COURSE/MODULE NAME OF EXAMINER

QM 1102 - Quantitative Methods II Mrs. Nazneen Ebrahim

Main Exam – Year 1 (Banking Diploma)

EXAMINATION DATE / TIME EXAMINATION DURATION

June 7, 2020 3 HOURS

MATERIALS/EQUIPMENT MATERIALS/EQUIPMENT
SUPPLIED BY CENTRE PERMITTED (candidate’s own)
Online Access to BIBF Myclass Page Open-Book Online Assessment

Instructions to candidates:
1) Candidates are strongly advised to divide their time accordingly.
2) This question paper consists of 10 pages, including this cover page.
3) Show your work on the answer sheet as you will be rewarded part of the grade for that.
4) Always make sure to write the question number next to your answer.
5) For each paper you use, please ensure that on the top of the sheet on the right, you
write your Full Name, Student ID, group and Unit.
6) You will either scan your papers (if you have a scanner available) or picture your answers
and put your answers in a word file. Please make sure that the images are not blurry. You
can then save your file as a PDF or submit as word file.
7) Upload the file on Moodle as a single attachment and not as multiple images. Multiple
separate images will not be graded.
8) The document should be uploaded within the time allocated for the exam and no papers
will be graded after that period.
9) The document should be submitted only through Moodle and not sent to your instructor
via email. Documents sent to the instructor’s email will not be graded.

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Section I Answer all questions in this section Total Marks = 10

Section II Answer all questions in this section Total Marks = 15

Answer ANY THREE questions in this section

Question No.1 (25 marks) Total Marks = 75
Section III Question No.2 (25 marks)
Question No.3 (25 marks)
Question No.4 (25 marks)

SECTION I [10 Marks]

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Answer all the questions in this section.
Select one correct answer for each question (1 mark each):

1) The confidence level for a confidence interval for a mean is

A. the probability the procedure provides an interval that covers the sample mean.
B. the probability of making a Type 1 error if the interval is used to test a null hypothesis about
the population mean.
C. the probability that individuals in the population have values that fall into the interval.
D. the probability the procedure provides an interval that covers the population mean.

2) Which of the following assumptions is necessary to apply a goodness-of-fit test? 

A. The population must be normally distributed.
B.  The data are measured with a nominal or ordinal scale.
C.  The population variance must be known.
D. The population mean must be known.

3) Of the three components in any decision-making situation, which of the following cannot be
controlled? 
A. Alternatives
B. Payoff
C. States of nature
D. Seasonal indexes

4) A linear trend equation is used to represent time series values when the data are changing by
equal what? 
A. Percents
B.  Proportions
C.  Amounts
D. Both percents and proportions are correct.

5) In hypothesis testing, what is the level of significance? 

A. The risk of rejecting the null hypothesis when it is true.
B. A value symbolized by the Greek letter α.
C. A value between 0 and 1.
D. All apply.

6) A rise in prices before Eid is an example of

A. Secular trend

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B. Seasonal trend
C. Irregular trend
D. Cyclical trend

7) Purchasing power of money can be accessed through:

A. Simple index
B. Fisher’s index
C. Consumer price index
D. Volume index

8) Which chi-square distribution would be closest to a normal distribution? 

A. The distribution with 3 degrees of freedom.
B. The distribution with 12 degrees of freedom.
C. The distribution with 15 degrees of freedom.
D. The distribution with 9 degrees of freedom.

9) If there are four independent variables in a multiple regression equation, there are also four
______.
A. Y-intercepts
B.  Regression coefficients
C.  Dependent variables
D. Constant terms

10) When is it appropriate to use the paired difference t-test? 

A. When four samples are compared at once
B.  When any two samples are compared
C.  When two independent samples are compared
D. When two dependent samples are compared

SECTION II [15 marks]

Answer all the questions in this section.

