# Question: You are making a hotel reservation and are offered a

You are making a hotel reservation and are offered a choice of two rates. The advanced purchase rate is $ 100, but your credit card will be charged immediately and there is no refund, even if you don’t use the room. The flexible rate is $ 140 but you don’t pay anything if you don’t use the room. Suppose p is the probability that you will end up using the room.

a. Suppose p = 0.70, so there is a 70% chance you will use the room. What is the expected value of your cost if you reserve the room with the flexible rate?

b. No longer assume a specific value for p. In terms of p, what is the expected value of your cost if you reserve the room with the flexible rate?

c. What is the expected value of your cost if you choose the advanced purchase rate?

d. For what value of p are the expected values you found in parts (b) and (c) the same?

e. For what range of values of p are you better off choosing the advanced purchase rate?

a. Suppose p = 0.70, so there is a 70% chance you will use the room. What is the expected value of your cost if you reserve the room with the flexible rate?

b. No longer assume a specific value for p. In terms of p, what is the expected value of your cost if you reserve the room with the flexible rate?

c. What is the expected value of your cost if you choose the advanced purchase rate?

d. For what value of p are the expected values you found in parts (b) and (c) the same?

e. For what range of values of p are you better off choosing the advanced purchase rate?

**View Solution:**## Answer to relevant Questions

Suppose you are seated next to a stranger on an airplane, and you start discussing various topics such as where you were born (country or state), what your favorite movie of all time is, your spouse’s occupation, and so ...Find out the sensitivity and specificity of a common medical test. Calculate the probability of a true positive for someone who tests positive with the test, assuming the rate in the population is 1 per 100; then calculate ...The United States Census Bureau, Statistical Abstract of the United States 1999 (p. 877) contains a table listing median family income for each year from 1947 to 1997. The incomes are presented “in current dollars” and ...The Dow Jones Industrial Average reached a high of $ 7801.63 on December 29, 1997. Recall from Example 18.4 that it reached a high of $ 1003 on November 14, 1972. The Consumer Price Index for November 1972 was 42.4; for ...According to the Sacramento Bee (2 April 1998, p. F5), Americans get an average of 6 hours and 57 minutes of sleep per night. A survey of a class of 190 statistics students at a large university found that they averaged ...Post your question