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Applied Statistics for Business

Exercise Book

Trần Trọng Huỳnh - 2022

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Chapter 1. Defining and collecting data
1. Explain the concepts in Statistics:

a. Discrete – continuous variables

b. Measurement scales: nominal, ordinal, interval and ratio

c. Population – sample, and parameter – statistic

d. Types of sampling methods: nonprobability (judgment sample, convenience sample),

probability (simple random sample, systematic sample, stratified sample, cluster sample),
random sample

e. Sampling errors – nonsampling errors

2. The following information is collected from students upon exiting the campus bookstore
during the first week of classes.

a. Amount of time spent shopping in the bookstore

b. Number of textbooks purchased

c. Academic major

d. Gender

Classify each variable as categorical or numerical and determine its measurement scale.

3. For each of the following variables, determine whether the variable is categorical or
numerical and determine its measurement scale. If the variable is numerical, determine
whether the variable is discrete or continuous.

a. Name of Internet service provider

b. Time, in hours, spent surfing the Internet per week

c. Whether the individual uses a mobile phone to connect to the Internet

d. Number of online purchases made in a month

e. Where the individual accesses social networks to find sought after information

f. Amount of money spent on clothing in the past month

g. Favorite department store

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h. Most likely time period during which shopping for clothing takes place (weekday,
weeknight, or weekend)

i. Number of pairs of shoes owned

4. Suppose the following information is collected from Robert Keeler on his application for a
home mortgage loan at the Metro County Savings and Loan Association.

a. Monthly payments: $2,227

b. Number of jobs in past 10 years: 1

c. Annual family income: $96,000 d. Marital status: Married

Classify each of the responses by type of data and measurement scale.

5. A population has four members (called A, B, C, and D). You would like to select a
random sample of n = 2, which you decide to do in the following way: Flip a coin; if it is
heads, the sample will be items A and B; if it is tails, the sample will be items C and D.
Although this is a random sample, it is not a simple random sample. Explain why.

6. Suppose that 10,000 customers in a retailer’s customer database are categorized by three
customer types: 3,500 prospective buyers, 4,500 first time buyers, and 2,000 repeat (loyal)
buyers. A sample of 1,000 customers is needed.

a. What type of sampling should you do? Why?

b. Explain how you would carry out the sampling according to the method stated in (a).

c. Why is the sampling in (a) not simple random sampling if you don’t use the simple
random sample methodology?

7. The cellphone brands owned by a sample of 20 respondents were: Apple, Samsung,

Appel, Nokia, Blackberry, HTC, Apple, Samsung, HTC, LG, Blueberry, Samsung, Samsung,
APPLE, Motorola, Apple, Samsun, Apple, Samsung

a. Clean these data and identify any irregularities in the data.

b. Are there any missing values in this set of 20 respondents?

8. Determine whether the given value is a statistic or a parameter

a. A sample of 120 employees in a company is selected, and the mean age is found to be 37
years.

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b. After inspecting all of 55,000 kg of meat stored at the Wurst Sauage Company, it was
found that 45,000 kg of the meat was spoiled.

c. After taking the first exam, 15 of students dropped the class.

9. Identify the number as either continuous or discrete

a. The number of freshman entering college in a certain year is 621.

b. The number of stories in a Manhattan building is 22.

c. The average height of all freshmen entering college in a certain year is 68.4 inches

10. Determine which of the four levels of measurement (nominal, ordinal, interval, ratio) is
most appropriate.

a. Survey responses of “good, better, best”.

b. Salaries of college professors.

c. Student’s grades, A, B, or C, on a test.

d. Ages of survey respondents.

e. Temperatures of the ocean at various depths.

11. Identify the sample and population. Also, determine whether the sample is likely to be
representative of the population.

a. An employee at the local ice cream parlor asks three customers if they like chocolate ice
cream.

b. In a poll of 50,000 randomly selected college students, 74% answered “yes” when asked
“Do you have a TV in your dorm room?”.

12. Identify which of types of sampling is used: random, stratified, systematic, cluster,
convenience.

a. 49, 34, and 48 students are selected from the Sophomore, Junior, and Senior classes with
496, 384, and 481 students respectively.

b. A sample consists of every 49th student from a group of 496 students.

c. The name of each contestant is written on a separate card, the cards are placed in a bag and
three names are picked from the bag.

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d. A market researcher selects 500 drivers under 30 years of age and 500 drivers over 30
years of age.

e. A market researcher selects 500 people from each of 10 cities.

f. An education researcher randomly selects 40 middle schools and interviews all the
teachers at each school.

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Chapter 2. Organizing and Visualizing variables
1. Explain the statistical terms as listed below:

a. Summary Table, Contingency Table, Ordered Array, Frequency Distributions, Cumulative

Distributions

b. Bar Chart, Pareto Chart, Doughnut Chart, Side By Side Bar Chart, Stem-and-Leaf
Display, Histogram, Polygon, Ogive, Scatter Plot, Time-Series Plot.

2. A categorical variable has three categories with the following frequency of occurrence:

Category Frequency
A 13
B 28
C 9
a. Calculate the percentage of values in each category.

b. Construct a bar chart.

c. Construct a pie chart.

3. Pat, the owner of Pat’s Cars, asked 200 customers their color preference when purchasing
a new car. The following summary table gives the results.

Color Frequency
White 56
Blue 31
Red 29
Brown 17
Grey 19
Silver 15
Green 15
Black 13
Other 5
a. Construct bar and pie charts.

b. What colors of cars should Pat have on show?

4. The values for a data set vary from 11.6 to 97.8.

a. If these values are grouped into nine classes, indicate appropriate class boundaries.

b. What class width did you choose?

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c. What are the corresponding class mid-points?

5. The cumulative percentage polygon below shows the amount spent (in dollars) by 200
customers at a local supermarket.

a. Approximately what percentage of customers spent less than $100?

b. Approximately how many customers spent at least $60?

c. Approximately how much did the top 10% of customers spend?

d. Approximately how much did the bottom 10% of customers spend?

6. The following data represent the electricity cost (in dollars) during the month of July for a
random sample of 50 two-bedroom apartments in a New Zealand city.

Electricity charge ($)

96 171 202 178 147 102 153 197 127 82 157 185 90 116 172 111 148 213 130 165

141 149 206 175 123 128 144 168 109 167 95 163 150 154 130 143 187 166 139 149

108 119 183 151 114 135 191 137 129 158

a. Construct a frequency distribution and a percentage distribution with upper class

boundaries of <$100, <$120, and so on.

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b. Plot the corresponding histogram and percentage polygon.

c. Construct the corresponding cumulative percentage distribution and plot the corresponding
ogive (cumulative percentage polygon).

d. Around what amount does the monthly electricity cost seem to be concentrated?

7. The following data represent the responses to two questions asked in a survey of 40
undergraduate students majoring in business: What is your gender? (M = Male; F = Female;
O = Other) What is your major? (A = Accounting; I = Information Systems; M = Marketing)
Gender M M M F M F F M F M F M M M M F F M F F

Major A I I M A I A A I I A A A M I M A A A I

Gender M M M M F M F F M M F M M M M F M F M M

Major I I A A M M I A A A I I A A A A I I A I

a. Represent the data in a contingency table where the rows represent the gender categories
and the columns the academic-major categories.

b. Construct cross-classification tables based on percentages of all 40 student responses, on

row percentages and on column percentages.

c. Using the results from (a), construct a side-by-side bar chart of gender based on student
major

8. The Living in Australia Study gives information on the study mode (full or part time) of
students studying for a post-school qualification, as well as their employment status

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Data obtained from the Household, Income and Labour Dynamics in Australia (HILDA)
Survey, 2001–2005 (also known as the Living in Australia Study), The University of
Melbourne 1994–2011

a. Construct cross-classification tables based on row percentages and column percentages.

b. Construct a side-by-side bar chart for employment status and study mode.

c. What conclusions do you draw from these analyses?

9. Below is a set of data from a sample of n = 11 items:

X (horizontal axis): 7 5 8 3 6 10 12 4 9 15 18

Y (vertical axis): 21 15 24 9 18 30 36 12 27 45 54

a. Plot the scatter diagram.

b. Is there a relationship between X and Y? Explain.

10. Below is a series of real annual sales (in millions of constant 2010 dollars) for a
department over an 11-year period (2007 to 2017):

Year: 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Sales: 13.0 17.0 19.0 20.0 20.5 20.5 20.5 20.0 19.0 17.0 13.0

a. Construct a time-series plot.

b. Does there appear to be any change in real annual sales over time? Explain

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Chapter 3. Numerical descriptive measure
1. The data below are a sample of n = 5: 7 4 9 8 2

a. Calculate the mean, median and mode.

b. Calculate the range, interquartile range, variance, standard deviation and coefficient of
variation.

c. Calculate the Z scores. Are there any outliers?

