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Final

3300S11 - Final Exam.pdf

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Department
Administrative Studies
Course
ADMS 3300
Professor
Shamim Abdullah
Semester
Winter

Description
YORK UNIVERSITY Department of Administrative Studies AP/ADMS 3300.3.0 A – Decision Analysis Summer 2011 – FINAL EXAMINATION VERSION “ A ” Professor Mustafa Karakul August 10, 2011 Time Allowed:2.5 hours INSTRUCTIONS: 1. This is a closed book examination. (No Formula Sheet allowed) 2. Record Multiple Choice answers in pencil on the Scantron sheet provided. 3. Calculations are to be 4 decimal places. 4. You MUST show your work (in the space provided) for problems, otherwise “0” mark (even if the answer is correctly recorded). Order of questions does not follow the order of Chapters in the text book. 5. YOU MUST HAND IN THIS EXAM BEFORE LEAVING THE EXAMINATION ROOM. FAILURE TO DO SO WILL RESULT IN AN AUTOMATIC F GRADE AS WELL AS A LETTER ON YOUR ACADEMIC FILE. MARKS: Problem 1: (25) Student’s Name (Print) Problem 2: (20) Problem 3: (25) NumbStrdent MCQs: (30) Signature TOTAL: (100) THIS EXAM CONTAINS 20 PAGES (INCLUDING COVER PAGE and FORMULA.PAGE) DO NOT REMOVE ANY PAGE ADMS3300 – Summer 2011 VERSION “A” Final Exam Problem #1 (25 Marks) Jim, a risk-neutral investor has some funds available to invest in one of the following choices, high-risk (H), moderate-risk (M) or low-risk (L) stock, to maximize his earnings. His payoff for the three stocks depends on how the market moves. Market can rise or decline; there are 40% chances that market will decline. If market is rising (R), he will earn $3200 from high-risk stock, $2475 from high-risk and moderate-risk stock respectively, but still earn $450 from low-risk stock.500 and $350 from (a) Which option should Jim choose, draw atree to show your decision problem? __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ Page 2 of 20 ADMS3300 – Summer 2011 VERSION “A” Final Exam (b) How much is Jim willing to pay toet condition with certain ty? To answer this question, draw a new tree assuming that you already have a wizard to tell you the future. __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ Page 3 of 20 ADMS3300 – Summer 2011 VERSION “A” Final Exam (c) Jim is considering hiring the services of an economist to obtain better estimates of future market behavior. Economist forecast will be either Favorable (F) or Unfavorable (U). The reliability of the economist’s forecast of favorable and unfavorable is as given below: P(Unfavorable | Declining market) = 72% P(Declining market | Favorable) = 19.93% P(Unfavorable and rising market) = 15% Construct the decision tree for this problem? Calculate EVII? If consultant is asking a fee of $500, should he accept or not? Why or Why not? __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ Page 4 of 20 ADMS3300 – Summer 2011 VERSION “A” Final Exam __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ Page 5 of 20 ADMS3300 – Summer 2011 VERSION “A” Final Exam Problem # 2 (20 Marks) Ali is planning to buy a vehicle. Suppose that he came up with the following three cars with given price, life span, color, brand and type. Vehicle Life Span (years) P=Price ($) Color Brand Type Model (L) (P) (C) (B) (T) A 9.1 75,000 Silver GM SUV B 7 40,000 Red Nissan CAR C 14 140,000 Black Audi SPORT + He also found out his independent utility functions for each attribute as in the given table. Note that, x represents the best value and x represents worst value of an attribute. And, Ali uses proportional scoring in finding his utilities for Life Span and Price attributes. UTILITY TABLE Attribute Color U C(Silver) = 1 UC(Red) = 0.25 U CBlack) = 0.65 Brand U B(Nissan) =0.7 UB(GM) =0.65 U BAudi) = 1 Type U (Car) =1 U (Sport) =0.45 U (SUV) =0.65 T + T - T Life Span U Lx+) = 1 UL(x-) = 0 U L9.1) = ? Price U Px ) = 1 UP(x ) = 0 U P75000) = ? Using the additive utility model and assuming (weight related to LiLe Span) K = 0.30, (weight related to Color) KC= 0.12, B = KT, and Price is three times as important as Color. a) Find the overall utilities for the three vehicles? Which would be chosen and why? __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ Page 6 of 20 ADMS3300 – Summer 2011 VERSION “A” Final Exam __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ Page 7 of 20 ADMS3300 – Summer 2011 VERSION “A” Final Exam (b) Recall, that the swing-weighting approach can be used in virtually any weight-assessment situation. A Swing-weight assessment table with Ranks and Rates assessed is given below: Fill the table with missing details from i to viii. Then calculate overall utilities of vehicle A, B and C using the weights from this table? Which vehicle (among A, B, and C) would be chosen and why? Attribute Consequence to Compare Rank Rate Weight Swung from Worst to Best (i) 6 0 Life Span (ii) 3 95 (iv)L = Price 1 145 (v)P = Color 5 65 (vi)C = Brand 4 85 (viiBK = Type (iii) 2 110 (viiiTK = Show your work here. __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ Page 8 of 20 ADMS3300 – Summer 2011 VERSION “A” Final Exam (c) Ali carefully examined the five attributes and narrowed down to life span and price. He is willing to pay $7000 for an extra year of life span.LCalcuPate K and K and recommend which vehicle he would select from A, B, or C? Why? Vehicle Life Span P=Price ($) Attribute UTILITY Model ((L)rs) (P) + - A 9.1 75,000 Price (P) UP(x+) = 1 UP(- ) = 0 B 7 40,000 Life Span (L) UL(x ) = 1 UL(x ) = 0 C 14 140,000 Write your Final Answer in Box: K L P Recommendation Show your work here. __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ Page 9 of 20 ADMS3300 – Summer 2011 VERSION “A” Final Exam Problem # 3 (25 Marks) Suppose Angela faces an investment decision in which she must think about cash flows in two different years. Regard these two cash flows as two different attributes, and let X represent the cash flow in Year 1, and Y the cash flow in Year 2. He has as
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