BILL HOLIDAY AND MARK.docx

Bill Holliday is not sure what she should do. He can either build a quadplex (i.e., a building with four apartments), build a duplex, gather addional informaon, or simply do nothing. If he gathers addional informaon, the results could be either faorable or unfaorable, but it would cost him !",### to gather the informaon. Bill beliees that there is a $#%$#chance that the informaon will be faorable. If the &ental mar'et is faorable, Bill will earn !$,### ith the quadplex or !$,### with the duplex. Bill doesn*t hae the +nancial resources to do both. ith an unfaorable rental mar'et, howeer, Bill could ose !-#,### with the quadplex or !#,### with the duplex. ithout gathering addional informaon, Bill esmates that the probability of a faorable rental mar'et is #.. / faorable report from the study would increase the probability of a faorable rental mar'et to #.0. 1urthermore, an unfaorable report from the addional informaon would decrease the probability of a faorable rental mar'et to #.2. 3f course, Bill could forget all of these numbers and do nothing. hat is your adice to Bill4 Answer :       

567 (&ude -) 8 $### (#.) 9 (:-####) #." 8 2$## 567 (&ude ") 8 $### (#.) 9 (:####) #." 8 $## 567 (&ude 2) 8 -### (#.0) 9 (:-"###) #. 8 ;$## 567 (&ude $) 8 -### (#.0) 9 (:"###) #." 8 :-## 567 (&ude <) 8 -### (#.<) 9 (:-"###) #.2 8 :-### 567 (&ude ) 8 -### (#.<) 9 (:"###) #.2 8 :2### 567 (&ude ) 8 ;$## (#.$) 9 (:"###) #.$ 8 -$#

(#.) 6ar'et 1aorable

!$###

(#.") 6ar'et nfaorable

!:-###

(#.) 6ar'et 1aorable

!$###

(#.") 6ar'et nfaorable

!:####

(Auadplex)

B (?o @ot =onduct)

" (?uplex)

@o 1acility

!#

(#.0) 6ar'et 1aorable

!-###

(#.) 6ar'et nfaorable

!:####

(#.0) 6ar'et 1aorable

!-###

(#.) 6ar'et nfaorable

!:"###

2 (Auadplex)

/ (=onduct >tudy)

=

$ (?uplex)

@o 1acility

!"###

(#.<) 6ar'et 1aorable

!-###

(#.2) 6ar'et nfaorable

!:-"###

(#.<) 6ar'et 1aorable

!-###

(#.2) 6ar'et nfaorable

!:"###

< (Auadplex)

?

 (?uplex)

@o 1acility

!:"###

6ar' 6arn'o has been a class / racquetball player for the past +e years, and one of his biggest goals is to own and operate a racquetball facility. nfortunately, 6ar'*s thin's that the chance of a successful racquetball facility is only "#C. 6ar'*s lawyer has recommended that he employ one of the local mar'eng research groups to conduct a surey concerning the success or failure of a racquetball facility. Dhere is / #.; probability that the research will be faorable Eien a successful racquetball facility. In addion, Dhere is a #. probability that the research will be unfaorable gien an unsuccessful facility. =ompute &eised probabilies of a successful racquetball facility gien a faorable and gien an unfaorable surey. Answer :

F (>1) 8 #." F (&1G>1) 8 #.; F (&G1) 8 #.; F (1) 8  : F (>1) 8 #. F (&G>1) 8  : F (&1G>1) 8 #.F (&1G1) 8  : F (FG1) 8 #."

F (>1G&1) 8 8

|

(

)

(

)

 P  RF  SF  × P SF 

(

|

)

(

)+ P ( RU |UF ) × P ( UF )

 P  RF  SF  × P SF  0.8 × 0.3

0.8 × 0.3 + 0.3 × 0.7

8 #.$" Condional State of Name

Poskrior Prior Probability

Joint Probability

Probability

1aorable 6ar'et @on 1aorable 6ar'et Total

Probability

#.;

#."

#.-2

#.$"

#."

#.

#.-

#.2

0.45

>o the probabiity of a success full driing range gien a faorably research #.$" and #.2