2. The data below are a sample of n = 6: 7 4 9 7 3 12

a. Calculate the mean, median and mode.

b. Calculate the range, interquartile range, variance, standard deviation and coefficient of
variation.

c. Calculate the Z scores. Are there any outliers?

3. The data below are a sample of n = 7: 12 7 4 9 0 7 3

a. Calculate the mean, median and mode.

b. Calculate the range, interquartile range, variance, standard deviation and coefficient of
variation.

4. Suppose that the rate of return for a particular share during the past two years was 10%
and 30%. Calculate the geometric mean rate of return. (Note: A rate of return of 10% is
recorded as 0.10 and a rate of return of 30% is recorded as 0.30.)

5. A manufacturer of torch batteries took a sample of 13 batteries from a day’s production

and used them continuously until they were drained. The numbers of hours they were used
until failure were: < BATTERIES > 342 426 317 545 264 451 1,049 631 512 266 492 562
298

a. Calculate the mean, median and mode. Looking at the distribution of times to failure,
which measures of central tendency do you think are most appropriate and which least
appropriate to use for these data? Why?

b. Calculate the range, variance and standard deviation.

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c. What would you advise if the manufacturer wanted to say in advertisements that these
batteries ‘should last 400 hours’? (Note: There is no right answer to this question; the point is
to consider how to make such a statement precise.)

d. Suppose that the first value was 1,342 instead of 342. Repeat (a) to (c), using this value.
Comment on the difference in the results.

6. The data below are for a population with N = 10: 7 5 11 8 3 6 2 1 9 8

a. Calculate the population mean.

b. Calculate the population standard deviation.

7. The ages, to the nearest year, of all employees at a certain fast-food outlet are: 19 19 45 20
21 21 18 20 23 17

a. Calculate the mean, variance and standard deviation.

b. Calculate the Z scores.

c. Based on the results of (a) and (b), what conclusions can you reach about employee ages at
this fast-food outlet?

8. Given the following frequency distribution for n = 100:

Class intervals Frequency

0–under 10 10
10–under 20 20
20–under 30 40
30–under 40 20
40–under 50 10

Approximate:

a. the mean

b. the standard deviation

9. The data below are a sample of n = 5: 7 4 9 8 2

a. List the five-number summary.

b. Construct the box-and-whisker plot and describe the shape.

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10. The data below are a sample of n = 7: 12 7 4 9 0 7 3

a. List the five-number summary.

b. Construct the box-and-whisker plot and describe the

10. For the daily sales data:

< SALES > 13.0 17.0 19.0 20.0 20.5 20.5 20.5 20.0 19.0 17.0 13.0

a. List the five-number summary.

b. Construct the box-and-whisker plot and discuss the daily sales distribution for the store.

11. The data are from a sample of n = 11 items:

X: 7 5 8 3 6 10 12 4 9 15 18

Y: 21 15 24 9 18 30 36 12 27 45 54

a. Calculate the covariance. b. Calculate the coefficient of correlation.

c. How strong is the relationship between X and Y? Explain.

12. You are interested in the relationship between the number of people in a sales team and
the sales generated, in a certain industry.

Number of staff: 26 18 15 28 19 23 27 23 17 24

Sales: 45 38 35 77 33 44 54 55 32 47

These data show gross sales, measured in millions of dollars, and the number of people on a
sales team.

a. Calculate the covariance and coefficient of correlation.

b. What conclusions can you reach about the relationship between the number of people in a
sales team and the sales generated?

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Chapter 4. Basic probability
1. Explain the statistical terms as listed below:

a. Probability, Events, Sample Spaces, Complement, Mutually exclusive, Collectively

exhaustive, Joint event

b. Simple event, Impossible event, Certain event, Conditional probability

2. Two coins are tossed.

a. Give an example of a simple event.

b. Give an example of a joint event.

c. What is the complement of a head on the first toss?

3. Given the following contingency table:

what is the probability of

a. event A? b. event A′? c. event A and B? d. event A or B?

e. A|B f. A|B’ g. B|A h. B’|A’

4. Households in a certain town were surveyed to determine whether they would subscribe to
a new Pay TV channel. The households were classified according to ‘high’, ‘medium’ and
‘low’ income levels. The results of the survey are summarised in the table below.

a. What is the probability that:

i. a household will subscribe?

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ii. a household is high income?

iii. a household will subscribe and is high income?

iv. a high-income household will subscribe?

v. a household that subscribes is high income?

b. Is income level statistically independent of whether a household subscribes or not?

Explain.

5. At a certain university, 25% of students are in the business faculty. Of the students in the
business faculty, 66% are males. However, only 52% of all students at the university are
male.

a. What is the probability that a student selected at random in the university is a male in the
business faculty?

b. What is the probability that a student selected at random in the university is male or is in
the business faculty?

c. What percentage of males are in the business faculty?

6. A sample of 500 consumers was selected in a large metropolitan area to study consumer
behaviour with the following results:

a. What is the probability that a randomly chosen female consumer does not enjoy shopping
for clothing?

b. Suppose the chosen consumer enjoys shopping for clothing. What is the probability that
the individual is male?

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c. Are enjoying shopping for clothing and the gender of the individual statistically
independent? Explain.

7. If P(B) = 0.05, P(A | B) = 0.8 and P(A | B′) = 0.4, find P(B | A).

8. An advertising executive is studying the television viewing habits of married men and
women during prime-time hours. On the basis of past viewing records, the executive has
determined that, during prime time, husbands are watching television 60% of the time. When
the husband is watching television, 40% of the time the wife is also watching. When the
husband is not watching television, 30% of the time the wife is watching television. Find the
probability that

a. if the wife is watching television, the husband is also watching television.

b. the wife is watching television in prime time

9. From past records of personal loans the Check$mart Bank found that 10% of borrowers
default on their loan – that is, they fail to pay. It also found that, of those who default, 32%
are unemployed while, of those who do not default, only 2% are unemployed.

a. What percentage of unemployed borrowers default?

b. What proportion of borrowers are unemployed?

c. What proportion of borrowers who are not unemployed do not default?

10. If there are 10 multiple-choice questions in an exam, each with three possible answers:

a. How many different answer sequences are there?

b. If you answer the questions randomly, what is the probability that you get all 10 correct?

11. A reading list for a unit contains 20 articles. How many ways are there to choose three
articles from this list?

12. In a school of 200 students 95% are vaccinated against a certain disease. During a recent
outbreak of this disease 20 students, including 11 vaccinated students, developed the disease.

a. Find the probability that a student

i. who has the disease has been vaccinated

ii. who has been vaccinated catches the disease

iii. who is unvaccinated catches the disease

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 b. A parent states that vaccination is ineffective as more than 50% of those who developed
the disease had been vaccinated. Comment on this.

Chapter 5. Discrete probability distribution

1. Given the following probability distributions:

a. Calculate the expected value for each distribution.

b. Calculate the standard deviation for each distribution.

c. Compare and contrast the results of distributions A and B.

2. Are each of the following a valid probability distribution? Justify your answers:

3. Using the company records for the past 500 working days, the manager of Konig Motors
has summarised the number of cars sold per day in the following table:

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a. Form the probability distribution for the number of cars sold per day.

b. Calculate the mean or expected number of cars sold per day.

c. Calculate the standard deviation

4. Given the following probability distributions for variables X and Y:

Calculate:

a. E(X ) and E(Y ) b. σX and σY

c. σXY d. E(X + Y )

5. Two investments, X and Y, have the following characteristics: E(X ) = $50, E(Y ) = $100,
σ2X = 9,000, σ2Y = 15,000 and σXY = 7,500. If the weight assigned to investment X of
portfolio assets is 0.4. Calculate:
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a. the portfolio expected return

b. the portfolio risk

6. The process of being served at a bank consists of two independent parts – the time waiting
in line and the time it takes to be served by the teller. Suppose, at a branch of Check$mart,
that the time waiting in line has an expected value of 4 minutes with a standard deviation of
1.2 minutes and the time it takes to be served by the teller has an expected value of 5.5
minutes with a standard deviation of 1.5 minutes. Calculate:

a. the expected value of the total time it takes to be served

b. the standard deviation of the total time it takes to be served

7. You are developing a strategy for investing in two different shares. The anticipated annual
return for a $1,000 investment in each share has the following probability distribution:

a. Calculate:

i. the expected return for share X and for share Y

ii. the standard deviation for share X and for share Y

iii. the covariance of share X and share Y

b. Would you invest in share X or share Y? Explain.

