QUANTITATIVE METHODS - ISBM EXAM ANSWER - What role does MCDA play in decision making
QUANTITATIVE METHODS - ISBM EXAM ANSWER - What role does MCDA play in decision making
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INDIAN SCHOOL OF BUSINESS MANAGEMENT ANDADMINISTRATION
Subject : Quantitative Methods
Case Studies
Multi Criteria Decision Making
(20Marks)
MCDA. (multi criteria decision analysis) is considered to be one of the fastest growing research operations in the laseveral years. The researcher focus towards MCDA led to development of many different approaches and ways in tfield. There are two types of procedures: theoretical assumptions and decision addressed type. This difference throwchallenges to the prcedure of choosing the most ideal method for the decision making problem.
Most of the time, tinitial approach towards applying MCDA in the real world problems relates to the set up of simple understanding Of tcontext and recognizing the problem of decision. This step includes the ones• who make decisions and other importaparticipants who make important contributions for the MCDA procedure by sharing their knowledge. The common insigof the decision framework is received by knowing the goals of the decision making body and recognizing not only thopeople who make decisions but also those who face the decision. •
Dooley (2009) says that the first three steps take more time in the process of MCDA, particularly because of their qualitative features. Assigning of comparative significaweights to the selected criteria is the next step: These weights can be ascertained directly, for exampleranking, swintrade off; or indirectly, for example- centrality, regression and interactive. Later, the DM has to give individual scoreconsidering his or her views, to each of the recognized options according to the criteria which seem vital. These scorshow the decision of DM
. related to spreading of each substitute to every performance standard. The information whiis attained is maintained distinctively into
performance template, which is also as consequence matrix, options matrix, just decision table. The next process includes abstract of the information consisting of
the performance matrix in tform of multi criteria scores, for every possible plan. Mostly, this is attained by combining the individual scores of matso that total valuation of .each substitute which allows more comparison. The groups of substitute ranked on the basis all these scores. Finally, the procedure can include a warm evaluation of the outcome to amendments in the scores criteria, to conclude the sturdiness of the result of MCDA. At the end, the analysis and trade offs included in trespective choices are given to and conferred with the DM. In many cases, the ultimate decision that DM takes, does nmatch with the highest level of alternative, as they are more focused towards the process of knowing the effect of eaand every factor in ranking of choices than in the exactness of the ranking. Also, it should be observed that tgeneralizations are not used to of the outcome given by the process of MCDA, and they only appropriate for the group choices which were assessed.
Answer the following question.
QUANTITATIVE METHODS - ISBM EXAM ANSWER - What role does MCDA play in decision making
Q1.
What role does MCDA play in decision making? (Hint: MCDA is considered to be one of the fastestgrowing research operations, these scores show the decision of DM related to spreading of eachsubstitute to every performance standard)
Q2.
What does MCDA stand for? (Hint: multi criteria decision analysis)
(20
8/10/22, 1:00 PM Exam Paper
https://www.isbm.org.in/examsoft/exampaper_final.php?id=71532 2/3
A monte Carlo Case Study
QUANTITATIVE METHODS - ISBM EXAM ANSWER - What role does MCDA play in decision making
Marks)
Laura,' a 57 year old unmarried woman, earns around 68,000 dollars per year with expenditure of 37,500 dollars. She away 14,000 dollars each year and collected 330,000 dollars in her RRSP and TFSA, and also a rented apartment wor250,000 dollars. She has a iixed pension given by her employer, although it is not indicated to price rise, and Is entitlto get complete benefits of Canada Pension Plan and Old Age Security, for retirement.
She did not have a vecompetent portfolio: one fourth of cash is there, and most of it was in contracted sector ETFs, single stocks abusiness bonds. Due to wrong entry of ETFs in the account, unnecessary taxes were charged. Even beforeconstructing Laura's portfolio,"he had to make certain that it matched with.her financial aims. Laura's main aim was ascertain if she could retire before the age of 65, maybe as early as 60, therefore she had to know if her investmencould produce enough flow of cash after she retires. Monte Carlo may show a top possibility of success with tallotment of equity of 70% ot 80%. Through a risky questionnaire and art open interview, Justin
Ill 'ascertain that Lauwas the best person for a portfolio of 60% fixed income and 40% equities. .
Through Monte Carlo software, Jusentered the current portfolio
. size of Laura, her rate of savings, projected retirement expenditure, and other employincome and government pensions. If Laura feels that working till the age of 63 was unpleasant, she could go for treproduction again and with different estimation. Increasing her anticipated returns or bringing down the rate of inflatiois only a thought, therefore, she will have to make some stronger decisions: she will have to making some more savingor bring down her rate of planned expenses after retirement. Amazingly, by bringing up the allotment to fixed salacould increase her opportunity to succeed: in spite of th returns being lower than the equities, the volatility is also leswhich lessens the risk of helpless decline in the early years.