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Q.1 (10 Marks)
State whether the following are true or false and give brief explanation when it is false.
a) In a linear trend equation, t is a coded value that corresponds with a time period in a time
series. True
b) The chi- square distribution's curve is negatively skewed. False
c) Another term for real income is deflated income. True
d) The maximin criterion is a pessimistic approach where a decision maker wishes to avoid the
worst choice. False
e) In a goodness-of-fit test, the critical value of chi-square is based on number of samples.
False
f) For a specific confidence interval, the larger the sample size, the bigger the margin of error
will be. False
g) An alternate hypothesis is a statement about a population parameter that is accepted when
the null hypothesis is rejected. True

Q.2 (3 Marks)
For each of the following statements give the null and alternative hypotheses and say whether
they will need one- or two-tailed tests.
a) You are looking at data from two schools on the heights and weights of children by age. Are
the mean weights for girls aged 10–11 the same in the two schools? (1 mark)

b) You are looking at reading scores for children before and after a new teaching programme.
Have their scores improved? (1 mark)

c) A survey has been made of levels of satisfaction with housing by people living in different
types of accommodation. Levels of satisfaction are high, medium, low and very dissatisfied.
Levels of housing type are public housing apartment, public housing house, private apartment,
private detached house, private semi-detached house, miscellaneous (includes boat, caravan,
etc!). (1 mark)

Q.3 (2 Marks)
a) Explain what you understand by the statement:
‘The test is significant at the 5% significance level’. (1 mark)

b) How would you interpret a test that was significant at the 10% significance level, but not at the
5% significance level? (1 mark)
SECTION III [75 marks]
Answer ANY THREE questions out of four available; all questions carry equal weights

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 (25 marks)

Q.1] [25 Marks]

A) (18 marks)
An experiment was conducted to examine whether age, in particular being over 30 or not , has
any effect on preferences for a digital or an analogue watch. Specifically, randomly selected
people were asked what watch they prefer and their responses are summarised in the table below:
Analogue watch Digital watch
30-year-old or younger 10 37
Over 30 years old 31 12
i. Based on the data in the table, and without conducting any significance test, would you say
there is an association between age and watch preference? (2 marks)
ii. Calculate the chi – square statistic and use it to test for independence of age and watch
preference. What do you conclude? (16 marks)

B. (7 marks)
Given the following sample information,
Treatment 1 Treatment 2 Treatment 3
8 3 3
11 2 4
10 1 5
3 4
2

Source SS Df MS F
Treatment 107.20 2 53.600 50.96
Error 9.47 9 1.052
Total 116.67 11
i. Develop a 95 percent confidence interval for the difference in the treatment 1 and treatment 2.
(5 marks)
ii. Can we conclude that treatment 1 and treatment 2 differ? Give reason. (2 mark)

Solution
i)

treatment treatme
treatment 1 2 nt 3

count, ni = 3 5 4

mean , x̅ i = 9.67 2.20 4.00

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 std. dev., si = 1.53 0.84 0.82

sample variances, si^2 = 2.333 0.700 0.667

(grand
total sum 29 11 16 56 sum)

grand mean , x̅ = Σni*x̅i/Σni =   4.67

square of deviation of
sample mean from grand 0.4444444
mean,( x̅ - x̅)² 25 6.08 44

TOTA
L

SS(between)= SSB = Σn( x̅ 1.7777777

- x̅ )² = 75 30.42 78 107.2

SS(within ) = SSW = Σ(n- 4.6666666 9.4666

1)s² = 67 2.80 2 67

ii)
There is enough evidence to conlcude that At least one pair of treatment means is not the same at
α=0.05

Q.2] [25 Marks]

A. (18 marks)
Eight quantities of effluent from a pulp mill is each divided into 10 batches. From each quantity,
five randomly selected batches were subjected to a treatment process intended to remove toxic
substances. Five fish of the same species were places in each batch, and the mean number
surviving in the five treated and untreated portions of each effluent quantity after five days were
recorded and are given below.
Quantity 1 2 3 4 5 6 7 8
no.
Mean number surviving
Untreated 5 1 1.8 1 3.6 5 2.6 1
Treated 5 5 1.2 4.8 5 5 4.4 2
i. Use an appropriate hypothesis test to determine whether there is difference in the mean number
of surviving fish. State clearly the hypotheses, the test statistic and its distribution under the null
hypothesis, and carry out the test at two appropriate significance levels. Comment on your
findings. (16 marks)

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ii. State clearly any assumptions you made in i. (2 marks)

