153.HW2.Sum07

153.HW2.Sum07 - Introduction to Decision Making in...

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Introduction to Decision Making in Organizations (MS&E153) Summer 2007 Question 2 (20 pts.) Cassie received $2000 from her grandparents for her 21 st birthday. She must now decide what to do with the money. To help her think of possible options, Cassie solicits the input of others. Here are what others had to say. Father: “Cassie, you should invest your $2000 in the NASDAQ Index fund (stock market). I think you’ll get a high return after a year.” Mother: “I think you should put your money in the bank and open a one year CD (certificate of deposit). You can withdraw your money a year later to use when you graduate.” Friend: “Your hand-me-down car looks like it’ll break down any day. Why don’t you use the $2000 as a down payment towards a new car?” With every decision, there are three basic elements: alternatives, information, and preferences. To help Cassie make a good decision, you have to answer the following questions: a) What are Cassie’s alternatives? You can add your own suggestions as well. b) What might be Cassie’s key uncertainties (and their probability distribution) clouding
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153.HW2.Sum07 - Introduction to Decision Making in...

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