Case Study: Mortgage Application 


Principal: $500,000


Assume that the loan is an ‘interest-only’ loan.


Option 1: Variable Rate


a) The current rate of the loan (fixed for 2 years): 4.12%

b) The interest rate is unknown after Year 2.

c) The duration of the loan is 7 Years.


Option 2: Fixed Rate


a) Refinance the current loan and pay pre-payment penalty of (add into the cost of the loan) $25,000

b) Lock-in a fixed rate of interest of 4.00% for the 7-Year Term


Option 3: Interest Rate Swap 


a) Lock-in a fixed interest rate of 3.5%.

b) Pay an upfront cost of swap (add into the cost of the loan) of 3.00%.

c) Pay the pre-payment penalty of $25,000 (add into the cost of the loan).

d) The term of the loan is 7 years.


Deliverable: Draft a memo to your client outlining your decision-making process. Pay particular attention to the uncertainty created by the variable rate of interest included in Option 1.This memo should provide insight into your analysis and help your client reason through their impending decision. Your memo also needs to convey your understanding of the problem and the solution. 

Identify the sequence graphed below and the average rate of change from n = 1 to n = 3.

A group of people were given a personality test to determine if they were Type A or Type B. The results are shown in the table below:

Type A5575
Type B4822

Compare P(Male | Type B) with P(Male or Type B).

P(Male | Type B)> P(Male or Type B)

P(Male | Type B)< P(Male or Type B)

P(Male | Type B) = P(Male or Type B)

There is not enough information

A company offered one half of its employees a bonus if the production of cookies increased by 15%. The other half of the employees was not offered a bonus. As the end of the month, production in the group that did not get the bonus offer increased by a mean of 20 and production in the bonus group increased by a mean of 10.

What is the correct order of steps to determine if the results are significant?

A: Calculate the probability of a difference of 10.

B: Calculate the difference of the means.

C: Randomly separate the employees’ individual results into two groups.

D: Calculate the mean of each group.

E: Run the experiment many times.


What was the main reason Allied troops were horrified when they discovered Nazi concentration camps?

A.  Recommend which method (i.e., using reconditioned equipment, purchasing new equipment in its Shanghai plant, or outsourcing to another manufacturing operation) Shuzworld should consider for the manufacturing of its sneakers at all possible volumes of output, using an appropriate decision analysis tool, as directed in section 7 (“More challenges, more analysis!”) of the Shuzworld case study.  Note: Production ranges that favor each manufacturing option should be identified.   1.  Submit an accurate copy of the computer-generated output from the appropriate decision analysis tool used in part A. a.  Explain why the decision analysis tool you chose is the best fit for this problem.