Suppose that you wanted to create a portfolio that consists of share X and share Y.

c. Calculate the portfolio expected return and portfolio risk for each of the following
percentages invested in share X:

i. 30% ii. 50% iii. 70%

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d. On the basis of the results of your calculations in part (c), which portfolio would you
recommend? Explain.

8. If X is a binomial random variable, determine the following:

a. For n = 4 and p = 0.12, what is P(X = 0)?

b. For n = 10 and p = 0.40, what is P(X = 9)?

c. For n = 10 and p = 0.50, what is P(X = 8)?

d. For n = 6 and p = 0.83, what is P(X = 5)?

9. If X is a binomial random variable with n = 5 and p = 0.40, what is the probability that:

a. X = 4? b. X ⩽ 3? c. X < 2? d. X > 1?

10. Determine the mean and standard deviation of the random variable X in each of the
following binomial distributions:

a. n = 4 and p = 0.10 b. n = 4 and p = 0.40

c. n = 5 and p = 0.80 d. n = 3 and p = 0.50

11. The increase or decrease in the price of a share between the beginning and the end of a
trading day is assumed to be an equally likely random event. What is the probability that a
share will show an increase in its closing price on five consecutive days?

12. Research has shown that only 60% of consumers read every word, including the fine
print, of a service contract. Assume that the number of consumers who read every word of a
contract can be modelled using the binomial distribution. A group of five consumers has just
signed a 12-month contract with an ISP (Internet service provider).

a. What is the probability that:

i. all five will have read every word of their contract?

ii. at least three will have read every word of their contract?

iii. less than two will have read every word of their contract?

b. What would your answers be in (a) if the probability is 0.80 that a consumer reads every
word of a service contract?

13. A student taking a multiple-choice test consisting of five questions, each with four
options, selects the answers randomly. What is the probability that the student will get:
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a. five questions correct? b. at least four questions correct?

c. no questions correct? d. no more than two questions correct?

14. Assume a Poisson distribution.

a. If λ = 2.5, find P(X = 2). b. If λ = 8, find P(X = 8).

c. If λ = 0.5, find P(X = 1). d. If λ = 3.7, find P(X = 0).

e. If λ = 2, find P(X ≥ 2). f. If λ = 8, find P(X ≥ 9).

g. If λ = 0.5, find P(X ⩽ 1). h. If λ = 4, find P(X ≥ 1).

i. If λ = 5, find P(X < 3). j. If λ = 3, find P(X > 2).

15. The number of floods in a certain region is approximately Poisson distributed with an
average of three floods every 10 years.

a. Find the probability that a family living in the area for one year will experience:

i. exactly one flood ii. at least one flood

b. Find the probability that a student who moves to the area for three years will experience

i. exactly one flood ii. at least one flood

16. Based on past experience, it is assumed that the number of flaws per metre in rolls of
grade 2 paper follow a Poisson distribution with a mean of one flaw per 5 metres of paper.
What is the probability that in a:

a. 1-metre roll there will be at least two flaws?

b. 10-metre roll there will be at least one flaw?

c. 50-metre roll there will be between five and 15 (inclusive)

17. Determine the following:

a. If n = 4, N = 10 and A = 5, find P(X = 3), the mean and the standard deviation

b. If n = 4, N = 6 and A = 3, find P(X = 1).

c. If n = 5, N = 12 and A = 3, find P(X = 0), the mean and the standard deviation

d. If n = 3, N = 10 and A = 3, find P(X = 3), the mean and the standard deviation

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18. An auditor for the Australian Taxation Office is selecting a sample of six tax returns
from a batch of 100 for an audit. If two or more of these returns contain errors, the entire
batch of 100 tax returns will be audited.

a. What is the probability that the entire batch will be audited if the true number of returns
with errors in the batch is:

i. 25? ii. 30? iii. 5? iv. 10?

b. Discuss the differences in your results depending on the true number of returns in the
batch with error.

19. In a shipment of 15 hard disks, five are defective. If four of the disks are inspected,

a. What is the probability that:

i. exactly one is defective?

ii. at least one is defective?

iii. no more than two are defective?

b. What is the mean number of defective hard disks that you would expect to find in the
sample of four hard disks.

20. A study of various news home pages reports that the mean number of bad links per home
page is 0.4 and the mean number of spelling errors per home page is 0.16. Use the Poisson
distribution to find the probability that a randomly selected home page will contain:

a. no bad links b. five or more bad links

c. no spelling errors d. 10 or more spelling errors

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Chapter 6. The normal distribution and other
continuous distributions
1. Given the standard normal distribution (with a mean of 0 and a standard deviation of 1),
what is the probability that:

a. Z is less than 1.57? b. Z is greater than 1.84?

c. Z is between 1.57 and 1.84? d. Z is less than 1.57 or greater than 1.84?

e. Z is between 21.57 and 1.84? f. Z is less than 21.57 or greater than 1.84?

g. P (Z > 1.08) h. P (Z ≤ -0.21)

i. P (-1.96 < Z < -0.21) j. What is the value of Z if only 15.87% of all
possible Z values are larger?

2. Given a normal distribution with µ = 100 and  = 10, what is the probability that:

a. X > 75? b. X < 70?

c. X < 80 or X > 110? d. 80% of the values are between which two X values
(symmetrically distributed around the mean)?

3. The records of Check$mart Bank show that the average credit card balance of its
customers is $3,325 with a standard deviation of $1,500. Assume that the distribution of
these credit card balances is approximately normal.

a. Find the probability that an account balance is less than $2,500.

b. Find the probability that an account balance is more than $5,000.

c. What proportion of account balances are between $3,000 and $4,000?

d. 99% of account balances are less than which amount?

4. Toby’s Trucking Company determined that, on an annual basis, the distance travelled per
truck is normally distributed with a mean of 100,000 kilometres and a standard deviation of
20,000 kilometres.

a. What proportion of trucks can be expected to travel between 80,000 and 120,000
kilometres in the year?

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b. What percentage of trucks can be expected to travel either below 60,000 or above 140,000
kilometres in the year?

c. How many kilometres will be travelled by at least 80% of the trucks?

d. What are your answers to (a) to (c) if the standard deviation is 10,000 km?

5. The breaking strength of plastic bags used for packaging produce is normally distributed
with a mean of 35 kPa (kilopascals) and a standard deviation of 10 kPa.

a. What proportion of the bags have a breaking strength of:

i. less than 20 kPa? ii. at least 30 kPa? iii. between 25 and 45 kPa?

b. Between which two values symmetrically distributed around the mean will 95% of the
breaking strengths fall?

6. Suppose you sample one value from a uniform distribution with a = 0 and b = 10.

a. What is the probability of getting a value:

i. between 5 and 7? ii. between 2 and 3?

b. What is the mean?

c. What is the standard deviation?

7. The time between arrivals of customers at a bank between noon and 1 pm has a uniform
distribution over an interval from 0 to 120 seconds.

a. What is the probability that the time between the arrival of two customers will be:

i. less than 20 seconds?

ii. between 10 and 30 seconds?

iii. more than 35 seconds?

b. What is the mean and standard deviation of the time between arrivals?

8. In an apartment building the waiting time for a lift is found to be uniformly distributed
between 0 and 3 minutes.

a. What is the probability of waiting:

i. no more than a minute?

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ii. between 1 and 2 minutes?

iii. more than 2 minutes?

b. What is the mean and standard deviation of waiting time?

9. Given an exponential distribution with , what is the probability that X is:

a. less than 0.1? b. greater than 0.1?

c. between 0.1 and 0.2? d. less than 0.1 or greater than 0.2?

10. Vehicles arrive, randomly and independently, at a toll booth located at the entrance to a
bridge at the rate of 240 per hour between 1 am and 2 am. Suppose a vehicle has just arrived.

a. What is the probability that the next vehicle arrives within the next minute?

b. What is the probability that no vehicle arrives in the next 30 seconds?

c. What is the mean time between arrivals at the toll booth?

d. What are your answers to (a) to (c) if the rate of arrival of vehicles is 300 per hour?

e. What are your answers to (a) to (c) if the rate of arrival of vehicles is 210 per hour?

11. The number of floods in a certain region is approximately Poisson distributed with an
average of three floods every 10 years. A flood has just occurred.

a. What is the probability that:

i. a flood occurs in the next year? ii. there isn’t a flood in the next two years?

iii. a flood occurs in the next month? iv. at least one flood occurs in the next six months?

b. What is the average time between floods?

12. Suppose there is a free bus, with no timetable, which circles the city center every 20
minutes. You arrive at a bus stop unaware of when the bus last arrived at this stop. What is
the probability that you will wait for the bus:

a. less than 5 minutes? b. between 10 and 15 minutes?

c. more than 12 minutes?

