Assignment 1

Question 1

a)

z0 71 U(0,1) a 5 Formula in cell B2

z1 108 0.84 c 9 =MOD($F$1*B1+$F$2,$F$3)
z2 37 0.29 m 128 Formula in cell C2
z3 66 0.52 =B2/$F$3
z4 83 0.65
z5 40 0.31
z6 81 0.63
z7 30 0.23
z8 31 0.24
z9 36 0.28
z10 61 0.48
z11 58 0.45
z12 43 0.34
z13 96 0.75
z14 105 0.82
z15 22 0.17
z16 119 0.93
z17 92 0.72
z18 85 0.66
z19 50 0.39
z20 3 0.02
z21 24 0.19
z22 1 0.01
z23 14 0.11
z24 79 0.62
z25 20 0.16
z26 109 0.85
z27 42 0.33
z28 91 0.71
z29 80 0.63
z30 25 0.20
Mean 0.45 =AVERAGE(C2:C31)
Sd 0.27 =STDEV.S(C2:C31)
Variance 0.07177 =VAR.S(C2:C31)
Mean of the U(0,1) distribution = ½ = 0.5 > mean of sample = 0.45

Variance = 1/12 ~ 0.083 > variance of sample = 0.071

The difference of these means and variances are due to the fact that the sample size is small and Excel
does not give perfectly identically independent distributed numbers in the interval [0,1].

b)

z0 71 U(0,1) interest
z1 108 0.84 4.53
z2 37 0.29 2.87
z3 66 0.52 3.55
z4 83 0.65 3.95
z5 40 0.31 2.94
z6 81 0.63 3.90
z7 30 0.23 2.70
z8 31 0.24 2.73
z9 36 0.28 2.84
z10 61 0.48 3.43
z11 58 0.45 3.36
z12 43 0.34 3.01
z13 96 0.75 4.25
z14 105 0.82 4.46
z15 22 0.17 2.52
z16 119 0.93 4.79
z17 92 0.72 4.16
z18 85 0.66 3.99
z19 50 0.39 3.17
z20 3 0.02 2.07
z21 24 0.19 2.56
z22 1 0.01 2.02
z23 14 0.11 2.33
z24 79 0.62 3.85
z25 20 0.16 2.47
z26 109 0.85 4.55
z27 42 0.33 2.98
z28 91 0.71 4.13
z29 80 0.63 3.88
z30 25 0.20 2.59

Formula for interest rate on cell D2 = =2+C2*(5-2)

Question 2

a) mass probability function and the cumulative probability function for the number of business
customers requesting a room for a Monday night

s Count Pbb[S = s] P[S <= s]

