A businessman is shipping a machine to another country. The cost of overhauling is $2400. If the machine fails inoperation in the other country, it will cost $5000 in lost production and repairs. He estimates the probability that it will failat 0.8 if it is not overhauled, and 0.1 if it is overhauled. Neglect the possibility that the machine might fail more than oncein the 4 years.(a) Prepare a payoff matrix.(b) What should the businessman do to minimize his expected costs?(a) Fill in the entries of the payoff matrix.OverhaulDoes Not OverhaulFails Does Not Fail

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Answered: A businessman is shipping a machine to…

Advanced Engineering Mathematics

10th Edition

ISBN:9780470458365

Author:Erwin Kreyszig

Publisher:Erwin Kreyszig

Chapter2: Second-order Linear Odes

Section: Chapter Questions

Problem 1RQ

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A customer has approached a bank for a $100,000 one-year loan at an 8% interest rate. If the bank does not approve this loan application, the $100,000 will be invested in bonds that earn a 6% annual return. Withoutadditional information, the bank believes that there is a 4% chance that this customer will default on the loan, assuming that the loan is approved. If the customer defaults on the loan, the bank will lose $100,000. At a cost of $1000, the bank can thoroughly investigate the customer’s credit record and supply a favorable or unfavorable recommendation. Past experience indicates that the probability of a favorable recommendation for a customer who will eventually not default is 0.80, and the chance of a favorable recommendation for a customer who will eventually default is 0.15.a. Use a decision tree to find the strategy the bank should follow to maximize its expected profit.b. Calculate and interpret the expected value of information (EVI) for this decision problem.c.…
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You are a bitcoin trader. You have $1,000,000, and today one bitcoin costs $2000. Tomorrow bitcoins will either cost $1000 or $4000, each with equal probability. (Solve using discrete mathematics).For each of the following, give a strategy and why it’s correct:(a) If you want to maximize the expected amount of money you havetomorrow, what should you do?(b) If you want to maximize the expected number of bitcoins you have tomorrow, what should you do?
Consider the following payoff matrix. -1 P = 0 -1 (a) Find the optimal mixed row strategy. I 1 (b) Find the optimal mixed column strategy. (c) Find the expected value of the game in the event that each player uses his or her optimal mixed strategy.
You invest your life's savings in 5 different hedge fund companies, each of which invests your money in 10 different in-house funds. You realize that this type of investing is risky, but you want the maximum long-term growth rate. After one year, the results are as listed in the table. Are the hedge fund companies equally good, or are there statistically significant differences between them? 12 3 4 Company Average Return (%) 8.4 6.2 6.7 14.7 12.6 Standard Deviation (%) 2.55.3 1.3 2.5 5.8 5 SSE number (rtol=0.01, atol=0.0001) SSTT number (rtol=0.01, atol=0.0001) F number (rtol=0.01, atol=0.0001) Pval number (rtol=0.01, atol=0.0001) State your decision at significant level 0.1. O (a) Cannot Reject HO O (b) Reject HO
Scenario A. Movie executives are always looking at the bottom line, and even though a movie might make a huge amount of money, they might still consider it a “flop”. So, before greenlighting a new (but expensive to produce) movie, executives run a study to see if the budget is too high to recoup a future profit. They project that the movie’s budget is low enough to justify making the movie, as it is a good bet it will make a profit of at least $1. You think they made the correct call. Which is the null hypothesis? A.H0: profits = no profit (or $0) B.H0 profits > $0
You are considering purchasing stand-alone shares in two companies: Company A and Company B. While both companies expect a rate of return of 15% under normal market conditions, the possible returns under strong and weak economies differ. There is a 30% chance of a weak economy outcome, a 30% chance of a strong economy outcome, and a 40% chance of a normal outcome. For Company A, under a strong economy, they expect a return of 75%. Under a weak economy, they expect a return of -45%. For Company B, under a strong economy, they expect a return of 23%. Under a weak economy, they expect a return of 7.5%. 1. Create a probability distribution table for both companies. 2. Calculate the standard deviation for both companies. 3. With the distribution, create either a bar graph or a bell curve to graph the two companies. 4. From your calculations, describe which company you would consider investing in, if you were risk averse.
An entrepreneur who owns and operates two businesses (A and B) would like to analyze their profitability. They would like your help in the analysis. They give you the annual net profit (in thousands of $) for each business from 2008-2020. Table 1: Annual Net Profits for Businesses A and B Business Year Profit Business Year Profit 2008 -50 2008 -10 2009 57 2009 30 2010 71 2010 27 2011 64 2011 22 2012 60 2012 21 2013 50 2013 20 A 2014 41 2014 24 2015 59 2015 24 2016 71 2016 32 2017 71 2017 36 2018 74 2018 37 019 81 20 40 2020 97 2020 49 a. Suppose you want to graph the distribution of profits. Explain why using only one stem- plot might not be optimal for the analysis. b. Describe the correct stemplot to use. Generate this stemplot. Explain your steps. What can you say about the distribution from this stemplot? c. When are stemplots useful? And why is that? d. Suppose that instead of having 26 observations you have 200 observations. What graph should you generate? e. What other type of…

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