1

UNIVERSITI TUNKU ABDUL RAHMAN

FACULTY OF BUSINESS AND FINANCE
TUTORIAL 1 & 2 (Question & Answer)
1.

What is the difference between a sample and a population?

2.

What is the difference between a statistic and a parameter?

3.

A stores inventory of party supplies consists of 600 red balloons, 200 white balloons,
and 200 blue balloons. Your boss asks you to choose a representative sample of 75
balloons for a window display. How many red balloons should you place in the display?
Explain your answer.

4.

A businesswoman who is running for the vacant City Commission seat with 20,000
registered voters conducts a survey. In the survey, 56% of the 500 registered voters
interviewed say they planned to vote for her.
(i) What is the population of interest?
(ii) What is the sample?
(iii) Is the 56% a parameter or a statistic?

5.

Identify each of the following studies as either descriptive statistics or inferential

statistics:
(i) Examine the heights of a sample of 50 NBA basketball players to see if the average
height of all NBA basketball players is 75 inches.
(ii) Post the average midterm score for the statistics class.
(iii) Estimate the percentage of the US population that will vote for George W. Bush in
the 2004 presidential election.

6.

A manufacturer of children toys claims that less than 5% of his products are defective.
When 500 toys were drawn from a large production run, 7% were found to be defective.
(i) What is the population of interest?
(ii) What is the sample?
(iii) What is the parameter?
(iv) What is the statistic?
(v) Does the value 5% refer to the parameter or the statistic?
(vi) Is the value 7% a parameter or a statistics?
(vii) Explain briefly how the statistic can be used to make inferences about the parameter
to test the claim.

7.

Professor Smith graduated from Iowa with a code value = 2 while Professor Jackson
graduated from Michigan State with a code value = 3. The scale of measurement likely
represented by this information is ____________________________

2
8.

In rating the service provided by a waiter/waitress, the following responses are possible:
excellent, above average, average, below average, and poor. The responses are coded
from 1 to 5 with 5 being excellent. The scale of measurement these represent is
________________________

9.

An automobile insurance agent believes that company A is more reliable than company B.
Which scale of measurement does this information represent?
_____________________

10.

A consumer group is examining the actual weight of cans of tomato soup produced by a
company with a reputation for inaccurate content labels. The type of variable most
appropriate to their measurement is______________________________

11.

For each of the following indicate whether the variable of interest would be qualitative or
quantitative.
(i) Whether you are a US citizen
(ii) Your marital status
(iii) Number of cars in a parking lot
(iv) Amount of time you spend per week on your homework

12.

A frequency distribution of weekly wages for 56 skilled workers is as follows:

Weekly income (RM1,000)
0 and less than 5
5 and less than 15
15 and less than 30
30 and less than 45
45 and less than 65
65 and less than 75
75 and less than 95

Number of persons
4
9
12
10
13
5
3

(i) Calculated the sample mean, medium and mode (answers: 36.875, 34.500, 50.455)
(ii) Find the sample variance, standard deviation, coefficient of variation, coefficient of
skewness and interpret the results. (answers: 553.011, 23.516, 63.77%, 0.303)

13.

A sample of 8 employees is taken from the production department of a light engineering

factory. The data which follow relate to the number of weeks experience in the wiring of
components, and the number of components which were rejected as unsatisfactory last
week.
Employee
Weeks of experience (x)
Number of rejects (y)

A
3
20

B
5
20

C
7
15

D
9
18

E
11
16

F
13
14

G
11
14

H
12
13

x = 71; y = 130; x y = 1095; x = 719; y 2 = 2166;

( x x)( y y) 58.75 ; Sx = 3.5632; Sy = 2.7646
2

Calculate the covariance and coefficient of correlation for these data and interpret its
value.

