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Om Exam Problems Final

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This document contains solutions to two exam problems involving time series forecasting and optimization. For problem 6.11, the document finds that an exponential smoothing model with an alpha of 0.2 provides the best forecast of portfolio stock percentages over time. The forecast for the next quarter is 31.03%. For problem 12.8, the document formulates an optimization problem to maximize sales for a lawn care company's new aeration service by allocating a $3,000 advertising budget between radio and direct mail. The optimal solution allocates $2,500 to radio and $500 to direct mail, forecasting $37,000 in total sales.

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Om Exam Problems Final

Uploaded by

pgreezy
628 views4 pages
This document contains solutions to two exam problems involving time series forecasting and optimization. For problem 6.11, the document finds that an exponential smoothing model with an alpha of 0.2 provides the best forecast of portfolio stock percentages over time. The forecast for the next quarter is 31.03%. For problem 12.8, the document formulates an optimization problem to maximize sales for a lawn care company's new aeration service by allocating a $3,000 advertising budget between radio and direct mail. The optimal solution allocates $2,500 to radio and $500 to direct mail, forecasting $37,000 in total sales.

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This document contains solutions to two exam problems involving time series forecasting and optimization. For problem 6.11, the document finds that an exponential smoothing model with an alpha of 0.2 provides the best forecast of portfolio stock percentages over time. The forecast for the next quarter is 31.03%. For problem 12.8, the document formulates an optimization problem to maximize sales for a lawn care company's new aeration service by allocating a $3,000 advertising budget between radio and direct mail. The optimal solution allocates $2,500 to radio and $500 to direct mail, forecasting $37,000 in total sales.

Copyright:

Attribution Non-Commercial (BY-NC)
Download as DOCX, PDF, TXT or read online from Scribd
Download as docx, pdf, or txt
628 views4 pages

Om Exam Problems Final

Uploaded by

pgreezy
This document contains solutions to two exam problems involving time series forecasting and optimization. For problem 6.11, the document finds that an exponential smoothing model with an alpha of 0.2 provides the best forecast of portfolio stock percentages over time. The forecast for the next quarter is 31.03%. For problem 12.8, the document formulates an optimization problem to maximize sales for a lawn care company's new aeration service by allocating a $3,000 advertising budget between radio and direct mail. The optimal solution allocates $2,500 to radio and $500 to direct mail, forecasting $37,000 in total sales.

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James Hetzel Exam 3 Problems: 6.11, 12.

6.11)

The percentage of individual investors’ portfolios committed to stock depends on the state of
the economy. The following table reports the percentage of stocks in a portfolio for nine quarters:

Quarter Stock %
1 29.8
2 31.0
3 29.9
4 30.1
5 32.2
6 31.5
7 32.0
8 31.9
9 30.0

a) Use exponential smoothing to forecast this time series. Consider smoothing constants of
α =0.2 , 0.3 ,∧0.4 . What value of the smoothing constant provides the best forecast?
For α =0.2;

Forecast for Quarter 10 = 31.0310


For α =0.3 ;

Forecast for Quarter 10 = 31.0588

For α =0.4 ;

Forecast for Quarter 10 = 31.0063


The mean square errors of the lines created using exponential smoothing for the α values of 0.2,
0.3, and 0.4 are 0.99156, 1.02334, and 1.05686 respectively. The one with the lowest value, the one
with α = to 0.2, is the one that provides the best forecast because the line fits the data the best.

b) What is the forecast of the percentage of assets committed to stocks for the next quarter?

From the results obtained in part a above, the value of α that resulted in the best forecast was
0.2. Using that value and exponential smoothing to make a forecast, the forecast for Quarter 10 is
31.0310%.

12.8)

GreenLawns provides a lawn fertilizer and weed control service. The company is adding a special
aeration treatment as a low-cost extra service option, which it hopes will help attract new customers.
Management is planning to promote this new service in two media: radio and directmail advertising. A
media budget of $3000 is available for this promotional campaign. Based on past experience in
promoting its other services, GreenLawns obtained the following estimate of the relationship between
sales and the amount spent on promotion in these two media:

S=−2 R 2−10 M 2−8 RM +18 R+34 M


where

S = total sales in thousands of dollars

R = thousands of dollars spent on radio advertising

M = thousands of dollars spent on direct-mail advertising

GreenLawns would like to develop a promotional strategy that will lead to maximum sales subject to the
restriction provided by the media budget.

a) What is the value of sales if $2000 is spent on radio advertising and $1000 is spent on direct-
mail advertising?

R = 2, M = 1

S=−2(2)2 −10(1)2 −8 ( 2 )( 1 ) +18 ( 2 ) +34 ( 1 )=36=$ 36,000


b) Formulate an optimization problem that can be solved to maximize sales subject to the media
budget.

Function to be Maximized:

S=−2 R 2−10 M 2−8 RM +18 R+34 M


Constraints:

R+ M ≤3
c) Determine the optimal amount to spend on radio and direct-mail advertising. How much money
will be generated in sales?

Lingo Solution:

The Lingo solution for the optimal distribution of the advertising resources is;

R = 2.5 = $2,500

M = 0.5 = $500

which results in a sales value of;

S = 37 = $37,000

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