Draw the decision tree and derive optimal decision

Assignment Help Business Management

Reference no: EM13103437

Q. You are a bank manager. Ranga has approached your bank for a million dollar loan. The bank can charge 10% interest from Ranga for this loan. The bank will buy government bonds at 4% interest rate in case Ranga's application is rejected. You think there is 10% chance that Ranga would default on his loan based on your knowledge about Ranga. At a cost of about $1000, the bank can investigate and figure out Ranga's complete credit history.

Based on the past performance, you know that the credit reports give a favourable credit rating 80% of the time when the customer honours loan commitments; and unfavourable credit rating 20% of the time even when the customer honours loan commitments. The credit reports give a favourable credit rating 25% of the time and an unfavourable credit rating 75% of the time when the customer does not honour loan commitments.

Draw the decision Tree and Derive Optimal decision

Compute Expected Value of Perfect Information

Compute expected Value of Sample Information

Reference no: EM13103437

Questions Cloud

Explain how would you account for environmental factors : explain how would you account for environmental and economic factors that can impact your marketing strategy and tactics in the planning process?

Binomial probability of gambler : Consider a gambler who at each play of the game has probability of winning one unit and probability of loosing one unit. Assuming that the successive plays of the game are independent,

Define what the various objectives of a business : Do you approve with the statement that- the attendant of its purposes is the principal reason for the reason of a business? If therefore define what the various objectives of a business in the private sector might be and describe the roles

Explain naturalist concept of human personality and emotion : How would decision making process concerning money and career vary between someone with Naturalist Worldview and someone with Christian Worldview?

Draw the decision tree and derive optimal decision : The credit reports give a favourable credit rating 25% of the time and an unfavourable credit rating 75% of the time when the customer does not honour loan commitments. Draw the decision Tree and Derive Optimal decision.

Level of confidence a company producing street signs : With a 98% level of confidence a company producing street signs wants to make sure the length of their product is meeting quality standards.

What is the time required for an electron : Two parallel plates are 4.0 cm apart. The bottom plate is charged positively and the top plate is charged negatively, producing a uniform electric field of 5.0 * 10 exp 4 N/C in the region between the plates.

Test statistics as well as the stated life : The test question was if this variance between the test statistics as well as the stated life of the battery was significant? The .05 important level was selected for the test. Which is the accurate statement?

At what common temperture will ring just slide into rod : A steel rod is 3 cm in diameter at 25 C. A brass ring has an interior diameter of 2.992 cm at 25 C. At what common temperture will the ring just slide into the rod?

User Account

All Pages