Exhibit 14.5 The Following Questions Are Based on the Information Below

question 37

Multiple Choice

Exhibit 14.5
The following questions are based on the information below.
An investor is considering 4 investments, A, B, C, D. The payoff from each investment is a function of the economic climate over the next 2 years. The economy can expand or decline. The following decision tree has been developed for the problem. The investor has estimated the probability of a declining economy at 40% and an expanding economy at 60%.
-The scores in a scoring model can be thought of as subjective assessments of

• A) usefulness.
• B) worthiness.
• C) utility.
• D) payoff.

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Definitions:

Population Proportions

A measure of the fraction of the total population that falls into a specific category.

Unbiased Consistent Estimator

A statistical estimator that accurately targets the parameter of interest in the population and whose accuracy increases as the sample size increases.

Population Proportions

The fraction or percentage of the total number of individuals in a population that share a particular characteristic.

Pooled Proportion Estimate

A method for estimating the proportion of an entire population by combining the proportions from different samples.