NAME___________________ MAT174 QUIZ II JUNE 24, 2004 THIS QUIZ IS WORTH 50 POINTS. 1. What assumption in the oil lease project allows you to assume that( ) 0E R , i.e. why is the mean of the errors zero?2. What is a signal?3. What is the winner’s curse?4. This problem refers to Project 2. The table below shows a sample of signals from several companies from two previous auctions. All amounts arein millions of dollars. A. Complete the following table: B. Find the mean and standard deviation of the errors in part A.Auction Value Company 1 Company 2 Company 31 $55 $52 $53 $542 $120 $113 $127 $120SignalsLeaseCompany 1 Company 2 Company 3 Errors5. Each row below is a sample of 4 errors for a particular simulated auction. Each error is in millions of dollars.A. Calculate the value of C and B for each of the leases and use these values to calculate )(CE and )(BE. LABEL THE COLUMNS AND SHOW YOUR WORK.Lease Error 1 Error 2 Error 3 Error 41 12.1 7.6 -17.8 -5.92 -14.1 -4.7 16.5 12.23 -3.3 -4.7 4.3 -2.14 -5.4 11.7 20.0 -11.05 -8.7 -27.5 15.2 11.9)(CE:)(BE:B. If your geologist’s signal for a particular lease is $120 million, what bid will you submit using only )(CE?C. If your geologist’s signal for a particular lease is $120 million, what bid will you submit using both )(CE and )(BE?FORMULAE
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