Performing Cluster Analysis

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Performing Cluster Analysis

1. You have been given retail sales data from XYZ Mart and you have been asked to perform a Cluster Analysis in order to determine the individual customers to target with each of three advertising campaigns

a. Tell me for what reason you would use each of the following parts of the Solver window for this Cluster Analysis:

i. Set Objective:

ii. By Changing Variable Cells:

iii. Subject to the Constraints:

iv. Select a Solving Method:

b. Tell me whether you would use “k means” or “k median” analysis and why you chose the one you chose?

c. What would you tell your boss if your analysis indicated that the “best” number of clusters was five?

2. The trust office at XYZ National Bank needs to determine how to invest $100,000 in bonds to maximize the annual return. The options are:

Bond Annual Return Maturity Risk Tax-Free

A 9.5% Long High Yes
B 8.0% Short Low Yes
C 9.0% Long Low No
D 9.0% Long High Yes
E 9.0% Short High No

The office wants to invest at least 50% of the money in short term issues and no more than 50% in high-risk issues. At least 30% of the funds should go in tax-free investments and at least 40% of the total return should be tax free.

Use the following Excel Optimization Analysis Spreadsheet solution for the above problem for the questions that follow the spreadsheet.