BUS-660 Module 2 Decision Analysis

BUS-660 Module 2 Decision Analysis – Problems 3-17, 3-19, & 3-22. Quantitative Methods – Decision Analysis Grand Canyon University

Text book: Quantitative Analysis for Management (12th Edition)

Complete Problem 3-17 (respond based on maximum criteria). Complete Problem 3-19, parts a and b (respond based on EMV criteria). Complete Problem 3-22. Use an Excel spreadsheet file for the calculations and explanations, with one worksheet per problem. Use the problem number for each worksheet name. Cells should contain the formulas (i.e., if a formula was used to calculate the entry in that cell).

a)

Good Market      Y        N          N
Fair market        N        Y         N
Bad Market         N        N         Y
—————
Buy stock             x
Buy CD                            x        x

b)
CD return = 9%
Stock’s expected return = 0.4(0.14)+0.4(0.08)+0.2(0)=8.8%

Allen should buy CD to maximize his long-run average return

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