4
UNIVERSITI TUNKU ABDUL RAHMAN
FACULTY OF BUSINESS AND FINANCE
TUTORIAL 3 (Question & Answer)
1.

A set of final examination grades in an introductory statistics course was found to be

normally distributed with a mean of 73 and a standard deviation of 8.
a.
b.
c.
d.
e.

2.

What is the probability of getting a grade of 91 or less on this exam?

What percentage of students scored between 65 and 89?
What percentage of students scored between 81 and 89?
Only 5% of the students taking the test score higher than what grade?
If the professor grades on a curve (give As to the top 10% of the class regardless of
the score), are you better off with a grade of 81 on this exam or a grade of 68 on a
different exam where the mean is 62 and the standard deviation is 3? Show your
answer statistically and explain.

KleerCo supplies an under-hood emissions-control air pump to the automotive industry.

The pump is vacuum powered and works while the engine is operating, cleaning the
exhaust by pumping extra oxygen into the exhaust system. If a pump fails before the
vehicle in which it is installed has covered 50,000 kilometers, federal emissions
regulations require that it be replaced at no cost to the vehicle owner. The companys
current air pump lasts an average of 63,000 kilometres, with a standard deviation of
10,000 kilometres. The number of kilometres a pump operates before becoming
ineffective has been found to be normally distributed.
a. For the current pump design, what percentage of the companys pump will have to be
replaced at no charge to the consumer?
b. What percentage of the companys pumps will fail at exactly 50,000 kilometres?
c. What percentage of the companys pumps will fail between 40,000 and 55,000
kilometres?
d. For what number of kilometres does the probability become 80% that a randomly
selected pump will no longer be effective?

3.

An orange juice producer buys all his oranges from a large orange grove that has one
variety of orange. The amount of juice squeezed from each of these oranges is
approximately normally distributed with a mean of 4.70 ounces and a standard deviation
of 0.40 ounce. Suppose that a sample of 25 oranges is selected:
a. What is the probability that the sample mean will be at least 4.60 ounces?
b. Between what two values symmetrically distributed around the population mean will
70% of the sample mean fall?
c. 77% of the sample means will be above what value?

5
Self Practice:
1.

AirAsia Airlines reports the flight time from Kuala Lumpur International Airport to
Penang is 1 hour and 5 minutes, or 65 minutes. Suppose the actual flying time is
uniformly distributed between 60 and 70 minutes.
a.
b.
c.
d.

2.

A continuous random variable, x, is normally distributed with a mean of RM1,000 and a

standard deviation of RM100. Convert each of the following x values into its
corresponding z-score:
a.
b.
c.
d.
e.

3.

x = RM1,000
x = RM1,100
x = RM1,225
x = RM 750
x = RM 950

Using standard normal table, find the following probabilities associated with z:
a.
b.
c.
d.
e.
f.

4.

Show a graph of the continuous probability distribution.

What is the mean flight time? What is the variance of the flight times?
What is probability the flight time is less than 68 minutes?
What is the probability the flight takes more than 64 minutes?

P(0.00 z 1.10)
P(z 1.10)
P(z 1.35)
P(-0.36 z 0.00)
P(z -0.36)
P(z -0.43)

An accounting firm is planning for the next tax preparation season. From last year's
returns, the firm collects a systematic random sample of 100 filings. The 100 filings
showed an average preparation time of 90 minutes with a standard deviation of 140
minutes.
a. What assumptions do you need to make about the shape of the population distribution
of all possible tax preparation times to make inferences about the average time to
complete a tax form?
b. What is the standard error of the mean?
c. What is the probability that the mean completion time will be more than 120 minutes?
d. What is the probability that the mean completion time is between 1 and 2 hours, i.e.,
60 and 120 minutes?

6
UNIVERSITI TUNKU ABDUL RAHMAN
FACULTY OF BUSINESS AND FINANCE
TUTORIAL 4 (Question & Answer)
1.

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

a. 1- =0.95; n=10
b. 1- =0.95; n=32
c. 1- =0.90; n=16
d. 1- =0.99; n=10
e. 1- =0.95; n=65

2.

