Question 1

Exhibit 12.1 The following questions use the information below. The owner of Fix-a-dent Auto Repair wants to study the growth of his business using simulation. He is interested in simulating the number of damaged cars and the amount of damage to the cars each month. He currently repairs 100 cars per month and feels this can vary uniformly between a decrease of as much as 3% and an increase of up to 5% (average change of 1%) over the previous months. The dollar value of the damage to the cars is a normally distributed random variable with a mean of $3,000 and a standard deviation of $500. The average repair bill has been increasing steadily over the years and the owner expects the mean repair bill will increase by 1% per month. You have created the following spreadsheet to simulate the problem. -Using the information in Exhibit 12.1, what formula should go cell G5 to calculate the 80^th percentile of the empirical distribution of income? A) =IF(RANK(D21) = 80, 1, 0) B) None, use Excel Histogram on cell D21. C) =IF(COUNTIF(D8:D19 > D21) F1F1F1S1F1F1F10 8, 1, 0) D) =PsiPercentile(B21, .8).

Accepted Answer

The formula for the 80th percentile of the empirical distribution is =PsiPercentile(B21, .8), which calculates the value in cell B21 that corresponds to the 80th percentile of the data set. Choice A is not applicable because it is for a different problem. Choice B suggests using Excel Histogram, which is not relevant for calculating percentiles. Choice C is incorrect because it doesn't calculate the percentile correctly and lacks proper syntax.

Question 2

What is the correct Risk Solver Platform (RSP) function for generating random numbers from the following distribution on the number of children in families (assume a reference to the current worksheet). $$\begin{array} { c c c } 
& \text { A } & \text { B } \
1 & \# \text { of children } & \text { P(\# af children) } \
 2 & 1 & 0 .20 \
3 & 2 & 0.30 \
4 & 3 & 0.25 \
5 & 4 & 0.20 \
6 & 5 & 0.05
\end{array}$$
A) =PsiCustom(A2:A6,B2:B6)
B) =PsiRandom(A2:A6,B2:B6)
C) =PsiDiscrete(A2:A6,B2:B6)
D) =PsiUniform(A2:A6,B2:B6)

Accepted Answer

The PsiDiscrete function is used to generate random numbers from a discrete probability distribution, which matches the given distribution of the number of children.

Question 3

What method is used to generate observations from a distribution?
A) random number generator
B) sample generator
C) problem generator
D) steady state generator

Accepted Answer

A random number generator is commonly used to generate observations from a distribution. It allows us to simulate data that follows a certain distribution with specific parameters.

Question 4

Which of the following do not help determine the magnitude of risk in a decision-making problem?
A) The level of uncertainty in outcome.
B) The magnitude of potential loss.
C) The level of management interest in the problem.
D) The level of uncertainty in input variables.

Accepted Answer

The level of management interest in the problem may influence the decision-making process, but it does not directly provide information on the magnitude of risk. The other options all help determine the level of risk in a decision-making problem.

Question 5

What is a weakness of manual what-if analysis?
A) biased sample values of performance measures
B) hard to do many what-if scenarios
C) does not provide distribution information
D) all of these are weaknesses

Accepted Answer

All of these are weaknesses of manual what-if analysis. Manual what-if analysis can be biased based on the person conducting the analysis and the values they choose to input. It can also be difficult and time-consuming to conduct many what-if scenarios manually. Additionally, manual what-if analysis does not provide distribution information, which can limit the insight gained from the analysis.

Question 6

Simulation is used to
A) find possible worst case values for the dependent variable(s).
B) find worst case and best case values for the dependent variable(s).
C) find distribution information for the dependent variable(s).
D) find median values for the dependent variable(s).

Accepted Answer

Simulation is used to find the distribution information for the dependent variable(s), such as the mean, standard deviation, and probability distribution. A and B are not accurate because simulation cannot guarantee worst case or best case scenarios. D is not accurate because simulation does not necessarily provide information on specific quantiles like the median.

Question 7

Which of the following best describes a random variable?
A) A spreadsheet input cell containing a random number generator.
B) The outcome of a simulation model.
C) Any variable whose value cannot be predicted with certainty.
D) All of these describe random variables.

Accepted Answer

- A random variable can be generated using a random number generator, like the one found in a spreadsheet input cell (choice A).
- A simulation model has inputs and outputs, and the outputs are random variables (choice B).
- A core characteristic of a random variable is that its value cannot be predicted with certainty (choice C).
Therefore, all of these options describe random variables, making choice D the best answer.

Question 8

A variable whose value cannot be predicted or set with certainty is a
A) discrete variable
B) random variable
C) realistic variable
D) simulation variable

Accepted Answer

A random variable is a variable whose value cannot be predicted or set with certainty. It is used in probability theory and statistics to model uncertain or random events.

