Mat 540 Week 2 Homework - Latest 2015

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MAT 540 Week 2 Homework - latest 2015

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Chapter 12

1. A local real estate investor in Orlando is considering three alternative investments: a motel, a restaurant, or a theater. Profits from the motel or restaurant will be affected by the availability of gasoline and the number of tourists; profits from the theater will be relatively stable under any conditions. The following payoff table shows the profit or loss that could result from each investment:
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The director has set up the following payoff table for six of the most popular and successful degree programs at OCC that shows the estimated 5-year gross income ($) from each degree for four future economic conditions:

Economic Conditions

Degree Program Recession Average Good Robust

Graphic design 145,000 175,000 220,000 260,000

Nursing 150,000 180,000 205,000 215,000

Real estate 115,000 165,000 220,000 320,000

Medical technology 130,000 180,000 210,000 280,000

Culinary technology 115,000 145,000 235,000 305,000

Computer information 125,000 150,000 190,000 250,000


Determine the best degree program in terms of projected income, using the following decision criteria:

a. Maximax

b. Maximin

c. Equal likelihood

MAT540 Homework

Week 2 Page 3 of 3

d. Hurwicz (α = 0.50)

5. Construct a decision tree for the following decision situation and indicate the best decision.

Fenton and Farrah Friendly, husband-and-wife

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