The manager of a paint supply store wants to estimate the actual amount of paint
contained in 1-gallon cans purchased from a nationally known manufacturer. It is known
from the manufacturers specifications that the standard deviation of the amount of paint
is equal to 0.02 gallon. A random sample of 50 cans is selected, and the sample mean
amount of paint per 1-gallon can is 0.995 gallon.
a. Set up a 99% confidence interval estimate of the true population mean amount of
paint included in a 1-gallon can.
b. On the basic of your results, do you think that the manager has a right to complaint to
the manufacturer? Why?
c. Does the population amount of paint per can have to be normally distributed here?
Explain.

3.

The researcher wants to estimate the mean income per day for all chicken farms in U.S. A
sample of 20 farms shows income has an average of 20 dollars per day with a standard
deviation of 2 dollars per day.
a. What is the value of the population mean? What is the best estimate of this value?
b. Explain why we need to use the t distribution. What assumption do you need to
make?
c. For a 95% confidence interval, what is the value of t?
d. Develop the 95% confidence interval for the population mean.
e. Would it be reasonable to conclude that the population mean is 21 dollars? What
about 25 dollars?

4.

Based on its 1999 survey, Students Monitor reports that 20% of U.S. college students
used the Internet for job hunting during month preceding the survey. Assuming this
finding to be based on a simple random sample of 1600 college students, construct and
interpret the 90% confidence interval for the population proportion of college students
who used the internet for job hunting during this period.

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 equal to 15, what sample size is
required?

7
UNIVERSITI TUNKU ABDUL RAHMAN
FACULTY OF BUSINESS AND FINANCE
TUTORIAL 5 (Question & Answer)
1.

The manager of a paint supply store wants to estimate the actual amount of paint
contained in 1-gallon cans purchased from a nationally known manufacturer. It is known
from the manufacturers specifications that the standard deviation of the amount of paint
is equal to 0.02 gallon. A random sample of 50 cans is selected, and the sample mean
amount of paint per 1-gallon can is 0.995 gallon.
d. State the null and alternative hypotheses.
e. Is there evidence that the mean amount is different from 1.0 gallon (use =0.01)?
f. Compute the p-value and interpret its meaning.
g. Set up a 99% confidence interval estimate of the population mean amount of paint.
h. Compare the results of (b) and (d). What conclusions do you reach?

2.

An article in the The Star Newspaper implies that more than half of all Malaysians would
prefer to being given RM100 rather than a day off for work. This statement is based on a
survey conducted by Malaysian Employee Incentives and Remunerations Research
Consultant Agency, in which 1,040 of 2,000 respondents indicated that they would
rather have the RM100.
At 0.05 level of significance, is there evidence based on the survey data that more than
half of all Malaysians would rather have RM100 than a day off from work?

3.

A scrap metal dealer claims that the mean of his cash sales is no more than RM80, but
an International Revenue Service agent believes the dealer is untruthful. Observing a
sample of 20 cash customers, the agent finds the mean purchase to be RM91, with a
standard deviation of RM21. Assuming the population is approximately normal
distributed, and using the 0.05 level of significance, is the agents suspicion confirmed?

8
Self Practice:
1.

For each of the following situations, determine whether a one-tail test or a two-tail test
would be appropriate. Describe the test, including the null and alternative hypotheses,
then explain your reasoning in selecting it.
a. A machine that has been serviced for several months is producing output in which 5%
of the items are defective. The machine has just been serviced and quality should now
be improved.
b. In a speech during her campaign for reelection, a Republican candidate claims that
55% of registered Democrats in her country intend to vote her.
c. Of those who have bought a new car in the past, dealer has found that 70%
experience three or more mechanical problems in the first four months of ownership.
Unhappy with this percentage, the dealer has heavily revised the procedure by which
pre-delivery mechanical checks are carried out.