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Chapter 7. Sampling distribution
1. Given a normal distribution with μ = 100 and σ = 10, if you select a sample of n = 25:

a. What is the probability that X is:

i. less than 95? ii. between 95 and 97.5? iii. above 102.2?

b. There is a 65% chance that X is above what value?

2. Given a normal distribution with μ = 50 and σ = 5, if you select a sample of n = 100:

a. What is the probability that X is:

i. less than 47? ii. between 47 and 49.5? iii. above 51.1?

b. There is a 35% chance that X is above what value?

3. The following data represent the number of days absent per year in a population of six
employees of a small company: 1 3 6 7 9 10

a. Assuming that you sample without replacement, select all possible samples of n = 2 and
construct the sampling distribution of the mean. Calculate the mean of all the sample means
and also calculate the population mean. Are they equal? What is this property called?

b. Repeat (a) for all possible samples of n = 3.

c. Compare the shape of the sampling distribution of the mean in (a) and (b). Which
sampling distribution has less variability? Why?

d. Assuming that you sample with replacement, repeat (a), (b) and (c) and compare the
results. Which sampling distributions have the least variability, those in (a) or (b)? Why?

4. The number of passengers passing through a large South East Asian airport is normally
distributed with a mean of 110,000 persons per day and a standard deviation of 20,200
persons. If you select a random sample of 16 days:

a. What is the sampling distribution of the mean?

b. What is the probability that the sample mean is less than 98,000 passengers per day?

c. What is the probability that the sample mean is between 102,000 and 104,500 passengers
per day?

25
d. The probability is 60% that the sample mean will be between which two values
symmetrically distributed around the population mean?

5. Travel time on a bus between two suburban stops is normally distributed with μ = 8
minutes and σ = 2 minutes.

a. If you select a random sample of 25 trips, what is the probability that the sample mean is
between 6.9 and 8.2 minutes?

b. If you select a random sample of 25 trips, what is the probability that the sample mean is
between 7.5 and 8 minutes?

c. If you select a random sample of 100 trips, what is the probability that the sample mean is
between 6.9 and 8.2 minutes?

d. Explain the difference between the results of (a) and (c).

6. In a random sample of 64 people, 48 are classified as ‘successful’. If the population

proportion is 0.70:

a. Determine the sample proportion p of ‘successful’ people.

b. Determine the standard error of the proportion.

7. The following data represent the responses (Y for yes and N for no) from a sample of 40
university students to the question, ‘Do you currently own any shares in listed companies?’:

NNYNNYNYNYNNYNYYNNNY

NYNNNNYNNYYNNNYNNYNN

If the population proportion is 0.30:

a. Determine the sample proportion p of university students who own shares in listed
companies.

b. Determine the standard error of the proportion.

8. A political polling organization is conducting an analysis of sample results in order to

make predictions on election night. Assuming a two-candidate election, if a specific
candidate receives at least 55% of the vote in the sample, then that candidate will be forecast
as the winner of the election. If you select a random sample of 100 voters:

a. What is the probability that a candidate will be forecast as the winner when:

26
i. the true percentage of her vote is 50.1%?

ii. the true percentage of her vote is 60%?

iii. the true percentage of her vote is 49% (and she will actually lose the election)?

b. If the sample size is increased to 400, what are your answers to (a)? Discuss.

9. A normal population has mean 10 and variance 20. How large must be the random sample
be if we want the standard error of the sample mean to be

a. 2.10 b. 1.02 c. 0.45 d. 0.01

10. The Tasmanian Visitor Survey presents data in an analyzer database on a number of
aspects of tourism, including attractions visited by tourists aged 14 or over. The most visited
attractions by 1,283,618 tourists in the October 2016 to September 2017 period were the
Saturday Salamanca Market (443,600/34.6%), MONA – the Museum of Old and New Art
(352,222 /27.4%) and Mt Wellington (328,752/25.6%) (data obtained from
<www.tvsanalyser.com.au>).

a. If a survey of 300 people aged 14 or over who toured Tasmania during the period in
question is taken, what is the probability that at least 30% visited MONA?

b. What is the probability in this survey that between 31% and 36% of tourists visited the
Saturday Salamanca Market?

c. What is the probability in this survey that fewer than 23% of tourists visited Mt
Wellington?

27
Chapter 8. Confidence interval estimation
1. If the values of x̄ , σ, n and α are given, construct a (1 – α)% confidence interval estimate
of the population mean μ.

a. x̄ = 85, σ = 8, n = 64 and α = 5% b. x̄ = 125, σ = 24, n = 36 and α = 1%

c. x̄ = 6, σ = 2, n = 14 and α = 3% d. x̄ = 14.56, σ = 2.5, n = 10 and α = 6%

2. The manager of a paint supply store wants to estimate the actual amount of paint
contained in 4-litre cans purchased from a nationally known manufacturer. It is known from
the manufacturer’s specifications that the standard deviation of the amount of paint is equal
to 0.08 litres. A random sample of 50 cans is selected, and the sample mean amount of paint
per 4-litre can is 3.98 litres.

a. Construct a 99% confidence interval estimate of the population mean amount of paint
included in a 4-litre can.

b. On the basis of your results, do you think that the manager has a right to complain to the
manufacturer? Why?

c. Must you assume that the population amount of paint per can is normally distributed here?
Explain.

d. Construct a 95% confidence interval estimate. How does this change your answer to (b)?

3. The quality control manager at a light globe factory needs to estimate the mean life of a
large shipment of energy-saving light-emitting diode (LED) light globes. The standard
deviation is 3,000 hours. A random sample of 64 light globes indicates a sample mean life of
34,000 hours.

a. Construct a 95% confidence interval estimate of the population mean life of light globes in
this shipment.

b. Do you think that the manufacturer has the right to state that the light globes last an
average of 35,000 hours? Explain.

c. Must you assume that the population of light globe life is normally distributed? Explain.

d. Suppose that the standard deviation changes to 6,000 hours. What are your answers in (a)
and (b)?

4. Determine the critical value of t in each of the following circumstances:

28
a. 1 - α = 0.95, n = 10 b. 1 - α = 0.99, n = 10

c. 1 - α = 0.95, n = 32 d. 1 - α = 0.95, n = 65

5. If x̄ = 75, s = 24, n = 36, and assuming that the population is normally distributed,
construct a 95% confidence interval estimate of the population mean μ.

6. If x̄ = 50, s = 15, n = 16, and assuming that the population is normally distributed,
construct a 99% confidence interval estimate of the population mean μ.

7. Construct a 95% confidence interval for the population mean, based on the numbers 1, 2,
3, 4, 5, 6 and 20. Change the number 20 to 7 and recalculate the confidence interval. Using
these results, describe the effect of an outlier (i.e. extreme value) on the confidence interval.

8. Water resources in many parts of Australia are being closely watched and restrictions or
water-wise rules have been imposed on activities such as garden watering. Suppose that
Sydney Water monitors water usage in a suburb and finds that for one summer the average
household usage is 408 litres per day. A year later it examines records of a sample of 50
households and finds that there is a daily mean usage of 380 litres with a standard deviation
of 25 litres.

a. Construct a 95% confidence interval for the population mean daily water usage in the
second summer. Assume the population usage is normally distributed.

b. Interpret the interval constructed in (a).

c. Do you think water usage has changed in the second summer? Explain

9. If n = 200 and X = 50, construct a 95% confidence interval estimate of the population
proportion.

10. If n = 400 and X = 25, construct a 99% confidence interval estimate of the population
proportion.

11. A telco wants to estimate the proportion of mobile phone customers who would purchase
a phone plan with unlimited standard calls and SMS and 2GB of data if it were made
available at a substantially reduced cost. A random sample of 500 customers is selected. The
results indicate that 190 of the customers would purchase the plan at a reduced cost.

a. Construct a 99% confidence interval estimate of the population proportion of customers

who would purchase the unlimited 2GB plan.

b. How would the manager in charge of promotional programs for mobile customers use the
results in (a)?
29
12. A survey of 500 highly educated women who left careers for family reasons found that
66% postponed their return to work due to difficulty in making suitable childcare
arrangements.

a. Construct a 95% confidence interval for the population proportion of highly educated
women who have postponed their return to work due to difficulty in making suitable
childcare arrangements.

b. Interpret the interval in (a).

