Midterm Examination Spring 2009 Let Y be a normally distributed random variable with mean 4 and variance 9.

Determine Pr (IYI)>2) and show the area the area corresponding to this probability in a standard normal pdf plot. Let X , and X , and X be the numbers of small, medium, and large pizzas, respectively, sold during the day at a pizza parlor. These are random variables with expected values E(X ) = 25, E(X ) = 57, and E(X ) = 40. The prices of small, medium, and large pizzas are $5.50, $7.60, and $9.15. Compute the expected revenue from pizza sales on a given day. Let Y , Y , Y , and Y be independent, identically distributed random variables. You know that E()= and that var () = /4. Now consider a different estimator of : W = 1/8 Y + 1/8 Y + 1/4Y + 1/2Y Obtain the expected value and variance of W. Is W an unbiased estimator of ? Which estimator of do you prefer, or W? Given that E(W) = , W is an unbiased estimator . However, is more efficient than W because The CEO of Starbucks claims that workers in his firm are more productive than the workers in Peets, which is why wages in Starbucks are generally higher. We have samples of 110 Starbucks employees and 100 Peet s employees. The average hourly wage for Starbuck s workers is $11.50 and $10.25 for Peets workers . The sample standard deviations are $2.25 for Starbucks and $1.75 for Peets. The (true) mean hourly wage in the country is $10. At a 5% level, is the Starbucks mean wage statistically different from the country mean? Compute the p-values from the previous tests. Based on those p-values from the previous tests. Based on those p-values, can you reject any of the null hypotheses from part (a) at a 1% level? Using a 5% significance level test, is there statistical evidence showing that workers in Peets have lower mean wage than workers in Starbucks? Construct also 95% confidence interval for this difference and evaluate the following statement: At a 5% level and with a two-sided alternative, I can reject the null hypothesis that there is a one dollar difference between the mean wages of Peets and Starbucks.

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Midterm Exam Fall 2009 Suppose a certain mutual fund has an annual rate of return that is normally distributed with mean 10% and standard deviation 4% Find the probability that your 1-year return will be negative. Find the probability that your 1-year return will exceed 15%. If the mutual fund managers modify the composition of its portfolio, they can raise its mean annual return to 12%, but will also raise the standard deviation returns to 5%. Answer parts (a) and (b) in light of these decisions. Would you advise the fund managers to make this portfolio change? Suppose Y , Y , Y is a sample of observations from a population with mean and variance . However, Y , Y and Y are NOT independent. In fact, suppose Cov (Y , Y ) = Cov(Y , Y ) = cov (Y , Y )= .5 a) b) c) Show that = is an unbiased estimator of Find the variance of (Hint: it is not /3 Does /3 understate or overstate the actual variance?

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3. A vending machine is designed to pour 7.0 ounces of coffee into 8-ounces cups. A technician takes n=4 sample cups yielding the following measurements. 6.92, 7.34, 7.26, and 6.88 ounces. Assume that the poured amounts follow a normal distribution (so that although n is small, we can use the standard normal distribution for a t-test). a) Test the hypothesis that the true average amount of coffee poured is 7 ounces against the alternative that the average amount is not 7 ounces at a 5% level of significance. b) Obtain the p-value corresponding to the previous two-sided test. What does it mean? c) Construct a 95% confidence interval for the mean amount of coffee dispensed. Nike claims that the number of miles a jogger can get on pair of Nike s running shoes is higher than1000. Moreover, Nike also claims that their shoes outperform Adidas shoes by more than 15 miles. We have samples of 150 joggers using Nike shoes and 170 using Adidas shoes. The sample averages of miles they got are 1015 for Nike and 995 for Adidas. The sample standard deviations are 100 for Nike and for Adidas. At a 5% level of significance, is there statistical evidence showing that Nike shoes get more than 1000 miles? Obtain the p-value for the previous test. What does it mean? At a 5% level of significance, is there statistical evidence showing that Nike shoes out perform Adidas shoes by more than 15 miles? Let Y be normally distributed with mean of 2, variance of 81, and 9 observations Determine the probability that the magnitude of is between -2 and 6 and show the area in a corresponding pdf plot. Determine the probability that the magnitude of is greater than 4 Determine the probability that the magnitude of is less than -2

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2. Robco sells x robots in a given year with one factory, at a price of $1,500 per robot. It costs Robco $45,000 per year to run the factory, and each robot requires $300 worth of parts and labor. is a random variable, with E(x)=120. a) Compute Robco s expected profit in a given year. b) Given the above factory represents the average factory for Robco, which are distributed normally, and Robco samples 64 of its own factories with a variance of 144, construct and interpret a 95% confidence interval for the average number of robots Robco sells. Is X, where X = n/(n+1) an unbiased estimator of Z? Explain. b) Is X a consistent estimator of Z? Explain. A) In order to avoid events like GCFD of 2008, the average circumference of cans cannot positively deviate more than 2cm from the standard excepted can-circumference of 10cm. In your analysis, do you predict a repeat of the GCFD of 2008? b) State the p-value of your findings from A) c) Now suppose there is another quality control specialist on the line, and his 8 samples showed that his deviation from the can-circumference standard of 10cm is positive 1.46cm. His sample s standard deviation is unknown, because he had a PC and a virus ate all his data. In the past, you conducted a hypothesis, test to see if his sample was smaller than our sample by 2cm. You found at 95% confidence that the difference between your samples was bigger than 2, with a p-value of .0808. What was the quality control specialist s sample standard deviation? Assume X~N (, ). The sample mean was found to be 850. Find the variance of the sample mean given that Pr(800<x<900)=.95 Assume X~N (, ) and Y~N(, ). The variance of the sample mean of X was found to be 64. The population mean of X was 25 greater than the population mean of Y. Given Pr (12<x) = .975 and Pr(<9)= .975, find (the variance)?

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