The partner-manager of a franchise of Au Bon Pain, Inc., the French bakery restaurant chain, believes that the average daily revenue of her business may be viewed as a random variable (she adheres to the Bayesian philosophy) with mean $8,500 and standard deviation $1,000. Her prior probability distribution of average daily revenue is normal. A random sample of 35 days reveals a mean daily revenue of $9,210 and a standard deviation of $365. Construct the posterior distribution of average daily revenue. Assume a normal distribution of daily revenues.
Answer to relevant QuestionsMoney surveyed mutual funds as a good investment instrument. Suppose that the annual average percentage return from mutual funds is a normally distributed random variable with mean 8.7% and standard deviation 5%, and ...In the situation of problem 15-1, suppose that a second random sample of cardholders was selected, and 7 out of the 17 people in the sample were found to pay their bills on time. Construct the new posterior distribution ...For Example 15-1 suppose that a third sample is obtained. Three out of 10 people in the sample are product users. Update the probabilities of market share after the third sampling, and produce the new posterior distribution. For the situation in problem 15-26, suppose the designer is offered expert opinion about the new fall styles for a price of $300,000. Should she buy the advice? Explain why or why not. Money suggests an interesting decision problem for family investments. Start with $50,000 to invest over 20 years. There are two possibilities: a low-cost index fund and a fixed-interest investment paying 6.5% per year. The ...
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