13. A survey of 293 inhabitants of Tropical North Queensland in 2013 found that 45%
considered increased property values were a negative impact of tourism in the region
(Tropical North Queensland Social Indicators 2013 <https://cdn-teq.queensland.
com/~/media/d0af5b7686754e2591d7e3fad2cdb673. ashx?vs=1&d=20140515T080145>
accessed 5 July 2017).

a. Construct a 95% confidence interval for the proportion of all residents in the region who
believe increased property values are a negative impact of tourism.

b. Construct a 90% confidence interval for the proportion of all residents in the region who
believe increased property values are a negative impact of tourism.

c. Which interval is wider? Explain why this is true.

14. If you want to be 95% confident of estimating the population mean to within a sampling
error of ±5 and the standard deviation is assumed to be 15, what sample size is required?

15. If you want to be 99% confident of estimating the population mean to within a sampling
error of ±20 and the standard deviation is assumed to be 100, what sample size is required?

16. If you want to be 99% confident of estimating the population proportion to within a
sampling error of ±0.04, what sample size is needed?

17. If you want to be 95% confident of estimating the population proportion to within a
sampling error of ±0.02 and there is historical evidence that the population proportion is
approximately 0.40, what sample size is needed?

18. An advertising agency that serves a major radio station wants to estimate the mean
amount of time that the station’s audience spends listening to the radio daily. From past
studies, the standard deviation is estimated as 45 minutes.

a. What sample size is needed if the agency wants to be 90% confident of being correct to
within ±5 minutes?
30
b. If 99% confidence is desired, what sample size is necessary?

19. Suppose that a survey of the audience at a Sydney Symphony Orchestra (SSO) concert
has found that 48 out of 350 members of the audience who participated in the survey are
visitors to Sydney.

a. Construct a 95% confidence interval for the population proportion of audience members at
SSO concerts who are visitors to Sydney.

b. Interpret the interval constructed in (a).

c. To conduct a follow-up study that would provide 95% confidence that the point estimate is
correct to within ±0.03 of the population proportion, how large a sample size is required?

d. To conduct a follow-up study that would provide 99% confidence that the point estimate is
correct to within ±0.03 of the population proportion, how large a sample size is required?

20. A sample of 25 is selected from a population of 500 items. The sample mean is 25.7 and
the sample standard deviation is 7.8. Construct a 99% confidence interval estimate of the
population total.

31
Chapter 9. Fundamental of hypothesis testing: one-
sample tests
1. In the Australian legal system, a defendant is presumed innocent until proven guilty.
Consider a null hypothesis, H0, that the defendant is innocent, and an alternative hypothesis,
H1, that the defendant is guilty. A jury has two possible decisions: convict the defendant (i.e.
reject the null hypothesis) or do not convict the defendant (i.e. do not reject the null
hypothesis). Explain the possible consequences of committing either a Type I or a Type II
error in this example.

2. Suppose that in a two-tail hypothesis test you calculate the value of the test statistic Z as
given. What is the p-value? And what is your statistical decision if you test the null
hypothesis at the 0.01 level of significance?

a. Z = 2 b. Z = -1.84 c. Z = 2.45 d. Z = -3.31

3. The director of manufacturing at a fabric mill needs to determine whether a new machine
is producing a particular type of cloth according to the manufacturer’s specifications, which
indicate that the cloth should have a mean breaking strength of 30 kg and a standard
deviation of 3.5 kg. A sample of 49 pieces of cloth reveals a sample mean breaking strength
of 29.3 kg.

a. Is there sufficient evidence that the machine is not meeting the manufacturer’s
specifications for mean breaking strength? (Use a 0.05 level of significance.)

b. Calculate the p-value and interpret its meaning.

c. What is your answer in (a) if the standard deviation is 1.8 kg?

d. What is your answer in (a) if the sample mean is 29 kg and the standard deviation is 1.7
kg?

4. The quality-control manager at a factory that manufactures memory cards for digital
cameras needs to determine whether a large shipment of UHS cards has a mean write speed
equal to 90 MB per second. The population standard deviation is 8 MB/s. A random sample
of 64 cards indicates a sample mean write speed of 87.5 MB/s.

a. At the 0.05 level of significance, is there sufficient evidence that the mean write speed is
different from 90 MB/s?

b. Calculate the p-value and interpret its meaning.

32
c. Construct a 95% confidence interval estimate of the population mean write speed of the
memory cards.

d. Compare the results of (a) and (c). What conclusions do you reach?

5. What is the upper-tail critical value of the Z test statistic at the 0.01 level of significance?
And what is your statistical decision if the calculated value of the Z test statistic is 2.39?

6. The Glendale Steel Company manufactures steel bars. If the production process is
working properly, it turns out steel bars with a mean length of at least 855 mm and a
standard deviation of 65 mm (as determined from engineering specifications on the
production equipment involved). Longer steel bars can be used or altered, but shorter bars
must be scrapped. You select a sample of 25 bars and the mean length is 832 mm. Do you
need to adjust the production equipment?

a. If you want to test the hypothesis at the 0.05 level of significance, what decision would
you make using the critical value approach to hypothesis testing?

b. If you want to test the hypothesis at the 0.05 level of significance, what decision would
you make using the p-value approach to hypothesis testing?

c. Interpret the meaning of the p-value in this problem.

d. Compare your conclusions in (a) and (b).

7. You are the manager of a restaurant that delivers pizza to customers. You have just
changed your delivery process in an effort to reduce the mean time between the order and
completion of delivery from the current 25 minutes. From past experience, you can assume
that the population standard deviation is 6 minutes. A sample of 36 orders using the new
delivery process yields a sample mean of 22.4 minutes.

a. Using the six-step critical value approach, at the 0.05 level of significance, is there
sufficient evidence that the mean delivery time has been reduced below the previous value of
25 minutes?

b. At the 0.05 level of significance, use the five-step p-value approach.

c. Interpret the meaning of the p-value in (b).

d. Compare your conclusions in (a) and (b).

8. In a sample of n = 16 selected from a normal population, x̄ = 56 and s = 12. Assume that

you are testing the null hypothesis, H0: µ = 50.

33
a. What is the value of the t test statistic?

b. How many degrees of freedom are there in the one-sample t test?

c. What are the critical values from the t table if the level of significance α = 0.05 and the
alternative hypothesis H1 is:

i. µ ≠ 50? ii. µ < 50? Iii. µ > 50?

d. What is your statistical decision if the alternative hypothesis, H1, is:

i. µ ≠ 50? ii. µ < 50? Iii. µ > 50?

9. The director of admissions at a large university advises parents of incoming students about
the cost of textbooks during a typical semester. He selected a sample of 100 students and
recorded their textbook expenses for the semester. He then calculated a sample mean cost of
$675.60 and a sample standard deviation of $45.20.

a. Using the 0.10 level of significance, is there sufficient evidence that the population mean
is above $665?

b. What is your answer in (a) if the standard deviation is $75 and the 0.05 level of
significance is used?

c. What is your answer in (a) if the sample mean is $669.60 and the sample standard
deviation is $45.20?

10. If, in a random sample of 400 items, 88 are defective.

a. What is the sample proportion of defective items?

b. If the null hypothesis is that 20% of the items in the population are defective, what is the
value of the Z test statistic?

c. Suppose you are testing the null hypothesis H0: π = 0.20 against the two-tail alternative
hypothesis H1: π ≠ 0.20 and you choose the level of significance of α = 0.05. What is your
statistical decision?

11. The Environmental Protection Authority in New South Wales published a paper which
discussed plastic shopping bags. The paper referred to a 2015 Omnipoll survey which
showed 64% of NSW respondents supported a total ban on single-use plastic shopping bags
(Environmental Protection Authority, Plastic Shopping Bags: Options Paper, EPA 2016,
<www.epa.nsw.gov. au> accessed 27 April 2018). Assume that a follow-up study is
undertaken to see whether the support for a ban on single-use plastic bags in NSW has
34
increased. A random sample of 300 shoppers is surveyed and 205 support a ban on single-
use plastic shopping bags.

a. At the 0.05 level of significance, use the six-step hypothesis-testing method to try to test
whether the proportion of shoppers using alternative bags is significantly higher.

b. Use the five-step p-value approach. Interpret the meaning of the p-value.

c. Repeat (a) and (b) using a sample size of 1,000 and the same sample proportion.

d. Discuss the effect that sample size had on the outcome of this analysis and, in general, on
the effect sample size plays in hypothesis testing.

12. The Australian Bureau of Statistics reported that, for the year 2015–16, 38.2% of
businesses had a social media presence (Australian Bureau of Statistics, Business Use of
Information Technology, 2015–16, Cat. No. 8129.0). Assume a recent survey has been
carried out of 3,996 Australian businesses . Results show that 1,595 of them have a social
media presence.

a. At the 0.05 level of significance, use the six-step hypothesis-testing method to try to prove
that the percentage of businesses with a social media presence has increased from 38.2%.

b. Use the five-step p-value approach. Interpret the meaning of the p-value.

