W10_WAS_Decision Tree for Analyzing Bank’s Gift Program


Step 1- Problem or Opportunity Statement

I saw bank offered gadget as gift that can be chosen by their customer depends on how long they agree to hold their money in the bank.

Image

Based on their program, I think Samsung Galaxy S III Mini will be my target! If I want to get S III mini, I have to put IDR 35.000.000 for 24 months of holding period.  I’ve already checked the price of Samsung SIII mini, which is IDR 2.800.000.

I want to analyze, is that program really give me a benefit?

Step 2 – “FEASIBLE alternatives”

If right now I have IDR 35.000.000 available, I will compare whether to:

1.Join the bank program: put IDR 35.000.000 for 2 years, then I will get Samsung Galaxy SIII mini immediately

2.Buy Samsung Galaxy SIII mini IDR 2.800.000 with my own money, then the rest of money IDR 32.200.000 goes to fixed deposit saving for 2 years.

3. Buy Samsung Galaxy SIII mini IDR 2.800.000, then the rest of money (IDR 32.200.000) will be put in mutual fund with uncertain interest.

Step 3- Develop the outcomes for each alternative (minimum 2)

1.          F = IDR 35.000.000

2.         P = IDR 32.200.000

i = 12 months is 6% à 12/6% = 0.5% per month

N = 24 months

F = P(F/P, i%, N)

F = 32.000.000 (1.1272)

F = 36.295.840

3.         In Mutual Fund, there is uncertainty in market situation. My prediction is:

Worst situation probability: 50%, investment rate = -10%

Moderate situation probability: 35%, investment rate = -15%

Best situation: 15%, investment rate = 25%

Image

P = IDR 32.200.000

Step 4- Selection of the acceptable criteria

I will choose the highest output while I also get Samsung S III mini.

Step 5- Analysis/ Comparison of the Alternatives against the Criteria

Image

Based on decision tree, highest outcome is fixed deposit, as it can increase my money’s value IDR 32.200.000 to IDR 36.295.840 with 6% rate of interest per year for 2 years. Mutual fund can give me higher outcome but as there is also worst probability, the outcome is IDR 35.492.450 (still higher than the bank’s scheme of “gadget gift”).

Step 6- Selection of the Best/ Preferred Alternative Compared against the Criteria

Given the options, I will choose to just buy Samsung Galaxy SIII mini with my own money then put the rest to fixed deposit saving.

Step 7- Performance Monitoring and Post Evaluation of Result/ Follow up Assessment

For better gain, I will search another option of fixed deposit saving that can give me more than 6% interest, probably in another bank.

REFERENCES

Sullivan, W. G., Wicks, E. M., & Koelling, C. P. (2012). The Time Value of Money. In Engineering Economy (15th ed., pp. 104-162). Upper Saddle River, N.J: Prentice Hall.

Sullivan, W. G., Wicks, E. M., & Koelling, C. P. (2012). Probabilistic Risk Analysis. In Engineering Economy (15th ed., pp. 478-521). Upper Saddle River, N.J: Prentice Hall.

Prasetio, Hadianto (2013). W5_HPO_Decision Tree for House Acquisition Scenario. [ONLINE] Available at: https://simatupangaace2014.wordpress.com/2013/11/02/w5_hpo_decision-tree-for-house-acquisition-scenario/. [Last Accessed 16 November 2013].

BNI (2010). Bunga Deposito. [ONLINE] Available at: http://www.bni.co.id/en-us/tarif/Simpanan/bungadeposito.aspx. [Last Accessed 16 November 2013].

Bank Mutiara (2013). Nabung 8 Juta Pasti Dapat Hadiah. [ONLINE] Available at: http://www.mutiarabank.co.id/media.php?menu=gadget. [Last Accessed 16 November 2013].

Tabloid Pulsa (2013). SAMSUNG I8190 GALAXY S III MINI. [ONLINE] Available at: http://www.tabloidpulsa.co.id/phones/samsung/item/3380-i8190-galaxy-s-iii-mini. [Last Accessed 16 November 2013].

Advertisements

2 Comments

Filed under Week 10, Wirawan ASP

2 responses to “W10_WAS_Decision Tree for Analyzing Bank’s Gift Program

  1. AWESOME pak Wirawan!!! Nice case study and you set it up perfectly!! Great job on your citations as well…….

    Be sure to claim credit not only for your blog but for your questions from the appropriate chapters in Engineering Economy!!

    Keep up the good work…..

    BR,
    Dr. PDG, Jakarta

  2. Hi Pak,

    I think you forgot to include the price of Samsung mini in your calculation of option 1. So, it shouldn’t be IDR 35 mio anymore. In addition, the bank usually still gives the interest rate of general saving account, say 1.5% per annum.

    By adding those two variables, the bank promo will become pretty much interesting.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s