2.

The average cost of tuition, room and board at small private liberal arts colleges is
reported to be $8,500 per term, but a financial administrator believes that the average cost
is higher. A study conducted using 150 small liberal arts colleges showed that the average
cost per term is $8,745 with a standard deviation of $1,200.
a. At the 0.05 level of significance, is there evidence that the average cost is higher?
b. What is the p-value for this test?
c. Based on the computed test statistic or p-value, what is our decision about the average
cost?

9
UNIVERSITI TUNKU ABDUL RAHMAN
FACULTY OF BUSINESS AND FINANCE
TUTORIAL 6 (Question & Answer)
1.

Do government employees take longer coffee breaks than private sector workers? That is
a question that interested a management consultant. To examine the issue, he took a
random sample of ten government employees and another random sample of ten private
sector workers and measured the amount of time (in minutes) they spent in coffee breaks
during the day. The results are listed below. Assume that the two populations are
normally distributed with equal variances.
Government Employees
23
18
34
31
28
33
25
27
32
21
n 10

a.
b.
c.

2.

Private Sector Workers

25
19
18
22
28
25
21
21
20
16
n 10

x 27.2

x 21.5

s 2 29.2888

s 2 13.1667

Do these data provide sufficient evidence at the 5% significance level to support

the consultants claim?
Estimate with 95% confidence interval the difference in coffee breaks mean time
between the two groups.
Explain what the interval estimate tells you.

Did the average price of new homes change between 2001 and 2002? The table contains
the typical sales prices of homes (in dollars) from a random sample of 10 zip codes in the
United States with median incomes of approximately $40,000. The 2001 values were
calculated using sales throughout the entire 2001 calendar year, while the 2002 values
used January through May data. (Source: Extracted from the Wall Street Journal, June 28,
2002, W10).
Self practice question
Table 1
Town
2001
2002
Alexandria
245795
293266
Boston
391750
408803
Decatur
205270
227561
Kirkland
326524
333569
New York
545363
531098

10
Philadelphia
Phoenix
Raleigh
San Bruno
Tampa

185736
170413
210015
385387
194205

197874
175030
196094
391409
199858

Table 2: Excel output:

t-Test: Paired Two Sample for Means
2001
2002
Mean
286045.8
295456.2
Variance
15079913231 1407613928
0
Observations
10
10
Pearson Correlation
0.989765971
Hypothesized Mean Difference
0
df
9
t Stat
-1.675385145
P(T<=t) one-tail
0.064089384
t Critical one-tail
1.383028803
P(T<=t) two-tail
0.128178769
t Critical two-tail
1.833113856
Based on the Excel output in Table 2, answer the following questions:
a. At the 0.10 level of significance, is there evidence of a difference in the mean selling
price for homes (in zip codes with median incomes of approximately $40,000)
between 2001 and 2002?
b. What assumption is necessary to perform this test?
c. Determine the p-value in (a) and interpret its meaning.

3.

An advertising executive suspects that there is a higher proportion of households which

own VCR's residing in places with cable systems than there are households residing in
places without cable systems. The basis of this suspicion is the broader offering of
premium programming available for taping in places with a cable system. The executive
commissions a survey, which results in random samples of 165 households located in a
cable system and 150 households, located outside any cable system. Of the households in
the cable system, 54 own VCR's; outside the cable system, 33 households own VCR's.
Let p1be the proportion of households owning a VCR in a cable system and p2 be the
proportion of households owning a VCR, but not in a cable system. The executive
chooses 0.05 as the significance level. Can the executive reasonably conclude that the
ownership of VCR's is higher in cable systems?
a.
b.
c.
d.

What is the null and alternative hypothesis?

Find the value of the test statistic.
What is the decision rule?
What is the conclusion?

11
Self-test exercises:
1.

Question 11.1 (Weiers (2005), p. 430)

2.

Question 11.44 (Weiers (2005), p. 450)

3.