35
Chapter 10. Two-sample tests
1. Given a sample of n1 = 30 from a population with known standard deviation σ1 = 10, and
an independent sample of n2 = 30 from another population with known standard deviation σ2
= 15, Suppose that you are testing H0: μ1 = μ2 and H1: μ1 ≠ μ2 if x1 = 72 , and x2 = 66 .

a. what is the value of the Z test statistic?

b. What is your decision using a level of significance of α = 0.10?

c. Find the p-value.

2. You need to test whether the average mealtime spending of American tourists (population
1) is greater than that of British tourists (population 2). Based on samples of 20 American
tourists (n1 = 20) and 17 British tourists (n2 = 17), you calculated the following statistics:
x1 = $53 , S1 = $4, x2 = $48 , S2 = $5.

a. What is the value of the pooled-variance t-test statistic for testing?

b. In finding the critical value of the test statistic t, how many degrees of freedom are there?

c. Using a level of significance of α = 0.01, what is the critical value for a two-tail test of the
hypothesis H0: μ1 - μ2 = 0 against the alternative H1: μ1 - μ2 ≠ 0?

d. What is your statistical decision?

e. Construct a 95% confidence interval estimate of the population difference between μ1 and
μ2 .

3. A manufacturer of batteries claims that its products last longer than those of its
competitors. The following information measures the lifetime of the manufacturer’s batteries
versus those of its competitors (in minutes).

a. Assuming that the population variances are equal, at the 0.05 level of significance, is there
sufficient evidence that the manufacturer’s claim is correct?

36
b. Repeat (a) assuming that the population variances are not equal.

c. Compare the results of (a) and (b).

4. (Using software) Travel expenses paid by companies can increase or decrease

dramatically when there are changes in the daily rates for hotel rooms. Did these rates stay
the same from 2011 to 2015? Assume that the following data < HOTEL_PRICE2 > give
typical daily rates in Australian dollars for hotels in 18 cities between 2011 and 2015.
Hotel Hotel
City 2015 2011
Auckland 120 173
Bangkok 139 133
Beijing 105 90
Christchurch 156 167
Ho Chi Minh City 170 139
Hobart 139 141
Hong Kong 201 180
London 247 223
Manila 122 116
Melbourne 125 167
Newcastle 156 142
New York 316 273
Osaka 148 143
Perth 177 124
Seoul 165 135
Singapore 191 176
Suva 163 159
Sydney 235 262
a. At the 0.05 level of significance, is there sufficient evidence of a difference in the mean
daily hotel rate where μ1 = 2015 rate and μ2 = 2011 rate?

b. What assumption is necessary to perform this test?

c. Determine the p-value in (a) and interpret its meaning.

d. Construct and interpret a 95% confidence interval estimate of the difference in the mean
daily hotel rate, μ1 - μ2.

5. (Using software) Determine FU and FL, the upper- and lower-tail critical values of F, in
each of the following two-tail tests:

a. α = 0.05, n1 = 8, n2 = 7 b. α = 0.05, n1 = 9, n2 = 6

c. α = 0.025, n1 = 7, n2 = 5 d. α = 0.01, n1 = 9, n2 = 9
37
6. (Using software) Determine FU and FL, the upper- and lower-tail critical values of F, in
each of the following one-tail tests:

a. α = 0.05, n1 = 8, n2 = 7 b. α = 0.025, n1 = 9, n2 = 6

c. α = 0.01, n1 = 7, n2 = 5 d. α = 0.005, n1 = 9, n2 = 9

7. The following information is available for two samples drawn from independent normally
distributed populations: n1 = 21, S12 = 133.7, n2 = 16, S22 = 161.9. If you are testing the null
hypothesis H0: σ12 - σ22 = 0 and the alternative hypothesis is H1: σ12 - σ22 ≠ 0.

a. What is the value of the F test statistic?

b. How many degrees of freedom are there in the numerator and denominator of the F test?

c. What is your statistical decision?

8. The following information is available for two samples selected from independent but
very right-skewed populations: n1 = 16, S12 = 47.3, n2 = 13, S22 = 36.4.

a. Should you use the F test to test the null hypothesis of equality of variances? Discuss.

b. If the two samples are drawn from independent, normally distributed populations:

i. At the 0.05 level of significance, is there sufficient evidence of a significant difference

between σ12 and σ22?

ii. Suppose that you want to perform a one-tail test. At the 0.05 level of significance, what is
the upper-tail critical value of the F test statistic to determine whether there is sufficient
evidence that σ12 > σ22? What is your statistical decision?

iii. Suppose that you want to perform a one-tail test. At the 0.05 level of significance, what is
the lower-tail critical value of the F test statistic to determine whether there is sufficient
evidence that σ12 < σ22? What is your statistical decision?

9. Assume that n1 = 120, X1 = 55, n2 = 65 and X2 = 30.

a. At the 0.05 level of significance, is there sufficient evidence of a significant difference

between the two population proportions in group 1 and group 2?

b. Set up a 95% confidence interval estimate of the difference between the two proportions.

10. A human resources manager is trying to reduce the percentage of employees resigning at
the organization’s two factories in Brisbane and Christchurch. She implements an employee
loyalty scheme at the Christchurch factory in which employees receive a financial bonus for
38
staying at the factory for over five years. Over the next 12-month period, 12 out of 345
employees resign at the Christchurch factory, compared to 32 out of 890 employees in
Brisbane.

a. At the 0.01 level of significance, is there sufficient evidence that the percentage of
employees resigning in Christchurch is lower than that of Brisbane?

b. Construct and interpret a 99% confidence interval estimate of the difference between the
population proportions for the factories.

39
Chapter 11. Analysis of Variance
1. You are working with an experiment that has a single factor with four groups, and five
values in each group. Assume that SSB = 60 and SST = 120.

a. How many degrees of freedom are there in determining:

i. the between-group variation? ii. the within-group variation? iii. the total variation?

b. Calculate:

i. MSB ii. MSW iii. the value of the test statistic F

c. Form the ANOVA summary table and fill in all values in the body of the table.

d. At the 0.05 level of significance, what is the upper-tail critical value from the F
distribution?

e. State the decision rule for testing the null hypothesis that all four groups have equal
population means.

f. What is your statistical decision?

2. You are conducting an experiment with one factor containing six groups, with five values
in each group. For the following ANOVA summary table, fill in all the missing results.

a. At the 0.05 level of significance, state the decision rule for testing the null hypothesis that
all six groups have equal population means.

b. What is your statistical decision?

40
3. You are conducting an experiment with one factor containing five groups, with 10 values
in each group. For the ANOVA summary table below, fill in all the missing results.

4. Consider a two-factor factorial design with three levels for factor A, three levels for factor
B and four replicates in each of the nine cells. Assume that SSA = 120, SSB = 110, SSE =
270 and SST = 540.

a. How many degrees of freedom are there in determining:

i. the factor A variation and the factor B variation?

ii. the interaction variation?

iii. the random variation? d. the total variation?

b. Calculate:

i. SSAB?

ii. MSA and MSB?

iii. MSAB?

iv. MSE?

c. What is the value of the test statistic F for the interaction effect?

d. What is the value of the test statistic F for the factor A effect?

e. What is the value of the test statistic F for the factor B effect?

f. Form the ANOVA summary table and fill in all values in the body of the table.

g. At the 0.05 level of significance:

41
i. Is there an effect due to factor A?

ii. Is there an effect due to factor B?

iii. Is there an interaction effect?

5. Given a two-way ANOVA with two treatment levels for factor A and five treatment levels
for factor B, and four replicates in each of the 10 treatment combinations of factors A and B,
with SSA = 18, SSB = 64, SSE = 60 and SST = 150:

a. Form the ANOVA summary table and fill in all values in the body of the table.

b. At the 0.05 level of significance:

i. Is there an effect due to factor A?

ii. Is there an effect due to factor B?

iii. Is there an interaction effect?

6. Given a two-factor factorial experiment and the ANOVA summary table that follows, fill
in all the missing results:

At the 0.05 level of significance:

a. Is there an effect due to factor A? b. Is there an effect due to factor B?

c. Is there an interaction effect?

