Q#1 Interest Calculation?

When calculating interest-on-interest, use the compound interest formula to determine the
amount of accumulated interest on the principal amount invested or borrowed. To figure
out compound interest on a loan or deposit, you need to know the principal amount, the
annual interest rate and the number of compounding periods.

Compound interest is the interest owed or received that grows at a faster rate than
basic interest.

How to Calculate Interest on Interest (Compound Interest)

Interest)
The formula to calculate compound interest is the principal amount multiplied by
1, plus the annual interest rate in percentage terms, raised to the total number of
compound periods. The principal amount is then subtracted from the resulting
value.

Compound Interest = [P (1 + i)n] – P

(Where P = Principal, i = nominal annual interest rate in percentage terms, and n
= number of compounding periods.).
Q#2 Present value calculation?

Present Value (PV) is a formula used in Finance that calculates the

present day value of an amount that is received at a future date. The
premise of the equation is that there is "time value of money".
Use of Present Value Formula:
The Present Value formula has a broad range of uses and may be
applied to various areas of finance including corporate finance, banking
finance, and investment finance. Apart from the various areas of finance
that present value analysis is used, the formula is also used as a
component of other financial formulas.
System reliability and availability :
Reliability –
 The probability of failure-free system operation over a specified time in a given environment
for a given purpose.
Availability – The probability that a system, at a point in time, will be operational and able to
deliver the requested services.
Availability specification • Both reliability and availability attributes can be expressed as
numbers: – Availability of 0.999 means that the system is up and running for 99.9% of the
time;
Reliability specification • Probability of failure on demand (POFOD) of 0.0001 means that on
average 1 in 10, 000 demands for service from a system will fail in some way.
Q#3 Feasible sets and cost value contours(graph)?
Feasible set

We have seen from examples that optimization problems often have several constraints,
leading to several inequalities or a system of linear inequalities. A point (x,y) satisfies a system of
inequalities if it satisfies all of the inequalities in the system.

The solution set of a system of linear inequalities is the set of all points in the plane which satisfy
the system of inequalities. This is also called the feasible set of the system of inequalities or the
feasible region of the system.

The graph of the feasible set for a system of inequalities is the set of all points in the intersection of
the graphs of the individual inequalities.

Determining the feasible set

The two lines divide the plane into four regions:

Q#4 In house vs vendor development ?

In-house refers to conducting an activity or operation within a company, instead

of relying on outsourcing. A firm uses its employees and time to keep a division
or business activity, such as financing or brokering, in-house.
Vendor:

A vendor, also known as a supplier, is an individual or company that sells goods or services to
someone else in the economic production chain. ... In information technology as well as in
other industries, the term is commonly applied to suppliers of goods and services to other
companies
Q#5 Subjective probabilities?

• Often, we estimate likelihood of outcomes of uncertain events using judgment

• Examples:

– Likelihood of major earthquake (7.5-8 on Richter scale) in Southern California over next
30 years?

– Flipped a coin that has landed on floor. Have not seen coin. What is the likelihood that
it is heads?

Premise

• We can always assess a decision-maker uncertainty using probabilities.

• To assess a decision-makers probability observe his/her attitude toward accepting bets about
the outcome in question.

Assessing subjective probability:

• Assume risk neutral decision maker; his/her utility of an amount of money is proportional to the
amount.
practical way of Assess subjective probability:

1. Ask directly decision-maker

2. Ask decision-maker what bets she/he is willing to place

3. Compare lottery involving the outcome whose probability you want to estimate with
reference lottery whose probability mechanism is known .
Q# 6 Presentation technique for unquantifiable?

Definition of unquantifiable. : not capable of being quantified : lacking a characteristic that can
be measured or expressed as a number or amount Travel, then, is the thing that can never be
done badly, where even a failed effort brings unquantifiable rewards
Unquantatifiable criteria:

Preference table
Screnning matrix:
Mixed Criteria:

– Tabular methods
– Cost vs. capability graph
– Polar graph
– Bar charts:
 Q#7:Decision rules under complete uncertainty?

Methods of Decision Making under Uncertainty

The methods of decision making under certainty are. There are a variety of criteria that have been
proposed for the selection of an optimal course of action under the environment of uncertainty. Each
of these criteria make an assumption about the attitude of the decision-maker.
1. Maximin Criterion: This criterion, also known as the criterion of pessimism, is used when
the decision-maker is pessimistic about future. Maximin implies the maximization of
minimum payoff. The pessimistic decision-maker locates the minimum payoff for each
possible course of action. The maximum of these minimum payoffs is identified and the
corresponding course of action is selected. This is explained in the following example :

Example : Let there be a situation in which a decision-maker has three possible alternatives A1,
A2 and A3, where the outcome of each of them can be affected by the occurrence of any one of the
 four possible events S1, S2, S3 and S4. The monetary payoffs of each combination of Ai and Sj are
given in the following table:

Solution: Since 17 is maximum out of the minimum payoffs, the optimal action is A2.
2. Maximax Criterion: This criterion, also known as the criterion of optimism, is used when the
decision-maker is optimistic about future. Maximax implies the maximisation of maximum
payoff. The optimistic decision-maker locates the maximum payoff for each possible course
of action. The maximum of these payoffs is identified and the corresponding course of action
is selected. The optimal course of action in the above example, based on this criterion, is A3.

Q#8 Detailed cocomo cost driver?

An empirical model based on project experience

Well-documented, ‘independent’ model which is not tied to a specific software vendor

Long history from initial version published in 1981 (COCOMO-81) through various instantiations to
COCOMO 2

COCOMO 2 takes into account different approaches to software development, reuse, etc.

Cocomo level 2

COCOMO 2 is a 3 level model that allows increasingly detailed estimates to be prepared as

development progresses

Early prototyping level

Estimates based on object points and a simple formula is used for effort estimation

Early design level

Estimates based on function points that are then translated to LOC

Post-architecture level

Estimates based on lines of source code.