A new brand of battery for use in calculators and cameras is said to last significantly
longer than another brand. A camera manufacturer is to test this brand (Y) with brand (X)
to see if brand Y has a longer life. If brand Y does last longer, the camera manufacturer
will equip their new cameras with them. If not, they will equip them with brand X that is
less costly. Twenty cameras are equipped as follows: ten with brand Y batteries and ten
with brand X batteries and the life of the batteries measured. Is brand Y superior (does it
last longer) to brand X? To answer this question, the camera manufacturer uses a 0.01
significance level and knows that the populations are normally distributed with equal
variances. Sample data are:
Brand X
n1 = 10
x1 = 500 hours
s12 = 400
a.
b.
c.
d.

Brand Y
n2 = 10
x2 = 650 hours
s22 = 484

State the null and alternative hypotheses

What is the decision rule?
What is the test statistic?
State the conclusion.

4.

Assume that you have a sample of n1 8 with sample mean

, and a sample
standard deviation of s1 4 , and assume you have an independent sample of n2 15
from another population with a sample mean
and sample standard deviation
s2 5 ,
a. What is the value of the pooled-variance t-test statistic for testing differences in two
population means?
b. In obtaining the critical value of the test statistic t, how many degrees of freedom are
there?
c. Using a level of significance 0.01 , what is the critical value for a one-tail test of
the hypothesis H0 : 1 2 against the alternative H1 : 1 2 ?
d. What is your statistical decision?
e. What assumptions about the two populations must be made?
f. Set up a 95% confidence interval estimate of the population difference between 1
and 2 .

5.

The Gallup organizational surveyed 1100 adult Americans on May 6-9, 2002, and
conducted an independent survey of 1100 adult Americans on May 10-13, 2007. In both
surveys they asked the following: Right now, do you think the state of moral values in
the country as a whole is getting better or getting worse? On May 10-13, 2007, 902 of

12
the 1100 surveyed responded that the state of moral value is getting worse; on May 6-9,
2002, 737 of the 1100 surveyed responded that the state of moral value is getting worse.
(a) Test is there evidence for the difference between two population proportions at 0.05
significance level.
(b) Determine the p-value of this test.

6.

A comparison of the price-earnings (P/E) ratio for the top and bottom 100 companies in
valuation is being prepared. A financial advisor randomly sampled each group to
determine whether there is any difference in P/E ratios of the two groups of companies.
Let 1 = a top 100 company and 2 = a bottom 100 company. Assume equal population
variances and that the populations are normally distributed. The advisor is to use a 0.01
significance level. The data were randomly selected and are summarized below:
Top 100 company
n1 = 6
x1 = 18.83
s12 = 128.17
a.
b.
c.
d.
e.

7.

Bottom 100 company

n2 = 6
x2 = 10.67
s22 = 8.67

State the null and alternative hypotheses.

Calculate the standard error of the estimate.
What is the value of the test statistic?
What is the decision rule?
What is the conclusion?

A slacks manufacturer is deciding whether to purchase a new method for bonding seams
together. Before purchasing a new method that bonds, or glues, the seams together, the
manufacturer wishes to determine whether or not the "bonded" seams can withstand more
pulling stress than standard seams sewn with thread. The creator of the new method
provides a demonstration machine and supplies for the slacks maker to test. Two samples
of the slacks produced are taken. Each pair of slacks has the seams tested in an
application of force to determine the breaking point (in lbs.) for the seam. The sample
results are:
Sample 1: Sewn
n1 = 50
x1 = 125 Ibs.

s1 = 46 Ibs.

Sample 2:
Glued
n2 = 50
x2 = 165 Ibs.
s2 =57 Ibs.

Assuming the populations variances are not equal, at the 0.05 level of significance, is the
gluing of seams better than sewing?

