Answer to the question no 1

Data-driven approach to decision in Business refers that involves collecting data based on
measurable goals, analysing patterns, develop Strategies.

“Business analytics is a data-driven approach to decision making that allows companies to

make better decisions.”-I appreciate that Statement. Now, I am describing about that.

Fundamentally, data driven decision making means working towards key business goals by
leverage verified, analysed data rather than merely shooting in the dark. However, to
extended genuine value from your data, it must be accurate as well as relevant to your aims.
But today, the development and democratisation of business Software empower users without
deep-rooted technical expertise to analyse as well as extract insight form their data.
Benefit of data driven approach:
 You'll make more confident decision: once you begin collecting and analysing data
you are likely to find that it's easier to reach a confident decision about virtually any
business challenge, whatever you're deciding to launch or discontinue a product,
adjust your marketing message or something else entirety.

 You’ll become more proactive: when you first implement a data -driven approach in
decision, it’s likely to be reactionary in nature. The death tells a story, which you and
your organisation must then react to.

 You can realise cost saving: There are many reasons a business might choose to invest
a big data initiative and aim to become more data-driven in its process. According to a
recent survey of future 1000 executives conducted by new. Vantage patterns for the
Harvard business review, these initiatives vary in their rates of success

Finally, I can say that Business analytics is a data-driven approach to decision making that
allows companies to make better decisions and it helps to make decision quickly and
accurately.
 Answer to the question no 2

(a) The decision table for both Bank and Stock is depicted below:
Status of Nature
Alternatives Favorable ($) Fair ($) Unfavorable ($)
Bank 900.00 900.00 900.00
Stock 1,400.00 800.00 0.00
Probability 0.4 0.4 0.2

(b) Investing in a certificate deposit would be the best decision for Mr. X. This option has the
highest Expected Monetary Value (EMV). The calculation of EMV for both Bank and Stock
is depicted below:

EMV bank =( 0.4 × 900 ) + ( 0.4 × 900 ) + ( 0.2 ×900 )

EMV bank =$ 90 0

EMV stock =( 0.4 × 14 00 ) + ( 0.4 × 8 00 ) + ( 0.2 ×0. 0 )

EMV stock =$ 880

Here, we can see that EMVbank is higher than EMVstock. Therefore, the best alternative for Mr.
X would be investing in the bank through a certificate deposit.
 Answer to the question no 3

(a) Without probability values, the conducted decision tree is depicted below:

(b) The revised probabilities needed to complete the decision is computed below:
S1: Survey Favorable
S2: Survey Unfavorable
S3: Study Favorable
S4: Study Unfavorable
S5: Market Favorable
S6: Market Unfavorable

P(S5/S1) = (0.7x0.5)/ ((0.7x0.5) +(0.2x0.5)) =0.78

P(S6/S1) =1-0.78=0.22
P(S5/S2) = (0.3x0.5)/ ((0.3x0.5) +(0.8x0.5)) =0.27
P(S6/S2) =1-0.27=0.73
P(S5/S3) =0.89 (used the same formula used for P(S5/S1))
P(S6/S3) =0.11
P(S5/S4) =0.18 (used the same formula used for P(S5/S1))
P(S6/S4) =0.82
(c) Conduct a survey would be the best decision for Mr. X. This option has the highest
Expected Monetary Value (EMV). The calculation of EMV is depicted below:

EMV (node 3) = (95000) (0.78) + (-65000) (0.22) = $59800

EMV (node 4) = (95000) (0.27) + (-65000) (0.73) = $-21800
EMV (node 5) = (80000) (0.89) + (-80000) (0.11) = $62400
EMV (node 6) = (80000) (0.18) + (-80000) (0.82) = $51200
EMV (node 7) = (100000) (0.5) + (-60000) (0.5) = $20000
EMV (conduct survey) = (59800) (0.45) + (-5000) (0.55) = $24160

Therefore, the best decision is to conduct survey.

 Solution to Starting Right Case

‘Starting Right Case’ is a decision-making-under-uncertainty case. There are two events: a

favorable market (event 1) and an unfavorable market (event 2). It has four alternatives,
which include do nothing (alternative 1), invest in corporate bonds (alternative 2), invest in
preferred stock (alternative 3), and invest in common stock (alter-native 4). The decision
table is presented below. Note that for (alternative 2), the return in a good market is $30,000
(1+0.13)5 = $55,273. The return in a good market is $120,000 (4 x $30,000) for alternative 3,
and $240,000 (8 x $30,000) for alternative 4.

Payoff Table:
Laplace
Alternative Minimu Hurwicz
Event 1 Event 2 Average Maximum
s m Value
Value
Alt. 1 0 0 0 0 0 0
Alt. 2 55273 -10000 22636.5 -10000 55273 -2819.97
Alt. 3 120000 -15000 152500 -15000 120000 -150.00
Alt. 4 240000 -30000 105000 -30000 240000 -300.00

Regret Table:
Maximum
Alternative Event 1 Event 2
Regret
Alt. 1 240000 0 240000
Alt. 2 184727 10000 184727
Alt. 3 120000 15000 120000
Alt. 4 0 30000 30000

Discussion Questions Solutions:

1. As a risk avoider and Sue Pansky should not do anything and not make an investment.
2. Ray Cahn should use a coefficient of realism of 0.11. The best decision is to try and do
nothing.
3. Lila Battle should eliminate alternative 1 of doing nothing and apply the maxi-min
condition. The results to speculate within the corporate bonds.
4. George Yates should use the similarly likely decision criterion. The best decision for him
is to advance in common stock.
5. As a risk seeker, Pete Metarko should advance in common shares.
6. Julia Day can reject the favored stock alternate and still offer replacements to risk seekers
and risk avoiders.