42
Chapter 13. Simple Linear Regression
1. Fitting a straight line to a set of data yields the following prediction line:

Ŷi = 15 + 25Xi

a. Interpret the meaning of the Y intercept, b0.

b. Interpret the meaning of the slope, b1.

c. Predict the mean value of Y for X = 12

2. An increasingly important topic in the context of climate change and global warming is
the link between countries’ energy generation and CO2 emissions. The following table lists
energy generation (terawatt hours) and CO2 emissions (000s metric tonnes) for 11 countries.
< CO2 >

Data obtained from <www.nationmaster.com>

a. Which variable would you choose as the (i) independent and (ii) dependent variable?
Explain the reason for your choice.

b. Construct a scatter diagram.

c. Assuming a linear relationship, use the least-squares method to find the regression
coefficients, b0 and b1.

d. Interpret the meaning of the slope, b1, in this problem.

e. Predict the CO2 emission for a country generating 1,000 terawatt hours of energy.

f. How useful do you think this regression model is for CO2 emissions?
43
3. A statistics professor is investigating the relationship between tutorial class size and
academic performance for a first-year business statistics course. She collects data on the
tutorial class size (number of students) and average class mark (/100) for a sample of 15
classes. < CLASS_SIZE >

a. Construct a scatter diagram.

b. Assuming a linear relationship, use the least-squares method to find the regression
coefficients, b0 and b1.

c. Interpret the meaning of the slope, b1, in this problem.

d. Predict the average class mark for a tutorial of 20 students.

e. Determine the coefficient of det ermination, r2, and interpret its meaning.

f. Determine the standard error.

4. If SSR = 25 and SSE = 24, calculate the coefficient of determination, r2, and interpret its
meaning.

5. You are testing the null hypothesis that there is no relationship between two variables, X
and Y. From your sample of n = 34, you determine that b1 = 3.4 and Sb1= 1.2.

a. What is the value of the t test statistic?

b. At the α = 0.05 level of significance, what are the critical values?

44
c. Based on your answers to (a) and (b), what statistical decision should you make?

d. Construct a 95% confidence interval estimate of the population slope, β1.

6. You are testing the null hypothesis that there is no relationship between two variables, X
and Y. From your sample of n = 21, you determine that SSR = 34 and SSE = 25.

a. What is the value of the F test statistic?

b. At the α = 0.05 level of significance, what is the critical value?

c. Based on your answers to (a) and (b), what statistical decision should you make?

d. Calculate the correlation coefficient by first calculating r2 and assuming b1 is negative.

e. At the 0.05 level of significance, is there a significant correlation between X and Y?

7. Suppose the results of a problem, b1 = 1442.216 and Sb1 = 60.209.

a. At the 0.05 level of significance, is there evidence of a linear relationship between energy
generation and CO2 emissions?

b. Construct a 95% confidence interval estimate of the population slope, β1.

8. Can you use Twitter activity to forecast box office receipts on the opening weekend? The
following data, stored in < TWITTER_MOVIES >, indicate the Twitter activity (‘want to
see’) and the receipts ($) per theatre on the weekend a movie opened, for seven movies.

a. Use the least-squares method to calculate the regression coefficients b0 and b1.

b. Interpret the meaning of b0 and b1 in this problem.

45
c. Predict the mean receipts for a movie that has a Twitter activity of 100,000.

d. Should you use the model to predict the receipts for a movie that has a Twitter activity of
1,000,000? Why or why not?

e. Calculate the coefficient of determination, r2, and explain its meaning in this problem.

f. Perform a residual analysis. Is there any evidence of a pattern in the residuals? Explain.

g. At the 0.05 level of significance, is there evidence of a significant linear relationship

between Twitter activity and receipts?

h. Construct a 95% confidence interval estimate of the mean receipts for a movie that has a
Twitter activity of 100,000 and a 95% prediction interval of the receipts for a single movie
that has a Twitter activity of 100,000.

i. Based on the results of (a) to (h), do you think that Twitter activity is a useful predictor of
receipts on the first weekend a movie opens? What issues about these data might make you
hesitant to use Twitter activity to predict receipts?

46
Chapter 14. Introduction to multiple regression
1. For this problem, use the following multiple regression equation:

Ŷi = 12 + 8X1i − 3X2i

a. Interpret the meaning of the slopes. Expected, predict, mean

b. Interpret the meaning of the Y intercept.

2. A marketing analyst for a shoe manufacturer is considering the development of a new

brand of tennis shoes. The marketing analyst wants to determine which variables to use in
predicting durability (i.e. the effect of long-term impact). Two independent variables under
consideration are X1 (Foreimp), a measurement of the forefoot shock-absorbing capability,
and X2 (Midsole), a measurement of the change in impact properties over time. The
dependent variable, Y, is LTIMP, a measure of the shoe’s durability after a repeated impact
test. A random sample of 15 types of currently manufactured tennis shoes was selected for
testing, with the following results

a. State the multiple regression equation.

b. Interpret the meaning of the slope coefficients b1 and b2 in this problem.

3. A financial planner believes that retirement trends reflect the trends in the labour market
and also share market returns. She collects data on 15 OECD countries’ retirement rates (%),
unemployment rates (%) and share market returns for 2011. < RETIRE >

47
a. State the multiple regression equation.

b. Interpret the meaning of the slope coefficients b1 and b2 in this problem.

c. Explain why the regression coefficient, b0, has no practical meaning in the context of this
problem.

d. Predict the mean retirement rate when unemployment is 6% and there is a share market
return of 5%.

e. Construct a 95% confidence interval estimate for the mean retirement rate when
unemployment is 6% and there is a share market return of 5%.

f. Construct a 95% prediction interval for the retirement rate when unemployment is 6% and
there is a share market return of 5%.

48
4. The study of ‘happiness’ and wellbeing is becoming popular in both economics and social
science as an alternative to GDP as a measure of countries’ standard of living. In an attempt
to analyze the possible connection (if any) between happiness and economic variables we
have obtained survey data measuring people’s happiness levels. The data below show the
percentage of respondents from various countries stating they were ‘very happy’. We have
included GDP per capita ($) and CPI as economic variables. < HAPPY >

a. State the multiple regression equation.

b. Interpret the meaning of the slope coefficients b1 and b2.

c. Explain why coefficient b0 would have no practical meaning in the context of this
problem.

d. Predict the mean happiness percentage for a country with GDP per capita of $35,000 and
CPI of 75.

e. Construct a 95% confidence interval estimate for the mean happiness percentage for a
country with GDP per capita of $35,000 and CPI of 75.

49
f. Construct a 95% prediction interval estimate for the mean happiness percentage for a
country with GDP per capita of $35,000 and CPI of 75.

5. The following ANOVA summary table is for a multiple regression model with two
independent variables.

a. Determine the mean square due to regression and the mean square due to error.

b. Calculate the F statistic.

c. Determine whether there is a significant relationship between Y and the two independent
variables at the 0.05 level of significance.

d. Calculate the coefficient of multiple determination, R2, and interpret its meaning.

e. Calculate the adjusted R2.

50
 x2
z −
2
e
Cumulative Standard Normal Distribution:  ( z ) = P ( Z  z ) =  dx
− 2

