PR1_S_11

# PR1_S_11 - ESE 302 PRACTICE QUESTIONS FOR EXAM I Spring...

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ESE 302 PRACTICE QUESTIONS FOR EXAM I Spring, 2011 1. A 160-room hotel currently rents rooms at \$120 per night, and has an average occupancy rate of 80%. Hotel management is now considering upgrading half of their rooms to luxury suites to be rented at a nightly rate of \$180. Given the projected cost of this upgrading, they estimate that average nightly revenues for the hotel must be at least \$16500 for the upgrade to be worthwhile. (i) Assuming that all room occupancies can be treated as independent Bernoulli events with probabilities given by their corresponding occupancy rates, and assuming in addition that the occupancy rate for old rooms will remain the same after the upgrading, use the Law of Large Numbers to determine the minimum occupancy rate for upgraded suites which will be necessary to achieve this goal. (ii) If the desired minimum expected occupancy rate for new suites is exactly achieved, then use the Central Limit Theorem to determine the chance that revenues will actually exceed \$17000 on any given night.

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PR1_S_11 - ESE 302 PRACTICE QUESTIONS FOR EXAM I Spring...

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