66 2 0.03 0.03
67 5 0.06 0.09
68 8 0.10 0.19
69 10 0.13 0.32
70 5 0.06 0.38
71 16 0.21 0.59
72 11 0.14 0.73
73 9 0.12 0.85
74 8 0.10 0.95
75 4 0.05 1.00
sum 78 1.00
b) Let P be the number of rooms protected from sale at a discount price.
Let D be the demand by business travellers.
Profit (D,P) = 120 x [number of rooms purchased in advance] + 200 x [number of rooms sold at
full price]
= 120 x (150 – P) + 200 x Min[D,P]
 Hotel Problem Let P be the amount that is supposed to be sold in last minute
P= 66 P= 67 P= 68
Sold in Sold in Sold in
Sold in Sold in Sold in
last- last- last-
INPUT DATA Run U Demand advance Profit advance Profit advance Profit
minute minute minute
price price price
price price price
Total
number
of rooms
= 150 1 0.17 68 84 66 23,280 83 67 23,360 82 68 23,440
In
advance
price = $120 2 0.64 72 84 66 23,280 83 67 23,360 82 68 23,440
Last-
minute
price = $200 3 0.54 71 84 66 23,280 83 67 23,360 82 68 23,440
4 0.67 72 84 66 23,280 83 67 23,360 82 68 23,440
5 0.34 70 84 66 23,280 83 67 23,360 82 68 23,440
6 0.28 69 84 66 23,280 83 67 23,360 82 68 23,440
7 0.72 72 84 66 23,280 83 67 23,360 82 68 23,440
8 0.93 74 84 66 23,280 83 67 23,360 82 68 23,440
9 0.62 72 84 66 23,280 83 67 23,360 82 68 23,440
10 0.70 72 84 66 23,280 83 67 23,360 82 68 23,440
11 0.48 71 84 66 23,280 83 67 23,360 82 68 23,440
12 0.91 74 84 66 23,280 83 67 23,360 82 68 23,440
13 0.21 69 84 66 23,280 83 67 23,360 82 68 23,440
14 0.53 71 84 66 23,280 83 67 23,360 82 68 23,440
15 0.76 73 84 66 23,280 83 67 23,360 82 68 23,440
16 0.85 74 84 66 23,280 83 67 23,360 82 68 23,440
17 0.18 68 84 66 23,280 83 67 23,360 82 68 23,440
18 0.96 75 84 66 23,280 83 67 23,360 82 68 23,440
19 0.01 66 84 66 23,280 83 66 23,160 82 66 23,040
20 0.66 72 84 66 23,280 83 67 23,360 82 68 23,440
s 21 0.46 71 84 66 23,280 83 67 23,360 82 68 23,440
22 0.79 73 84 66 23,280 83 67 23,360 82 68 23,440
23 0.90 74 84 66 23,280 83 67 23,360 82 68 23,440
24 0.29 69 84 66 23,280 83 67 23,360 82 68 23,440
25 0.49 71 84 66 23,280 83 67 23,360 82 68 23,440