Question 9

Why would a manager be interested in analyzing risk?
A) To determine a most likely outcome.
B) To determine a range of outcomes.
C) To determine a distribution of outcomes.
D) To determine a confidence interval on most likely outcomes.

Accepted Answer

A manager would be interested in analyzing risk to determine the distribution of outcomes, which can help identify the likelihood of different scenarios and inform decision-making. Options A and D are not as relevant to analyzing risk, while option B only partially addresses the issue.

Question 10

Worst case analysis is a(n) ____ view of the problem.
A) pessimistic
B) optimistic
C) risky
D) certain

Accepted Answer

Worst case analysis assumes that the worst possible scenario will occur, leading to a pessimistic view of the problem.

Question 11

Which Risk Solver Platform (RSP) function will generate random integer numbers between 2 and 8?
A) =PsiIntUniform(2, 8)
B) =PsiDiscrete(2, 8)
C) =PsiUniform(2, 8)
D) =PsiRandom(2, 8)

Accepted Answer

The function =PsiIntUniform(a,b) generates a random integer between a and b with equal probability distribution. In this case, the function =PsiIntUniform(2,8) will generate random integers between 2 and 8.

Question 12

Best case analysis is a(n) ____ view of the problem.
A) pessimistic
B) optimistic
C) risky
D) certain

Accepted Answer

Best case analysis is an optimistic view of the problem, which involves analyzing the problem or situation with the assumption that everything will go perfectly. It focuses on the best possible outcome and assumes that all factors and variables will work in our favor. Therefore, option B, optimistic is the correct choice.

Question 13

Exhibit 12.1
The following questions use the information below.
The owner of Fix-a-dent Auto Repair wants to study the growth of his business using simulation. He is interested in simulating the number of damaged cars and the amount of damage to the cars each month. He currently repairs 100 cars per month and feels this can vary uniformly between a decrease of as much as 3% and an increase of up to 5% (average change of 1%) over the previous months. The dollar value of the damage to the cars is a normally distributed random variable with a mean of $3,000 and a standard deviation of $500. The average repair bill has been increasing steadily over the years and the owner expects the mean repair bill will increase by 1% per month. You have created the following spreadsheet to simulate the problem.
  
-Using the information in Exhibit 12.1, what Risk Solver Platform (RSP) function should go in cell B8 to compute the number of cars repaired in the first month?
A) =PsiUniform($C$2*(1-$F$2), $C$2*(1+$H$2))
B) =PsiUniform($C$2*1-$F$2, $C$2*1+$H$2)
C) =PsiUniform($C$2-(1-$F$2), $C$2+(1+$H$2))
D) =PsiUniform($C$2+(1-$F$2), $C$2+(1+$H$2))

Accepted Answer

The PsiUniform function takes minimum and maximum values as inputs to simulate a uniform distribution. In this case, the inputs should be the minimum and maximum possible number of cars repaired in a month, which are calculated as $C$2*(1-$F$2) and $C$2*(1+$H$2), respectively. Therefore, the correct function is =PsiUniform($C$2*(1-$F$2), $C$2*(1+$H$2)).

Question 14

Exhibit 12.1
The following questions use the information below.
The owner of Fix-a-dent Auto Repair wants to study the growth of his business using simulation. He is interested in simulating the number of damaged cars and the amount of damage to the cars each month. He currently repairs 100 cars per month and feels this can vary uniformly between a decrease of as much as 3% and an increase of up to 5% (average change of 1%) over the previous months. The dollar value of the damage to the cars is a normally distributed random variable with a mean of $3,000 and a standard deviation of $500. The average repair bill has been increasing steadily over the years and the owner expects the mean repair bill will increase by 1% per month. You have created the following spreadsheet to simulate the problem.
  
-Using the information in Exhibit 12.1, what Risk Solver Platform (RSP) function should go in cell C8 and copied to cells C9:C19 to compute the average damage per car in the month?
A) =PsiNormal($C$3*$F$3^$A$8, $H$3)
B) =PsiNormal($C$3*$F$3^A8, $H$3)
C) =PsiNormal($C$3, $D$3*(1+$F$3)^A8)
D) =PsiNormal($C$3*(1+$F$3)^A8, $H$3)

Accepted Answer

The answer of Exhibit 12.1
The following questions use the information...

Question 15

Which Risk Solver Platform (RSP) function will generate random numbers between 3 and 7 from a continuous uniform distribution?
A) =PsiConUniform(3, 7)
B) =PsiUniDist(3, 7)
C) =PsiUniform(3, 7)
D) =PsiTruncate(3, 7)

Accepted Answer

The =PsiUniform(3, 7) function generates random numbers from a continuous uniform distribution between the specified minimum (3) and maximum (7) values.

