Question

In order to make a decision utilizing a decision tree, you must:

start at the most distant point in time and work backwards to Time 0.

begin at Time 0 and work towards the most distant point in time.

start at the top of the tree and work vertically downward to the very bottom.

start at the middle of the tree and work both upwards and downwards simultaneously.

concentrate only on the limbs with the highest probability of occurrence levels.

Answer 1

Decision tree starts with time 0 and we work towards the most distant point in time using their probability of occurrence, it has following steps:

1) Start with the main decision at time 0

2) Define various possibilities at time 1, and the probability of occurrence of each possibility.

3) continue to do the same for the given time period.

4) at last calculate the final value of each tranch, using the probabilities assigned to all the nodes needed to reach the final value of that tranch.