After three months of

release, the headphones are sold at 40 percent discount. The spreadsheet below shows

Sujito’s sales and demand for the headphones. We take demand at 51, and quantity

produced at 55.

Calculate the net profit for the headphones.

A) $586.8

B) $498.8

C) $1653.8

D) $466.8

Which of the following types of data-mining methods provides probabilistic if-then

statements?

A) association rule

B) logistic regression

C) reduction

D) cause-and effect modeling

Jonathan Reese is considering three stocks in which to invest with a fixed budget. The

table below provides information on Jonathan’s expected returns for each stock. The

table also provides information, collected from market researchers, on the

variance-covariance matrix of the individual stocks. He expects a total return of at least

10%.

Develop a quadratic optimization model to find the optimal allocation of the budget to

each stock, and variance calculations for squared terms and cross-products based on the

variance-covariance matrix.

According to the model, what is the expected total return on all stocks?

A) 18%

B) 10%

C) 11%

D) 12%

Which of the following is the root cause for the newsvendor problem?

A) uncertainty in supply

B) uncertainty in demand

C) high cost per unit sale

D) high total production cost

Which of the following is a similarity between a midrange and a mean?

A) Both measures are calculated using all the values in a data set.

B) Both measures are affected by outliers.

C) Both measures divide the data into two equal halves.

D) Both measures can only be used for small sample sizes.

For an independent variable Y, the error associated with the ith observation is:

A) ei = Yi – Å¶i

B) Yi = (ei)2 – Å¶i

C) (Å¶i)2 ei = Yi

D) ei = (Yi + Å¶i)2

In the spreadsheet below, there is data on the price, cost, demand, and quantity

produced for an item. There are also different “what if” values that can help a manager

to calculate costs and revenue with variability in demand.

Calculate the variable cost when the demand is 60,000 units.

A) $1,430,000

B) $1,375,000

C) $2,750,000

D) $1,320,000

Below is a spreadsheet for Trance Electronics.

Suppose that the project manager of Trance Electronics has identified the following

uncertain variables in the model and the distributions and parameters that describe

them, as follows: Market size: normal with mean of 20,000,000 units and standard

deviation of 4,000,000 units. R&D costs: uniform between $600,000,000 and

$800,000,000.

Clinical trial costs: lognormal with mean of $150,000,000 and standard deviation

$30,000,000. Annual market growth factor: triangular with minimum = 2%,

maximum = 6%, and most likely = 3%.

Annual market share growth rate: triangular with minimum = 15%, maximum =

25%, and most likely = 20%.

The number of trials per simulation is equal to 10,000 at a Sim. Random Seed of 2. Run

the simulation and answer the following questions using the Risk Solver Platform.

What is the standard deviation obtained from the simulation results of the net present

value? [Hint: Choose the approximate value.]

A) $204,868,924

B) $162,135,408

C) $182,992,245

D) $138,134,040