SOLUTIONS MANUAL

CHAPTER Statistical Techniques

4 in Financial
Management

1 A school is eligible for state grants if the average monthly earnings of the families from where the
children hail is lesser than RM 1000. Below are the monthly earnings of the families from where
the children hail. Find out whether the school is eligible for state grants.

1250, 1070, 750, 875, 959, 600, 2200, 1250, 1100, 795, 1100, 885, 950

The average of these numbers is: - 1060.308 Thus the school is not eligible for loans.

2 A packaging manufacturing company buys polyethylene rolls as a raw material for its finished
products. It is entitled to a 5% discount if the average monthly volume pickup is more than 100
tonnes. Below is the month wise volume of material bought in the year 2007. Find out whether
the company is eligible for a discount.

135, 120, 75, 75, 98, 77, 80, 95, 90, 105, 110, 120

The average monthly volume pickup 98.333. Thus the company is not eligible to any discount.

3 A professor of Financial Management is evaluating his students. He wishes that the students be
evaluated as per performance throughout the year rather than one exam only. He evaluates them
by giving surprise quizzes, assignments, projects and an end term exam. For each of these, he
marks the students out of 100marks.The following tables shows the % weight that he wants to
assign to each method of evaluation and also the scores obtained by 10 of his students. Calculate
the weighted average score for all the 10 students and also find out the average score of the class.

(See CD for excel sheet attached)

Answers:-
62.2 34.4
48.9 53.8
54.3 44.3
44.3 31.1
38.4 40

4 The growth rate of Gross Domestic Product of a country is as produced below:-

Year 1 2 3 4 5
Growth rate 5% 6% 4.2% 3.5% 7.6%

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 Statistical Techniques in Financial
Solutions
Management
Manual
2

(a) What measure of average is appropriate for measuring annual GDP growth of this country
for 5 years?
The geometric mean.
(b) Find out the geometric mean of growth of GDP of this country.
The geometric mean of GDP growth is 5.07%

5 A Fireworks manufacturing company is trying to estimate staffing requirements for its plants.
It  plans to have some permanent staff and some temporary staff on its rolls. These are the
expected sales volumes of the company in RM Million. It is estimated that staffing requirements
is dependent on turnover i.e. approximately for every RM 50,000 of sales, it needs one staff. Below
is listed the month wise sales turnover. Can you help the company determine its permanent
staffing needs?

Month Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Sales 200 240 220 180 210 197 230 225 215 1005 210 180
(RM ,000)

Minimum expected sales turnover= April & December RM 180,000.Thus the staffing level should
be such that they can make this amount.
Thus he needs about 180,000/50,000 staff = 3.6.

As he cannot employ fractional number of staff , he has to employ 4 staff.

6 A car workshop got cars of the following odometer readings in a week in the workshop. Calculate
the mode and mean for this set of data and comment on the more appropriate measure of central
tendency.

Odometer Readings approximated (‘000 Kms) 5, 6, 3, 6, 11, 7, 9, 10, 2, 4, 10, 6, 2, 1, 5

Mean = 5.8

is the most repeated value and is the mode.

Both the central tendencies give nearly the same results. However, the mode is a better measure
as it gives the most repeated value. As we can see, none of the numbers are fractional and thus a
non fractional number (in this case) is a better measure of central tendency.

8 Radio Taxi has 20 cabs and it collects the following amounts in one day. Find the range standard
deviation and comment on the utility of the measures of central tendency.

Collections (RM) 150, 93, 95, 125, 144, 100, 115, 77, 128, 130, 180, 91, 112, 105, 180, 112, 77, 90,
135, 176.

Range = 180 – 77= 103

Standard deviation = 32.27

The range is simple to calculate , but is not representative in this case as there is a lot of fluctuations
in the data and it gives an extreme value.

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 Statistical Techniques in Financial Management
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9 The a soda bottling factory is bottling 1 Litre of soda bottles. In a quality check conducted, these
are the amounts that are bottled. Can you determine the standard deviation of the quantity
bottled in the sample?

1.02, 1.10, 0.98, 0.97, 1.12, 0.93 ,1.02 ,1.01,1.12 ,1.08

Standard deviation = 0.067

10 A researcher is studying a possible link between late coming to a factory and seniority as reflected
in the salary scales. He beaks the salary into various grades, ranked from 1 being the least till 15
being the highest. He also ranks late coming into 10 categories, from 1 to 10, 1 being the most
tardy to 10 being the least tardy. He then draws up a sample of 10 people and this is the result.

Salary Ranking

Sl No 1 2 3 4 5 6 7 8 9 10
Salary Ranking 2 5 4 5 12 15 11 12 6 8
Tardiness ranking 1 7 3 11 8 8 6 1 4 3

Draw a scatter diagram of the above and determine whether there is a relationship between
tardiness and salary.

The scatter diagram is as below:-

12

10

0
0 2 4 6 8 10 12 14 16

From here, it does not appear that there is a strong relationship between tardiness and salary.

11 Plot the scatter diagram from the following set of data and determine the equation that best
describes the data.
X 11 13 14 10 15 7 11 15 17 10
Y 4.6 6.8 7.1 4.3 7.7 2.6 8.7 11.4 13.4 7.9

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 Statistical Techniques in Financial
Solutions
Management
Manual
4

16

14

12

10

0
0 5 10 15 20

The equation is

Y = .88 × –3.37

Find y for values of X=4 and X=18

For x=4 , Y= 0.15

For x=18 , Y= 12.46

12 In a factory, there was an attempt to link stress and noise levels in factory. A test was administered
to people to measure their stress levels. Here is the sample of data of the sample chose. The noise
levels is the noise that a worker is exposed to in the factory (Various places have various noise
levels) and the level of stress as determined by the test administered by a psychologist.

Sl No. 1 2 3 4 5 6 7 8 9 10
Noise level 1 7 4 6 8 9 2 10 7 8
Stress readings 14 47 24 42 51 55 15 62 51 65

(a) What is the dependent variable?

Stress readings
(b) What equation fits the data best?
y = 6.87 × –0.16
(c) What is he expected stress readings for a noise level of 3?
20.462

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