26 0.45 71 84 66 23,280 83 67 23,360 82 68 23,440
27 0.11 68 84 66 23,280 83 67 23,360 82 68 23,440
28 0.11 68 84 66 23,280 83 67 23,360 82 68 23,440
29 0.34 70 84 66 23,280 83 67 23,360 82 68 23,440
30 0.93 74 84 66 23,280 83 67 23,360 82 68 23,440
31 0.69 72 84 66 23,280 83 67 23,360 82 68 23,440
32 0.49 71 84 66 23,280 83 67 23,360 82 68 23,440
33 0.64 72 84 66 23,280 83 67 23,360 82 68 23,440
34 0.24 69 84 66 23,280 83 67 23,360 82 68 23,440
35 0.88 74 84 66 23,280 83 67 23,360 82 68 23,440
36 0.74 73 84 66 23,280 83 67 23,360 82 68 23,440
37 0.88 74 84 66 23,280 83 67 23,360 82 68 23,440
38 0.51 71 84 66 23,280 83 67 23,360 82 68 23,440
39 0.18 68 84 66 23,280 83 67 23,360 82 68 23,440
40 0.02 66 84 66 23,280 83 66 23,160 82 66 23,040
41 0.24 69 84 66 23,280 83 67 23,360 82 68 23,440
42 0.68 72 84 66 23,280 83 67 23,360 82 68 23,440
43 0.21 69 84 66 23,280 83 67 23,360 82 68 23,440
44 0.15 68 84 66 23,280 83 67 23,360 82 68 23,440
45 0.55 71 84 66 23,280 83 67 23,360 82 68 23,440
46 0.31 69 84 66 23,280 83 67 23,360 82 68 23,440
47 0.81 73 84 66 23,280 83 67 23,360 82 68 23,440
48 0.90 74 84 66 23,280 83 67 23,360 82 68 23,440
49 0.34 70 84 66 23,280 83 67 23,360 82 68 23,440
50 0.86 74 84 66 23,280 83 67 23,360 82 68 23,440
51 0.04 67 84 66 23,280 83 67 23,360 82 67 23,240
52 0.26 69 84 66 23,280 83 67 23,360 82 68 23,440
53 0.17 68 84 66 23,280 83 67 23,360 82 68 23,440
54 0.73 72 84 66 23,280 83 67 23,360 82 68 23,440
55 0.04 67 84 66 23,280 83 67 23,360 82 67 23,240
56 0.53 71 84 66 23,280 83 67 23,360 82 68 23,440
57 0.49 71 84 66 23,280 83 67 23,360 82 68 23,440
58 0.17 68 84 66 23,280 83 67 23,360 82 68 23,440
59 0.96 75 84 66 23,280 83 67 23,360 82 68 23,440
60 0.68 72 84 66 23,280 83 67 23,360 82 68 23,440
E(Profit) 23,280 E(Profit) 23,353 E(Profit) 23,420
± 0 ± 9 ± 20
 P= 69 P= 70 P= 71 P= 72
Sold in Sold in Sold in Sold in
Sold in Sold in Sold in Sold in
last- last- last- last-
advance Profit advance Profit advance Profit advance Profit
minute minute minute minute
price price price price
price price price price