Question 16

If chance or uncertainty is present in a system then there is an element of ____ in the decision-making problem.
A) danger
B) security
C) risk
D) difficulty

Accepted Answer

Risk refers to the possibility of experiencing harm or loss, which is associated with chance or uncertainty. If a decision-making problem involves a level of risk, there is a likelihood of unwanted outcomes that must be considered and managed.

Question 17

How should one determine which RNGs to employ in a spreadsheet simulation model?
A) Use the Risk Solver Platform (RSP)gallery and pick a distribution.
B) Generate thousands of samples and compare the resulting histogram to ensure the distribution is correct.
C) Solve the deterministic model repeatedly and use Risk Solver Platform (RSP) distribution fitting tools.
D) The distributions selected should represent the underlying pool of values expected to occur.

Accepted Answer

The most important factor in selecting RNGs is that the distributions should represent the underlying pool of values expected to occur in the real-world situation being modeled. The other options may be helpful in refining the selection, but ultimately the best way to determine which RNGs to employ is by choosing distributions that accurately reflect the expected values.

Question 18

The Risk Solver Platform (RSP) is a good simulation tool because
A) it is difficult to use
B) it provides several polymorphic spreadsheet interpreter "psi" functions to facilitate Excel calculations
C) it has a limited choice of statistical distributions making it difficult to approximate reality
D) it requires a standalone platform operating independently of Excel

Accepted Answer

Option B states that the Risk Solver Platform provides several polymorphic spreadsheet interpreter "psi" functions to facilitate Excel calculations, making it a good simulation tool. This implies that RSP is easy to use and can simplify calculations in Excel, which is a desirable characteristic for a simulation tool. Options A, C, and D all suggest limitations or difficulties associated with using RSP, which contradicts its status as a good simulation tool.

Question 19

Exhibit 12.1
The following questions use the information below.
The owner of Fix-a-dent Auto Repair wants to study the growth of his business using simulation. He is interested in simulating the number of damaged cars and the amount of damage to the cars each month. He currently repairs 100 cars per month and feels this can vary uniformly between a decrease of as much as 3% and an increase of up to 5% (average change of 1%) over the previous months. The dollar value of the damage to the cars is a normally distributed random variable with a mean of $3,000 and a standard deviation of $500. The average repair bill has been increasing steadily over the years and the owner expects the mean repair bill will increase by 1% per month. You have created the following spreadsheet to simulate the problem.
  
-Using the information in Exhibit 12.1, what Risk Solver Platform (RSP) function should go in cell B9 and copied to B10:B19 to compute the number of cars repaired in the subsequent months?
A) =PsiUniform($B$8*(1+$F$2), $B$8*(1-$H$2))
B) =PsiUniform(B8*(1-$F$2), B8*(1+$H$2))
C) =PsiUniform($C$2*(1-$F$2), $C$2*(1+$H$2))
D) =PsiIntUniform($C$2*(1-$F$2), $C$2*(1+$H$2))

Accepted Answer

The PsiUniform function is used to generate random numbers from a uniform distribution. In this case, the function should be applied to the current number of cars repaired (100) and the range of possible variation (a decrease of as much as 3% and an increase of up to 5%). The correct formula is therefore =PsiUniform(B8*(1-$F$2), B8*(1+$H$2)), which should be copied to cells B10:B19 to simulate the number of cars repaired in subsequent months.

Question 20

Which of the following distributions can be generated by Risk Solver Platform (RSP)?
A) Poisson
B) Normal
C) Weibull
D) All of these

Accepted Answer

The answer of Which of the following distributions can be...

Quiz 12: Introduction to Simulation Using Risk Solver Platform

What method is used to generate observations from a distribution?

Which of the following do not help determine the magnitude of risk in a decision-making problem?

What is a weakness of manual what-if analysis?

Simulation is used to

Which of the following best describes a random variable?

A variable whose value cannot be predicted or set with certainty is a

Why would a manager be interested in analyzing risk?

Worst case analysis is a(n) ____ view of the problem.

Which Risk Solver Platform (RSP) function will generate random integer numbers between 2 and 8?

Best case analysis is a(n) ____ view of the problem.

Which Risk Solver Platform (RSP) function will generate random numbers between 3 and 7 from a continuous uniform distribution?

If chance or uncertainty is present in a system then there is an element of ____ in the decision-making problem.

How should one determine which RNGs to employ in a spreadsheet simulation model?

The Risk Solver Platform (RSP) is a good simulation tool because

Which of the following distributions can be generated by Risk Solver Platform (RSP) ?