1. Find the best alternative given the cost outcomes below.

The probability of
rain is 0.3, clouds is 0.2, and sun is 0.5.

Here P(rain)=0.3, P(clouds)=0.2, P(sun)=0.5

E(a)=6(0.3)+3(0.2)+4(0.5)
=1.8+0.6+2
= 4.4

E(b)=2(0.3)+4(0.2)+5(0.5)
=0.6+0.8+2.5
= 3.9

E(c)=5(0.3)+4(0.2)+3(0.5)
= 3.8

E(d)=5(0.3)+4(0.2)+3(0.5)
= 3.8

So, based on the above averages, it is the alternatives c and d only get
the lowest average cost, implying that these two alternatives will be the
best.

2. In Number 1, base your decision instead on the worst possible outcome for
each alternative. Now consider a decision based on the best possible
outcome. When might both of these give you the same decision?

3. Laptops‐R‐Me keeps detailed data on their laptop sales. In the last 300 days
the number of laptops sold was as shown in the table below.

a. Find the frequency distribution of sales (in percentage).

 Number sold Number of Frequency
days
0 15 0.05 5%
1 30 0.10 10%
2 87 0.29 29%
3 141 0.47 47%
4 27 0.09 9%
300

b. Find the average number of laptops sold daily.

=0(.5)+1(.10)+2(.29)+3(.47)+4(.09)
=0+.10+.58+1.41+.36
= 2.45
c. Find the yearly profit assuming the store is only open on weekdays 50
weeks a year and the average profit per laptop is $65.
=2.45 x 50 x 5 x 68
=$39,812.50

4. You are offered the chance to play a dice game at $10 per toss of 2 dice.
If the sum of the two dice tossed is 4, you will receive $100. Should you
play or not? Why?

Dice 1 Dice 2
1 2 3 4 5 6
1 2 3 4 5 6 7
2 3 4 5 6 7 8
3 4 5 6 7 8 9
4 5 6 7 8 9 10
5 6 7 8 9 10 11
6 7 8 9 10 11 12

When tossing two dice, the total of four occurs only three times out of
36 times, as shown in the table above. Because it occurs only 8.33 percent
of the time (3/36), the expected value of the game is $100 x 0.0833 =
$8.33. I should not play since the expected value of $8.33 is lower than
the $10 cost of participation.