COB 291 FULL QUESTIONS AND CORRECT ANSWERS PROFESSIONAL PREPARATION MATERIAL

COB 291 FULL QUESTIONS AND CORRECT
ANSWERS PROFESSIONAL PREPARATION
MATERIAL

●● Suppose that, for a given decision alternative, the payoffs are (10, 20,
30) with respective probabilities of (0.2, 0.3 and 0.5). The expected
payoff for this alternative is:
Answer: 23 = (10*0.2) + (20*0.3) + (30*0.5)


●● New information obtained through research or experimentation that
enables an updating or revision of the state-of-nature probabilities is
known as _____.
Answer: sample information


●● _____ refer to the probabilities of the states of nature after revising
the prior probabilities based on sample information.
Answer: Posterior probabilities


●● We can apply a process known as ______ to a decision tree to
determine the decision with the largest EMV.
Answer: Rolling back.

, ●● A measure of the outcome of a decision such as profit, cost, or time
is known as a _____.
Answer: payoff


●● _____ refers to the probability of one event, given the known
outcome of a (possibly) related event.
Answer: Conditional probability


●● Future events that are not under the decision maker's control are
known as:
Answer: States of nature.


●● What would be the value added by a market analysis undertaken if
the expected value with sample information is $8.56 million and the
expected value without sample information is $6.39 million?
Answer: $2.17 million = 8.56 - 6.39


●● Lines showing the alternatives from decision nodes and the
outcomes from chance nodes are called _____.
Answer: branches


●● No more than one state of nature can occur at a given time for a
chance event. This indicates that the states of nature are defined such
that they are _____.