81 68 23,320 80 68 23,200 79 68 23,080 78 68 22,960

81 69 23,520 80 70 23,600 79 71 23,680 78 72 23,760

81 69 23,520 80 70 23,600 79 71 23,680 78 71 23,560

81 69 23,520 80 70 23,600 79 71 23,680 78 72 23,760
81 69 23,520 80 70 23,600 79 70 23,480 78 70 23,360
81 69 23,520 80 69 23,400 79 69 23,280 78 69 23,160
81 69 23,520 80 70 23,600 79 71 23,680 78 72 23,760
81 69 23,520 80 70 23,600 79 71 23,680 78 72 23,760
81 69 23,520 80 70 23,600 79 71 23,680 78 72 23,760
81 69 23,520 80 70 23,600 79 71 23,680 78 72 23,760
81 69 23,520 80 70 23,600 79 71 23,680 78 71 23,560
81 69 23,520 80 70 23,600 79 71 23,680 78 72 23,760
81 69 23,520 80 69 23,400 79 69 23,280 78 69 23,160
81 69 23,520 80 70 23,600 79 71 23,680 78 71 23,560
81 69 23,520 80 70 23,600 79 71 23,680 78 72 23,760
81 69 23,520 80 70 23,600 79 71 23,680 78 72 23,760
81 68 23,320 80 68 23,200 79 68 23,080 78 68 22,960
81 69 23,520 80 70 23,600 79 71 23,680 78 72 23,760
81 66 22,920 80 66 22,800 79 66 22,680 78 66 22,560
81 69 23,520 80 70 23,600 79 71 23,680 78 72 23,760
81 69 23,520 80 70 23,600 79 71 23,680 78 71 23,560
81 69 23,520 80 70 23,600 79 71 23,680 78 72 23,760
81 69 23,520 80 70 23,600 79 71 23,680 78 72 23,760
81 69 23,520 80 69 23,400 79 69 23,280 78 69 23,160
81 69 23,520 80 70 23,600 79 71 23,680 78 71 23,560
81 69 23,520 80 70 23,600 79 71 23,680 78 71 23,560
81 68 23,320 80 68 23,200 79 68 23,080 78 68 22,960
81 68 23,320 80 68 23,200 79 68 23,080 78 68 22,960
81 69 23,520 80 70 23,600 79 70 23,480 78 70 23,360
81 69 23,520 80 70 23,600 79 71 23,680 78 72 23,760
81 69 23,520 80 70 23,600 79 71 23,680 78 72 23,760
81 69 23,520 80 70 23,600 79 71 23,680 78 71 23,560
81 69 23,520 80 70 23,600 79 71 23,680 78 72 23,760
81 69 23,520 80 69 23,400 79 69 23,280 78 69 23,160
81 69 23,520 80 70 23,600 79 71 23,680 78 72 23,760
81 69 23,520 80 70 23,600 79 71 23,680 78 72 23,760
81 69 23,520 80 70 23,600 79 71 23,680 78 72 23,760
81 69 23,520 80 70 23,600 79 71 23,680 78 71 23,560
81 68 23,320 80 68 23,200 79 68 23,080 78 68 22,960
81 66 22,920 80 66 22,800 79 66 22,680 78 66 22,560
81 69 23,520 80 69 23,400 79 69 23,280 78 69 23,160
81 69 23,520 80 70 23,600 79 71 23,680 78 72 23,760
81 69 23,520 80 69 23,400 79 69 23,280 78 69 23,160
81 68 23,320 80 68 23,200 79 68 23,080 78 68 22,960
81 69 23,520 80 70 23,600 79 71 23,680 78 71 23,560
81 69 23,520 80 69 23,400 79 69 23,280 78 69 23,160
81 69 23,520 80 70 23,600 79 71 23,680 78 72 23,760
81 69 23,520 80 70 23,600 79 71 23,680 78 72 23,760
81 69 23,520 80 70 23,600 79 70 23,480 78 70 23,360
81 69 23,520 80 70 23,600 79 71 23,680 78 72 23,760
81 67 23,120 80 67 23,000 79 67 22,880 78 67 22,760
81 69 23,520 80 69 23,400 79 69 23,280 78 69 23,160
81 68 23,320 80 68 23,200 79 68 23,080 78 68 22,960
81 69 23,520 80 70 23,600 79 71 23,680 78 72 23,760
81 67 23,120 80 67 23,000 79 67 22,880 78 67 22,760
81 69 23,520 80 70 23,600 79 71 23,680 78 71 23,560
81 69 23,520 80 70 23,600 79 71 23,680 78 71 23,560
81 68 23,320 80 68 23,200 79 68 23,080 78 68 22,960
81 69 23,520 80 70 23,600 79 71 23,680 78 72 23,760
81 69 23,520 80 70 23,600 79 71 23,680 78 72 23,760
E(Profit) 23,460 E(Profit) 23,473 E(Profit) 23,477 E(Profit) 23,443
± 36 ± 54 ± 75 ± 93
 P= 73 P= 74 P= 75
Sold in Sold in Sold in
Sold in Sold in Sold in
last- last- last-
advance Profit advance Profit advance Profit
minute minute minute
price price price
price price price

