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%
What is the formula used to calculate the value of at in the linear trend equation Ft+k =
at + btk while using double exponential smoothing?
A) at = β(bt – bt–1) + (1 –β)bt–1
B) at = αFt-1 + (1 – α)(at +1 + bt+1)
C) at = αFt + (1 – α)(at –1 + bt-1)
D) at = β(bt + bt–1) + (1 + γ)bt–1
A(n) ________ is a single number derived from sample data that is used to estimate the
value of a population parameter.
A) confidence interval
B) frequentist interference
C) interval estimate
D) point estimate
Which of the following is true of variance?
A) The formula to calculate variance of a population is not the same as the formula to
calculate variance of a sample.
B) Its value is inversely proportional to the degree to which the data is spread from the
mean.
C) It only requires the middle 50% of data to be calculated.
D) It is the square root of standard deviation.
Which of the following propositions describes an existing theory or belief?
A) standard deviation
B) null hypothesis
C) proportion
D) alternative hypothesis
What is a database?
A) a structured collection of related files and data
B) simply a collection of data
C) a data file holding a single file
D) flat files used to store data
Below is a spreadsheet for Stone Age Surfboards.
Assume that the finishing time for a pair of Rockwell surfboards is triangular with a
minimum value of 1.4, a most likely value of 1.5, and a maximum value of 1.8 and that
finishing time for a pair of Limestone surfboards is also triangular with a minimum
value of 1.8, a most likely value of 2.0, and a maximum value of 2.4. The number of
trials per simulation is equal to 5000.
Which of the following cells is defined as the uncertain output cell?
A) D15
B) D16
C) D19
D) D22
Consider the following spreadsheet for an outsourcing decision model.
We assume that the production (demand) volume is normally distributed with a mean of
1,000 and a standard deviation of 100. For the unit cost, select the triangular
distribution. It has a minimum value of $150, most likely value of $165, and a
maximum value of $190. The number of trials per simulation is equal to 5,000 at a Sim.
Random Seed of 1. Run the simulation and answer the following question(s) using the
Risk Solver Platform.
What is the value of mode obtained from the simulation results?
A) $28,435
B) $22,485
C) $27,198
D) $25,394
Which of the following is true of linear functions used in predictive analytical models?
A) It is used when the rate of change in a variable decreases or increases quickly and
then levels out.
B) It is used when there is a steady decrease or increase over a range of a variable.
C) It is used when there is increase at a specific rate.
D) It is used when there is a rise or fall at a constantly increasing rate.
Regression models of ________ data focus on predicting the future.
A) missing
B) time-series
C) panel
D) cross-sectional
Robin Inc. feared that the average company loss is running beyond $34,000. It initially
conducted a hypothesis test on a sample extracted from its database. The hypothesis
was formulated as H0: average company loss $34,000 vs. H1: average company loss >
$34,000. The test resulted in favor of Robin Inc.’s loss not exceeding $34,000. Detailed
study of company accounts later revealed that the average company loss had run up to
$37,896. Which of the following errors were made during the hypothesis test?
A) Type III error
B) Type II error
C) Type I error
D) Type IV error
Below is the spreadsheet for a portfolio allocation model.
Answer the following question(s) using a model with uncertainty on type of investment
return. Assume that the distributions of life insurance annual return is uniform with
minimum 4% and maximum 6%, bond mutual funds annual return is normal with mean
7% and standard deviation 1%, stock mutual funds annual return is lognormal with
mean 11% and standard deviation 4%. Use 10,000 trials and 1 for random seed for the
simulation.
What is the mean absolute deviation obtained from the simulation results for
maximizing the total expected return? [Hint: Choose the approximate value.]
A) $ 887.25
B) $ 735.86
C) $ 651.97
D) $ 967.36
Below is a payoff table that lists three mortgage options:
What is the maximum opportunity loss incurred for the 5-year ARM?
A) $ 8,626
B) $ 13,716
C) $ 14,369
D) $ 10,581
Consider the following spreadsheet for an outsourcing decision model.
