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Math 337 - Practice Problems #3

Instructions: These problems are practice for the test problems. You may assume that you will be provided with: The formulas on the Practice Problems 3 Reference sheet, and If long sums are required for a cumulative distribution (e.g. more than 4 terms), you will be given the table columns for the relevant cumulative distributions 1. Consider the M/G/1 queuing model with = 0.2 mean arrivals per hour and = 0.25 mean service completions per hour. (a) Find the measures of performance (i.e., L, Lq, W, and Wq) for each of the following values of : 4, 3, 2, 1, 0. (b) What is the ratio of Lq with = 4 to Lq for = 0? What does this say about the importance of reducing the variability of the service times? (c) Calculate the reduction in Lq when is reduced from 4 to 3, from 3 to 2, from 2 to 1, and from 1 to 0. Which is the largest reduction? Which is the smallest? 2. The owner of a chain of three grocery stores has purchased ve crates of fresh melons. The estimated probability distribution of potential sales of the melons before spoilage diers among the three stores. Therefore, the owner wants to know how to allocate the ve crates to the three stores to maximize expected prot. For administrative reasons, the owner does not wish to split crates between stores. However, he is willing to distribute zero crates to any one of his stores. The following table gives the estimated expected prot at each store when it is allocated various numbers of crates: Store Number of Crates 1 2 3 0 0 0 0 1 5 6 4 9 11 9 2 3 14 15 13 17 19 18 4 5 21 22 20 Use dynamic programming to determine how many of the ve crates should be assigned to each of the three stores to maximize the total expected prot. 3. A political campaign is entering its nal stage, and polls indicate a very close election. One of the candidates has enough funds left to purchase TV time for a total of ve prime-time commercials on TV stations located in four dierent areas. Based on polling information, an estimate has been made of the number of additional votes that can be won in the dierent broadcasting areas depending upon the number of commercials run. These estimates are given in the following table in thousands of votes:

Number of Commercials 0 1 2 3 4 5

1 0 4 7 9 12 15

Area 2 3 0 0 6 5 8 9 10 11 11 10 12 9

4 0 3 7 12 14 16

Use dynamic programming to determine how the ve commercials should be distributed among the four areas in order to maximize the estimated number of votes won. 4. A county chairwoman of a certain political party is making plans for an upcoming presidential election. She has received the services of six volunteer workers for precinct work, and she wants to assign them to four precincts in such a way as to maximize their eectiveness. She feels that it would be inecient to assign a worker to more than one precinct, but she is willing to assign no workers to any one of the precincts if they can accomplish more in other precincts. The following table gives the estimated increase in the number of votes (measured in hundreds) for the partys candidate in each precinct if it were allocated various numbers of workers. Precinct Number of Workers 1 2 3 4 0 0 0 0 0 4 7 5 6 1 9 11 10 11 2 3 15 16 15 14 18 18 18 16 4 5 22 20 21 17 24 21 22 18 6 This problem has several optimal solutions for how many of the six workers should be assigned to each of the four precincts to maximize the total estimated increase in the plurality of the partys candidate. Use dynamic programming to nd all of them so the chairwoman can make the nal selection based on other factors. 5. Consider the misspelled word approprimate, and a) Use the table method shown in class to nd the length of the best sub-sequence match between this word and two (correctly spelled) alternatives, approximate, and appropriate. b) Write out both pairs (original mis-spelled vs. one correct word), indicating the alignment between the two strings. e.g if the words were firetruck and forethought, you would write firet-ru-ck | ||| | forethought

c) State which of the two correctly spelled words you would suggest in an automated spellchecker, given the input approprimate. 6. Find the optimal sub-sequence alignment between the two genetic sequences GCGCATGGATTGAG and TGCGCCATTGATGACC, given the scoring function: 3 points for an exact match 1 points for a mismatch, and 0 points for a gap or unmatched letter in one of the sequences e.g. The score for the alignment -GCGCA-TGGATTGAG |||||||||||||||| TGCGCCATTGATGACC would be -GCGCA-TGGATTGAG |||||||||||||||| TGCGCCATTGATGACC 0333310313331111 for a total score for this alignment of 8 3 + 6 1 + 2 0 = 30 points. 7. Consider a risky investment like mining. Investors buying $10 shares of an exploration company today can expect shares worth either $200 or $1 two years from now. The current annual risk-free interest rate is 3.2% (with interest compounded continuously). a) Find the price of a call option today on this stock of this exploration company, for a strike price of $150. b) If you were to buy 1 call option, how many stocks would you sell short to perfectly hedge your investment? c) Conrm that your portfolio of 1 call option and the number of short shares you picked has the same value for both the possible stock price outcomes. 8. Consider a stock with value $20 today. Each year, the price will be either multiplied by e0.07 , or by e0.07 . Assume the risk-free interest rate is 5%. a) Find the price of a call option today on this stock, based on a strike price of $18, and a maturity date 2 years from today. (This will be a multi-step question.) b) If you were to buy 1 call option, how many stocks would you sell short to perfectly hedge your investment? c) Conrm that your portfolio of 1 call option and the number of shares you sold short has the same value for all the possible stock price outcomes.