B. (7 marks)
The following data was collected on mutual fund prices.

   
i. Compute the Laspeyres index to compare mutual fund prices in 2010 to 2000. (3.5 marks)

ii. Compute the Paasche price index to compare mutual fund prices in 2010 to 2000. (3.5 marks)

Q.3] [25 Marks]

A. (16 marks)
Given the following software output.
ANOVA Table
Source Df SS MS F P
Regression 2 3533.1 1766.5 31.75 0.000
Residual 11 612.0 55.6
Error
Total 13

Predictor Coef SE Coef T P

Constant 42.23 23.77 1.78 0.103
Age 1.0223 0.4682 2.18 0.052
Snatch 0.8571 0.1262 6.79 0.000

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 i. What is the sample size? (1 mark)
13
ii. How many independent samples are being considered? (0.5 mark)

iii. Conduct a global test of hypothesis. Can you conclude at least one of the independent
variables does not equal zero? Use the 0.01 significance level. (7 marks)
iv. Conduct an individual test of hypothesis on each of the independent variables. Would you
stats consider dropping any of the independent variables? If so, which variable or variables
would you drop? Use the 0.01 significance level. (7.5 marks)

B. (9 marks)
Reported below are the amounts spent on electricity bill ($) from 2009 to 2019.
Yea Amount
r
2009 88.1
2010 94.7
2011 102.1
2012 109.8
2013 118.1
2014 125.6
2015 132.6
2016 141.9
2017 150.9
2018 157.9
2019 162.6
Determine the logarithmic trend equation.

Q.4] [25 Marks]

A. (15 marks)
An oil company has some land that is reported to possibly contain oil. The company classifies
such land into four categories by the total number of barrels that are expected to be obtained
from the well, i.e. a 500,000 – barrel well, 200,000 – barrel well, 50,000 – barrel well, and a dry
well. The company is faced with deciding whether to drill for oil, to unconditionally lease the
land or to conditionally lease the land at a rate depending upon oil strike.
The probability for striking a500,000 – barrel well is 0.1, probability for striking a 200,000 –
barrel well is 0.15, probability for striking a50,000 – barrel well is 0.25, and probability for a dry
well is 0.5.
The payoff table($1000s) is as follows:

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 Profit Payoff Table
States of Nature
Decision 500,000 Bar 200,000 Bar 50,000 Bar Dry
Drill 650 200 -25 - 75
Unconditional 45 45 45 45
Conditional 250 100 0 0
0.1 0.15 0.25 0.5
i. Compute the expected monetary value for each decision.(3 marks)
ii. What decision would you recommend? (1 mark)
iii. Develop an opportunity loss table.(2 marks)
iv. Compute the expected opportunity loss for each decision.(3 marks)
v. Compute the expected value of perfect information. (2 marks)
vi. What is the decision using Maximin criteria? (2 marks)
vii. What is the decision using minimax criteria? (2 marks)

B. (7 marks)
The XYZ Association surveyed retired senior executives who had returned to work. They found
that after returning to work, 38% were employed by another organization, 32% were self-
employed, 23% were either freelancing or consulting, and 7% had formed their own companies.
To see if these percentages are consistent with those of Bahrain residents, a local researcher
surveyed 300 retired executives who had returned to work and found that 122 were working for
another company, 85 were self-employed, 76 were either freelancing or consulting, and 17 had
formed their own companies. At the 10% significance level, test the claim that the percentages
are the same for those people in Bahrain.

C. (3 marks)
In a study of women science majors, the following sample data were obtained on two groups,
those who left their profession within a few months after graduation (leavers) and those who
remained in their profession after they graduated (stayers). Test the claim that those who stayed
had a higher science grade point average than those who left. Use α = 0.05.
Stayers Leavers
X́ 1 = 3.28 X́ 2 = 3.16
s1= 0.46 s2 = 0.52
n1 = 225 n2 = 103
i. Calculate the test statistic. (2 marks)
ii. Find the critical value. (1 mark)

i)

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 Below are the null and alternative Hypothesis,
Null Hypothesis, H0: μ1 = μ2
Alternative Hypothesis, Ha: μ1 < μ2

Test statistic,
z = (x1bar - x2bar)/sp
z = (3.16 - 3.28)/0.0597
z = -2.01
ii)
This is left tailed test, for α = 0.05
Critical value of z is -1.645.

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