Q1. Leon set the university decision aside for a few days and had forgotten about it completely until one night when his frewuent dining companion Pedro visited his house and they retired to the living room for an aperitif. "What you must do, my friend," Pedro began, "is to declare your coefficient of realism, which can be tricky." After forty-five minutes of intense concentration, the cold, calculating Leon decided that he would be indifferent between attending Vanderbilt and keeping his current job that will pay $34,100 annually under any of the three stated foreseeable scenarios.

What is Leon's implied coefficient of realism?

Q2. Suppose the likelihood for each of scenarios 1 through 3 is 0.3, 0.4, and 0.3, respectively. What is the optimal decision under the expected monetary value criterion?

A. Vanderbilt University

B. Texas Tech University

C. Seattle University

D. Northeastern State University

Q3. Suppose the likelihood for each of scenarios 1 through 3 is 0.3, 0.4, and 0.3, respectively. What is the expected value of perfect information for Leon's decision making problem? $

Leon is contemplating four institutions of higher learning as options for a Master's in Business Administration. Each university has strong and weak points and the demand for MBA graduates is uncertain. The availability of jobs, student loans, and financial support will have a significant impact on Leon's ultimate decision. Vanderbilt and Seattle University have comparatively high tuition, which would necessitate Leon take out student loans resulting in possibly substantial student loan debt. In a tight market, degrees with that cachet might spell the difference between a hefty paycheck and a piddling unemployment check. Northeastern State University and Texas Tech University hold the advantage of comparatively low tuition but a more regional appeal in a tight job market. Leon gathers his advisory council of Jim and Pedro to assist with the decision. Together they forecast three possible scenarios for the job market and institutional success and predict annual cash flows associated with an MBA from each institution. All cash flows in the table are in dollars. School Scenario 1 Scenario 2 Scenario 3 Vanderbilt 95,000 20,000 -10,000 Texas Tech 55,000 60,000 60,000 Seattle 90,000 10,000 80,000 Northeastern State 65,000 50,000 60,000 Leon is contemplating four institutions of higher learning as options for a Master's in Business Administration. Each university has strong and weak points and the demand for MBA graduates is uncertain. The availability of jobs, student loans, and financial support will have a significant impact on Leon's ultimate decision. Vanderbilt and Seattle University have comparatively high tuition, which would necessitate Leon take out student loans resulting in possibly substantial student loan debt. In a tight market, degrees with that cachet might spell the difference between a hefty paycheck and a piddling unemployment check. Northeastern State University and Texas Tech University hold the advantage of comparatively low tuition but a more regional appeal in a tight job market. Leon gathers his advisory council of Jim and Pedro to assist with the decision. Together they forecast three possible scenarios for the job market and institutional success and predict annual cash flows associated with an MBA from each institution. All cash flows in the table are in dollars. School Scenario 1 Scenario 2 Scenario 3 Vanderbilt 95,000 20,000 -10,000 Texas Tech 55,000 60,000 60,000 Seattle 90,000 10,000 80,000 Northeastern State 65,000 50,000 60,000