77 68 22,840 76 68 22,720 75 68 22,600

77 72 23,640 76 72 23,520 75 72 23,400

77 71 23,440 76 71 23,320 75 71 23,200

77 72 23,640 76 72 23,520 75 72 23,400
77 70 23,240 76 70 23,120 75 70 23,000
77 69 23,040 76 69 22,920 75 69 22,800
77 72 23,640 76 72 23,520 75 72 23,400
77 73 23,840 76 74 23,920 75 74 23,800
77 72 23,640 76 72 23,520 75 72 23,400
77 72 23,640 76 72 23,520 75 72 23,400
77 71 23,440 76 71 23,320 75 71 23,200
77 73 23,840 76 74 23,920 75 74 23,800
77 69 23,040 76 69 22,920 75 69 22,800
77 71 23,440 76 71 23,320 75 71 23,200
77 73 23,840 76 73 23,720 75 73 23,600
77 73 23,840 76 74 23,920 75 74 23,800
77 68 22,840 76 68 22,720 75 68 22,600
77 73 23,840 76 74 23,920 75 75 24,000
77 66 22,440 76 66 22,320 75 66 22,200
77 72 23,640 76 72 23,520 75 72 23,400
77 71 23,440 76 71 23,320 75 71 23,200
77 73 23,840 76 73 23,720 75 73 23,600
77 73 23,840 76 74 23,920 75 74 23,800
77 69 23,040 76 69 22,920 75 69 22,800
77 71 23,440 76 71 23,320 75 71 23,200
77 71 23,440 76 71 23,320 75 71 23,200
77 68 22,840 76 68 22,720 75 68 22,600
77 68 22,840 76 68 22,720 75 68 22,600
77 70 23,240 76 70 23,120 75 70 23,000
77 73 23,840 76 74 23,920 75 74 23,800
77 72 23,640 76 72 23,520 75 72 23,400
77 71 23,440 76 71 23,320 75 71 23,200
77 72 23,640 76 72 23,520 75 72 23,400
77 69 23,040 76 69 22,920 75 69 22,800
77 73 23,840 76 74 23,920 75 74 23,800
77 73 23,840 76 73 23,720 75 73 23,600
77 73 23,840 76 74 23,920 75 74 23,800
77 71 23,440 76 71 23,320 75 71 23,200
77 68 22,840 76 68 22,720 75 68 22,600
77 66 22,440 76 66 22,320 75 66 22,200
77 69 23,040 76 69 22,920 75 69 22,800
77 72 23,640 76 72 23,520 75 72 23,400
77 69 23,040 76 69 22,920 75 69 22,800
77 68 22,840 76 68 22,720 75 68 22,600
77 71 23,440 76 71 23,320 75 71 23,200
77 69 23,040 76 69 22,920 75 69 22,800
77 73 23,840 76 73 23,720 75 73 23,600
77 73 23,840 76 74 23,920 75 74 23,800
77 70 23,240 76 70 23,120 75 70 23,000
77 73 23,840 76 74 23,920 75 74 23,800
77 67 22,640 76 67 22,520 75 67 22,400
77 69 23,040 76 69 22,920 75 69 22,800
77 68 22,840 76 68 22,720 75 68 22,600
77 72 23,640 76 72 23,520 75 72 23,400
77 67 22,640 76 67 22,520 75 67 22,400
77 71 23,440 76 71 23,320 75 71 23,200
77 71 23,440 76 71 23,320 75 71 23,200
77 68 22,840 76 68 22,720 75 68 22,600
77 73 23,840 76 74 23,920 75 75 24,000
77 72 23,640 76 72 23,520 75 72 23,400
E(Profit) 23,373 E(Profit) 23,290 E(Profit) 23,177
± 106 ± 118 ± 121
 23,600

23,500

23,400
Average profit

23,300

23,200

23,100

23,000

22,900
66 67 68 69 70 71 72 73 74 75
Amount supposed to be sold in last minute (P)

The optimal protection level, in terms of expected/mean profit, should be 70 or 71 rooms as the average
profit would be highest and the results will not have as large variabilities as higher number of rooms.

c) The booking limit for discount room = total number of rooms – number of rooms protected from
discounts (70 or 71 in part b)
Hence, the optimal booking limit for discount rooms should be between 79 or 80 rooms.
d) If the forecast of business customer demand is biased upward, more rooms that were protected
from discounts will not be purchased, the hotel will lose $120 per room that was not purchased
because they could have sold them to leisure travelers.
e) If the forecast of business customer demand is biased downward, the hotel will have less rooms
that could be sold to business customers. The hotel will lose $80 as the rooms could have been
sold at a higher price.
f) The critical fractile = Cu/(Co+Cu)
80/(120+80) = 0.4
Based on the probability functions from part a), the protection level for full price room is
between 70 and 71 rooms, and the booking limit for discount rooms that maximize the expected
revenue for Monday night is between 79 or 80 room. This is similar to part b) and c).
PERSONAL ETHICS STATEMENT

Individual Assignment:

By signing this Statement, I am attesting to the fact that I have reviewed the entirety of my attached
work and that I have applied all the appropriate rules of quotation and referencing in use at the Telfer
School of Management at the University of Ottawa, as well as adhered to the fraud policies outlined in
the Academic Regulations in the University’s Undergraduate Studies Calendar Academic Fraud
Webpage.

______Chau____________________ ____29th September 2021___

Signature Date

________NGUYEN, CHAU________ ______3001433695__________

Last Name (print), First Name (print) Student Number