z 0.00 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09
0.0 0.5000 0.5040 0.5080 0.5120 0.5160 0.5199 0.5239 0.5279 0.5319 0.5359
0.1 0.5398 0.5438 0.5478 0.5517 0.5557 0.5596 0.5636 0.5675 0.5714 0.5753
0.2 0.5793 0.5832 0.5871 0.5910 0.5948 0.5987 0.6026 0.6064 0.6103 0.6141
0.3 0.6179 0.6217 0.6255 0.6293 0.6331 0.6368 0.6406 0.6443 0.6480 0.6517
0.4 0.6554 0.6591 0.6628 0.6664 0.6700 0.6736 0.6772 0.6808 0.6844 0.6879
0.5 0.6915 0.6950 0.6985 0.7019 0.7054 0.7088 0.7123 0.7157 0.7190 0.7224
0.6 0.7257 0.7291 0.7324 0.7357 0.7389 0.7422 0.7454 0.7486 0.7517 0.7549
0.7 0.7580 0.7611 0.7642 0.7673 0.7704 0.7734 0.7764 0.7794 0.7823 0.7852
0.8 0.7881 0.7910 0.7939 0.7967 0.7995 0.8023 0.8051 0.8078 0.8106 0.8133
0.9 0.8159 0.8186 0.8212 0.8238 0.8264 0.8289 0.8315 0.8340 0.8365 0.8389
1.0 0.8413 0.8438 0.8461 0.8485 0.8508 0.8531 0.8554 0.8577 0.8599 0.8621
1.1 0.8643 0.8665 0.8686 0.8708 0.8729 0.8749 0.8770 0.8790 0.8810 0.8830
1.2 0.8849 0.8869 0.8888 0.8907 0.8925 0.8944 0.8962 0.8980 0.8997 0.9015
1.3 0.9032 0.9049 0.9066 0.9082 0.9099 0.9115 0.9131 0.9147 0.9162 0.9177
1.4 0.9192 0.9207 0.9222 0.9236 0.9251 0.9265 0.9279 0.9292 0.9306 0.9319
1.5 0.9332 0.9345 0.9357 0.9370 0.9382 0.9394 0.9406 0.9418 0.9429 0.9441
1.6 0.9452 0.9463 0.9474 0.9484 0.9495 0.9505 0.9515 0.9525 0.9535 0.9545
1.7 0.9554 0.9564 0.9573 0.9582 0.9591 0.9599 0.9608 0.9616 0.9625 0.9633
1.8 0.9641 0.9649 0.9656 0.9664 0.9671 0.9678 0.9686 0.9693 0.9699 0.9706
1.9 0.9713 0.9719 0.9726 0.9732 0.9738 0.9744 0.9750 0.9756 0.9761 0.9767
2.0 0.9772 0.9778 0.9783 0.9788 0.9793 0.9798 0.9803 0.9808 0.9812 0.9817
2.1 0.9821 0.9826 0.9830 0.9834 0.9838 0.9842 0.9846 0.9850 0.9854 0.9857
2.2 0.9861 0.9864 0.9868 0.9871 0.9875 0.9878 0.9881 0.9884 0.9887 0.9890
2.3 0.9893 0.9896 0.9898 0.9901 0.9904 0.9906 0.9909 0.9911 0.9913 0.9916
2.4 0.9918 0.9920 0.9922 0.9925 0.9927 0.9929 0.9931 0.9932 0.9934 0.9936
2.5 0.9938 0.9940 0.9941 0.9943 0.9945 0.9946 0.9948 0.9949 0.9951 0.9952
2.6 0.9953 0.9955 0.9956 0.9957 0.9959 0.9960 0.9961 0.9962 0.9963 0.9964
2.7 0.9965 0.9966 0.9967 0.9968 0.9969 0.9970 0.9971 0.9972 0.9973 0.9974
2.8 0.9974 0.9975 0.9976 0.9977 0.9977 0.9978 0.9979 0.9979 0.9980 0.9981
2.9 0.9981 0.9982 0.9982 0.9983 0.9984 0.9984 0.9985 0.9985 0.9986 0.9986
3.0 0.9987 0.9987 0.9987 0.9988 0.9988 0.9989 0.9989 0.9989 0.9990 0.9990

51
Chi-Squared Distribution 2

n
 0.99 0.975 0.95 0.9 0.1 0.05 0.025 0.01
1 0.000 0.001 0.004 0.016 2.706 3.841 5.024 6.635
2 0.020 0.051 0.103 0.211 4.605 5.991 7.378 9.210
3 0.115 0.216 0.352 0.584 6.251 7.815 9.348 11.345
4 0.297 0.484 0.711 1.064 7.779 9.488 11.143 13.277
5 0.554 0.831 1.145 1.610 9.236 11.070 12.833 15.086
6 0.872 1.237 1.635 2.204 10.645 12.592 14.449 16.812
7 1.239 1.690 2.167 2.833 12.017 14.067 16.013 18.475
8 1.646 2.180 2.733 3.490 13.362 15.507 17.535 20.090
9 2.088 2.700 3.325 4.168 14.684 16.919 19.023 21.666
10 2.558 3.247 3.940 4.865 15.987 18.307 20.483 23.209
11 3.053 3.816 4.575 5.578 17.275 19.675 21.920 24.725
12 3.571 4.404 5.226 6.304 18.549 21.026 23.337 26.217
13 4.107 5.009 5.892 7.042 19.812 22.362 24.736 27.688
14 4.660 5.629 6.571 7.790 21.064 23.685 26.119 29.141
15 5.229 6.262 7.261 8.547 22.307 24.996 27.488 30.578
16 5.812 6.908 7.962 9.312 23.542 26.296 28.845 32.000
17 6.408 7.564 8.672 10.085 24.769 27.587 30.191 33.409
18 7.015 8.231 9.390 10.865 25.989 28.869 31.526 34.805
19 7.633 8.907 10.117 11.651 27.204 30.144 32.852 36.191
20 8.260 9.591 10.851 12.443 28.412 31.410 34.170 37.566
21 8.897 10.283 11.591 13.240 29.615 32.671 35.479 38.932
22 9.542 10.982 12.338 14.041 30.813 33.924 36.781 40.289
23 10.196 11.689 13.091 14.848 32.007 35.172 38.076 41.638
24 10.856 12.401 13.848 15.659 33.196 36.415 39.364 42.980
25 11.524 13.120 14.611 16.473 34.382 37.652 40.646 44.314
26 12.198 13.844 15.379 17.292 35.563 38.885 41.923 45.642
27 12.879 14.573 16.151 18.114 36.741 40.113 43.195 46.963
28 13.565 15.308 16.928 18.939 37.916 41.337 44.461 48.278
29 14.256 16.047 17.708 19.768 39.087 42.557 45.722 49.588
30 14.953 16.791 18.493 20.599 40.256 43.773 46.979 50.892
40 22.164 24.433 26.509 29.051 51.805 55.758 59.342 63.691
50 29.707 32.357 34.764 37.689 63.167 67.505 71.420 76.154
60 37.485 40.482 43.188 46.459 74.397 79.082 83.298 88.379
70 45.442 48.758 51.739 55.329 85.527 90.531 95.023 100.425
80 53.540 57.153 60.391 64.278 96.578 101.879 106.629 112.329

52
Student's t-distribution tn

n
 0.4 0.3 0.2 0.1 0.05 0.025 0.01 0.005 0.0005
1 0.325 0.727 1.376 3.078 6.314 12.706 31.821 63.657 636.619
2 0.289 0.617 1.061 1.886 2.920 4.303 6.965 9.925 31.599
3 0.277 0.584 0.978 1.638 2.353 3.182 4.541 5.841 12.924
4 0.271 0.569 0.941 1.533 2.132 2.776 3.747 4.604 8.610
5 0.267 0.559 0.920 1.476 2.015 2.571 3.365 4.032 6.869
6 0.265 0.553 0.906 1.440 1.943 2.447 3.143 3.707 5.959
7 0.263 0.549 0.896 1.415 1.895 2.365 2.998 3.499 5.408
8 0.262 0.546 0.889 1.397 1.860 2.306 2.896 3.355 5.041
9 0.261 0.543 0.883 1.383 1.833 2.262 2.821 3.250 4.781
10 0.260 0.542 0.879 1.372 1.812 2.228 2.764 3.169 4.587
11 0.260 0.540 0.876 1.363 1.796 2.201 2.718 3.106 4.437
12 0.259 0.539 0.873 1.356 1.782 2.179 2.681 3.055 4.318
13 0.259 0.538 0.870 1.350 1.771 2.160 2.650 3.012 4.221
14 0.258 0.537 0.868 1.345 1.761 2.145 2.624 2.977 4.140
15 0.258 0.536 0.866 1.341 1.753 2.131 2.602 2.947 4.073
16 0.258 0.535 0.865 1.337 1.746 2.120 2.583 2.921 4.015
17 0.257 0.534 0.863 1.333 1.740 2.110 2.567 2.898 3.965
18 0.257 0.534 0.862 1.330 1.734 2.101 2.552 2.878 3.922
19 0.257 0.533 0.861 1.328 1.729 2.093 2.539 2.861 3.883
20 0.257 0.533 0.860 1.325 1.725 2.086 2.528 2.845 3.850
21 0.257 0.532 0.859 1.323 1.721 2.080 2.518 2.831 3.819
22 0.256 0.532 0.858 1.321 1.717 2.074 2.508 2.819 3.792
23 0.256 0.532 0.858 1.319 1.714 2.069 2.500 2.807 3.768
24 0.256 0.531 0.857 1.318 1.711 2.064 2.492 2.797 3.745
25 0.256 0.531 0.856 1.316 1.708 2.060 2.485 2.787 3.725
26 0.256 0.531 0.856 1.315 1.706 2.056 2.479 2.779 3.707
27 0.256 0.531 0.855 1.314 1.703 2.052 2.473 2.771 3.690
28 0.256 0.530 0.855 1.313 1.701 2.048 2.467 2.763 3.674
29 0.256 0.530 0.854 1.311 1.699 2.045 2.462 2.756 3.659
30 0.256 0.530 0.854 1.310 1.697 2.042 2.457 2.750 3.646
40 0.255 0.529 0.851 1.303 1.684 2.021 2.423 2.704 3.551
60 0.254 0.527 0.848 1.296 1.671 2.000 2.390 2.660 3.460
120 0.254 0.526 0.845 1.289 1.658 1.980 2.358 2.617 3.373

53