At last, Laura decided to work for 6 more years and plan hretirement at the age of 63. After this, Justin decided to help her make a fresh ETF
portfolio to match that goal: it wfinalized at 30% short term business bonds, 30% GICs, and the rest of it was divided among Canadian, L'S and globequities. Laura was able to make a notified decision through the Monte Carlo simulation, but this wasn't the end of tprocedure. In two or three years time, she will have to visit the location again to see that she is still on the right path her retirement goal, as many issues like, loss of job, a legacy, new connections, increase in the
interest rates, all thecould bring a change in the main suppusitions
1 ; and she will have to redo her plans.
The possibilities are differebefore the age of 63. For each added year that Laura works, her portfolio will addition instead of a decrease and this wlead to a thrilling difference: the success rate will rise up by 25% points if she continues to work till the age of 61 insteaof 60.
Answer the following question.
Q1.
How much was Laura earning at the age of 57? (Hint: 68,000 dollars per year)
QUANTITATIVE METHODS - ISBM EXAM ANSWER - What role does MCDA play in decision making
CASE STUDY
(20Marks)
The cost of fuel in running of an engine is proportional to the square of the speed and is
Rs 48 per hour for speed of kilometers per hour. Other expenses amount to Rs 300
per hour. What is the most economical speed?
Answer the following question.
Q1.
What is most economical speed?
Q2.
What is a chi-square test?
Q3.
What is sampling and what are its uses.
Q4.
Is there any alternative formula to find the value of Chi-square?
Finoplastika Industries Ltd, Nigeria
(20Marks)
Time series analysis has two important aims: 1) recognizing the quality of the phenomenon shown by the series studies, and 2) Both the aims need the plan of the viewed time series data is recognized and somewhat officiaexplained:
A time series is said to be a 'collection of observations made in sequence with time'. For example: recordilevel of daily rainfall, periodical total domestic product of US, and monthly strength of the. workers in Marine Corps forspecific rank and MOS. The evaluation of time series gives instruments for picking a symbolic model and deliveriforecasts. There are two sorts of times series data:
• Continuous: in this the data consists of study at every moment, fexample, seismic movement recorded on a seismogram.
• Discrete: the data contains recordings taken at differeperiods
,like, statistics of each month crime. Until the data is absolutely haphazard, studies in time series are usuarelated to each and the following studies could be partly ascertain by the last values. For instance, the reasopertaining to the meteorology which have an effect on the temperature for any given day tend to have some affect on tnext day's climate. Hence, the observations of the past temperature are helpful for predicting temperatures for tfollowing days. •
A time series can be deterministic if there are no haphazard or feasible features but goes in a set aforeseeable manner. The data gathered during the classical physics experiment like showing Newton's Law of Motion,
QUANTITATIVE METHODS - ISBM EXAM ANSWER - What role does MCDA play in decision making
8
one example of a deterministic time series. The stochastic type of series is more appropriate to the econometfunction. Stochastic variables contain undefined or arbitrary viewpoint. Though the worth of each study cannot precisely foreseen, calculating the various observations could follow the expected method. These methods can explained through the statistical models. According to these models, studies differ erratically on the underlying meavalue whtch is the role of time. Time series data can be put in the following categories: one or more performance factotrend, seasonality, cyclical function and random sound.
Various kinds of time series predicting models give forecasthrough extrapolating the previous performance of the values of a specified
\'l!riable of interest. Consecutive study econometric times series are generally not free and forecast can be made on the basis of last observations. Althouprecise predictions can be made with deterministic time series, predictions of stochastic time series are restricted 'conditional statements regarding the future on the basis of particular hypothesis.' Armstrong (2001) says, "The basAssumption is that the variable ui!! continue in the future as it has behaved in the past. " Particularly, the time seripredictions are suitable for stochastic type of data in which the fundamental root cause of variation like, trend, cyclicperformance, seasonality, and uneven variations, do not change radically m time. Therefore, modeling is considered be more suitable temporarily instead of permanent predictions.
Answer the following question.
Q1.
Write briefly on time-series analysis. (Hint: recognizing the quality of the phenomenon shown by theseries of studies, and, both the aims need the plan of the viewed time series data is recognized andsomewhat officially explained)
QUANTITATIVE METHODS - ISBM EXAM ANSWER - What role does MCDA play in decision making
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