We assume that the production (demand) volume is normally distributed with a mean of
1,000 and a standard deviation of 100. For the unit cost, select the triangular
distribution. It has a minimum value of $150, most likely value of $165, and a
maximum value of $190. The number of trials per simulation is equal to 5,000 at a Sim.
Random Seed of 1. Run the simulation and answer the following question(s) using the
Risk Solver Platform.
What is the value of mean obtained from the simulation results? [Hint: Choose the
nearest answer]
A) $18,385
B) $21,608
C) $14,894
D) $23,946
Which of the following is true about one-tailed and two-tailed tests?
A) For standard normal and t-distributions, which have a mean of zero, lower-tail
critical values are negative and upper-tail critical values are positive.
B) For an upper one-tailed test, if the test statistic is greater than the critical value, the
decision would be to fail to reject the null hypothesis.
C) For a lower one-tailed test, if the test statistic is less than the critical value, the
decision would be to fail to reject the null hypothesis.
D) For a two-tailed test, if the test statistic is either greater than the upper critical value
or less than the lower critical value, the decision would be to fail to reject the null
hypothesis.
Which of the following is true of calculating confidence intervals for larger samples?
A) For larger samples, the t-distribution is indistinguishable from the standard normal
distribution.
B) For larger samples, both the t-distribution and the standard normal distribution
require standard deviation values to be calculated.
C) For larger samples, the degrees of freedom cannot be calculated accurately.
D) For larger samples, only z-values provide a true sampling distribution of the mean.
Pickson Luthiers Corporation makes four models of electric guitars, ScarCT, Dela Mort,
Warax, and Invazen. Each guitar must flow through five departments, assembly,
painting, sound testing, inspection, and packaging. The table below shows the relevant
data. Production rates are shown in units/hour. (ScarCT is assembled elsewhere).
Pickson wants to determine how many guitars to make to maximize monthly profit.
According to the linear optimization model, which of the following departments uses all
the time that it is allocated to finish its job?
A) assembly
B) painting
C) inspection
D) packaging
The worldwide sales of cars from 1981-1990 are shown in the table below. Given: α =
0.2 and β = 0.15 (Hint: Use XLMiner)
Using the double exponential smoothing, calculate the value of the mean absolute
deviation for the given data.
A) 8.10
B) 1.80
C) 91.27
D) 11976.17
Below is the spreadsheet for a portfolio allocation model.
Answer the following question(s) using a model with uncertainty on type of investment
return. Assume that the distributions of life insurance annual return is uniform with
minimum 4% and maximum 6%, bond mutual funds annual return is normal with mean
7% and standard deviation 1%, stock mutual funds annual return is lognormal with
mean 11% and standard deviation 4%. Use 10,000 trials and 1 for random seed for the
simulation.
What is the value of the mean obtained from the simulation results that maximizes the
total expected return? [Hint: Choose the approximate value.]
A) $ 5,876.28
B) $ 6,570.76
C) $ 7,257.45
D) $ 5,178.84
Give the logical function for the following: If cell B7 equals 12, check contents of cell
B10. If cell B10 is 10, then the value of the function in the string is YES; if not, it is a
blank space. If cell B7 does not equal 12, then the value of the function is 7.
A) =IF(B7=12,(AND(B10=10, “”)(YES)),7)
B) =IF(B10=10,(OR(B7=12,””)”YES”)7)
C) =IF(B7=12,(IF(B10=10,”YES”, “”)),7)
D) =IF(B7=12,(AND(B10=10,”YES”,””)(B10=”NO”),7)
Which of the following measures of location is calculated using the formula is the
number of observations?
A) midrange
B) sample mean
C) mode
D) median
In the linear trend equation Ft+k = at + btk, identify the term that signifies the trend.
A) bt
B) k
C) at
D) Ft + k
Which of the following describes periodic sampling?
A) It is a sampling method based solely on expert opinion.
B) It is a sampling method based on selecting a time and then sampling the products
after that time.
C) It is a sampling method based on selecting every nth item from a population.
D) It is a sampling method exclusively used for population that is divided into subsets.
Below is a payoff table that lists four mortgage options:
What is the best payoff rate for the 1-year ARM?
A) $ 49,618
B) $ 43,650
C) $ 38,560
D) $ 66,645