STATS1900 Business Statistics

Answers to Statistics Revision Questions

1. (a) 0.15; (b) 0.30; (c) 0.45; (d) E(X) = 1.5. On average a person will donate
blood 1½ times per year. (e) StDev(X) = 1.3229; (f) E(Y) = 11, V(Y) = 28

2.1 (a) 0.0135; (b) 0.8399; (c) 0.00135; (d) 2.6775 mins. (e) 4.14 mins

2.2 a) Z = (30 – 15)/10 = 1.5; Pr(Z≥1.5) = 0.5 – 0.4332 = 0.0668

b) For zero return Z = (0.0 – 15)/10 = -1.5; Pr(Z<-1.5) = 0.0668 = Pr(-‘ve return)
c) For return = 2.5% Z = (2.5 – 15)/10 = -1.25; Pr(Z≥-1.25) = 0.5 + 0.3944 = 0.8944
d) A return with 90% chance of being exceeded gives Z = -1.28
X = 10(Z) + 15 so X = -12.8 + 15 = 2.2% i.e. Pr(return ≥ 2.2%) = 0.90

3.1 (a) i) 99%CI = 0.4250 ± 0.043 = 0.382 to 0.468; ii) decreasing sample size would
increase the width of the confidence interval (because  would increase)
(b) use n = 752 (assume p = 0.5 and use z = 1.645); (c) n = 121

3.2 a) ROT k = 2. s.e.mean = 0.5/sqrt(9) = 0.167.

95% CI = 4 ± 2 (0.167) = 4 ± 0.334 = 3.666 to 4.334 mins
We can be 95% certain that the true mean time taken waiting in line at the supermarket
will be between 3.67 and 4.33 mins.
b) Sample size is < 30 so normality (or near normality) needs to be assumed because
the central limit theorem is generally not appropriate for small samples. Also require
the sample to independently and randomly selected
c) If waiting times were more variable the standard error would be larger resulting in a
wider confidence interval.

4. (a) i) No because the test statistic is -0.5 and p = 0.5 – 0.1915 = 0.3085 >> 0.05;
(a) ii) Type I error means rejecting their claim when it is true i.e. concluding that the
life of the light bulbs is significantly less than 750 hours when that is not the case.
(a) iii) Type II error means accepting their claim when in fact it is false i.e. concluding
that the life of the light bulbs is at least 750 hours when it is actually less than this.
(b) i) Single sample t-test; ii) Sample consists of independent random observations,
and is approximately normal. Independent random observations may be assumed from
what was initially stated and normality may be checked using a normality test.
(b) iii) H0 : The mean number of glasses of water adults drink each day is 5; i.e. = 5.
H1 : The mean number of glasses of water adults drink each day is less than 5;
i.e. < 5.
(b) iv) SE Mean = 0.963 ÷ √12 = 0.278; t = (4.208 – 5) ÷ 0.278 = -2.85.
(b) v) the p-value (0.0079) is the probability of obtaining an average of 4.208 if the true
average really was 5 glasses per day. It represents the probability of obtaining this
result by chance alone assuming H0 to be true.
(b) vi) Reject H0 and conclude that there is strong evidence that adults drink
significantly less than 5 glasses of water per day. It seems the claim by the water-
bottling company is justified.
5. a) Size correlates highest with Price.
b) The relationship is positive.
c) This means that as the size of the house increases so to does the price.
d) The least correlation is between the size of the house and the land
e) Perhaps people tend to build a house they can afford regardless of the size of the land.

6. (a) DV = components assembled, IV = time; (b) components = 8.1 + 60.4 × time;

(c) 1 = 60.4 which means that for every extra hour spent on the floor an extra 60.4
components are assembled. (d) R2 = 0.9783 which means 97.83% of the variation in
numbers of components assembled can be explained by this model. (e) 0 = 8.1 i.e.
even when assembly time is zero hours 8.1 components are assembled. This seems silly
because it is not possible to assemble any components if no time is spent in assembly!!
This is simply the point at which the regression line would cross the vertical axis IF it
were extended that far. In reality you would expect it to be zero.
(f) H0 : the intercept 0 = 0 vs H1 : the intercept 0  0. t = 1.67, p = 0.1085. Conclude
that the intercept is not significantly different from zero.
(g) 491.3, 8 hours is well outside range of values used to develop the model so we
cannot assume the model will still apply at these levels
(h) The residual plot shows random scatter and appear to be normally distributed as the
points lie close to the line. Hence the model seems most appropriate.

7. (a) There is a strong seasonal component with peaks occurring in Jan each year and
troughs immediately before and just after July. There are also very slight peaks in July
probably coinciding with the winter school holiday period. The effects of Sept and
Mar/April holidays are also clear, appearing as shoulder peaks either side of the main
Jan peak. There is also evidence of a slight increasing trend over the 7-year period. No
cyclical pattern is evident but irregular effects are seen by the slight differences in the
appearances (nature) of the peaks and troughs – some are pointed, some are flat, more
pronounced one year than another.
(b) i) (b) ii) A 5-period moving average would smooth the
4-Pt MA Centred data more so than the 4-period moving average.
501
488
504 517.75 523.25
578 528.75 546.75
545 564.75 592.75
632 620.75 639.13
728 657.50
725

8. The smoothed series for both (a) & (b) are shown in the table below:

Month July Aug Sept Oct Nov Dec Jan Feb Mar April May June
Sales 25 27 28 28 28 23 25 20 21 24 26 23
=
0.25 25 25.50 26.13 26.59 26.95 25.96 25.72 24.29 23.47 23.60 24.20 23.90
 = 0.8 25 26.60 27.72 27.94 27.99 24.00 24.80 20.96 20.99 23.40 25.48 23.50
3-pt MA 26.67 27.67 28.00 26.33 25.33 22.67 22.00 21.67 23.67 24.33

(c) For  = 0.25 the prediction for July-04 would be 23.68; for  = 0.8 predict 23.10
 (d) Monthly sales were less than target value of 29000 L for the 12 month period. Sales
peaked between Sept and Nov then declined till Feb when they began to rise again. The
peak in May was not as strong as that in the previous Sept – Nov period. Sales dropped
off again in June; it seems the target is unrealistic.

(e) The main purpose for smoothing data is to take out the irregular component of the
time series and to make clear any trend or cyclical or seasonal patterns.

9. (a) simple agg price index = 19.57/19.30 = 1.0140;

(b) 1.0111
(c) weighted agg index = 17199/16967 = 1.0137 (i.e. Laspeyres)
(d) Paasche Index = 17334/17100 = 1.01367
(e) The weighted agg index uses base-year quantities as the weighting whereas Paasche
uses quantities from the current year as weightings.
(f) sqrt(1.0137 × 1.01367) = 1.013683

10. Simple Index = 0.8438. This means working days lost per 1000 employees in 2004 is
only 84.38% of those lost in 2000; i.e. there has been a decrease in working days lost of
15.62%.