13
UNIVERSITI TUNKU ABDUL RAHMAN
FACULTY OF BUSINESS AND FINANCE
TUTORIAL 7 (Question & Answer)
1.

It has been hypothesized that treatments (after casting) of a plastic used in optic lenses
will improve wear. Four different treatments are to be tested. To determine whether any
differences in mean wear exist among treatments, 28 casting from a single formulation of
the plastic were made and 7 castings were randomly assigned to each of the treatments.
Wear was determined by measuring the increase in haze after 200 cycles of abrasion
(better wear being indicated by smaller increases). The data collected are reported in the
accompanying table.
Treatment
A
09.16
13.29
12.07
11.97
13.31
12.32
11.78

B
11.95
15.15
14.75
14.79
15.48
13.47
13.06

C
11.47
09.54
11.26
13.66
11.18
15.03
14.86

D
11.35
08.73
10.00
09.75
11.71
12.45
12.38

a. Construct ANOVA table.

b. At the 5%, is there evidence of significant difference in mean wear among the four
treatments?
c. Determine which treatments differ in average wear.

2.

Given the following computer output of lifetime of three different alloys, answer the
following questions.
ANOVA
Source of Variation
Between Groups
Within Groups

SS
5828.8
2745.6

df
2
12

8574.4

14

MS
2914.4
228.8

Turkey Kramer Multiple Comparisons

Level of significance
0.05
Numerator d.f.
3
Denominator d.f.
12
MSW
228.8
Q statistic
3.77
Comparison
Absolute Difference Std. Error of Difference
Group 1 to Group 2
6.8
6.7646
Group 1 To Group 3
44.8
6.7646
Group 2 to Group 3
38
6.7646

Critical Range
25.5026
25.5026
25.5026

14
a. At the 5%, is there evidence of a significant difference in the average lifetime of
the three alloys?
b. Determine which alloys differ in average lifetime.

Self Practice:
1.

What are the assumptions of ANOVA?

2.

Fill in the blanks (identified by asterisks) in the following partial ANOVA table:
Source of Variation
Treatments
Error
Total

3.

SS
*
625
1600

MS
195
*

F
*

In a completely randomized design, 7 experimental units were assigned to the first

treatment, 13 units to the second treatment, and 10 units to the third treatment. A partial
ANOVA table for this experiment is shown below:
Source of Variation
Treatments
Error
Total
a.
b.

4.

df
*
*
25

SS
*
*
*

df
*
*
*

MS
*
4

F
1.50

Fill in the blanks (identified by asterisks) in the above ANOVA Table.

Test at the 5% significance level to determine if differences exist among the three
treatment means.

A pharmaceutical manufacturer has been researching new formulas to provide quicker

relief of minor pains. His laboratories have produced three different formulas, which he
wanted to test. Fifteen people who complained of minor pains were recruited for an
experiment. Five were given formula 1, five were given formula 2, and the last five were
given formula 3. Each was asked to take the medicine and report the length of time until
some relief was felt. The results are shown below. Do these data provide sufficient
evidence to indicate that differences in the time of relief exist among the three formulas?
Use = .05.
Time in Minutes Until Relief is Felt
Formula 1 Formula 2
Formula 3
4
2
6
8
5
7
6
3
7
9
7
8
8
1
6

15
UNIVERSITI TUNKU ABDUL RAHMAN
FACULTY OF BUSINESS AND FINANCE
TUTORIAL 8 (Question & Answer)
1.

When performing a 2-test for independence in a contingency table with r rows and c
columns, determine the upper-tail critical value of the 2 -test statistic in each of the
following circumstances:
a. = 0.05, r = 4 rows, c = 5 columns
b. = 0.01, r = 4 rows, c = 5 columns
c. = 0.01, r = 4 rows, c = 6 columns

2.

A survey of Internet users in the United States, Australia, and Europe studied whether
those who downloaded music subsequently purchased a CD or tape of the music (Net
Music Inspires Buying, USA Today, January 23, 2001, 1A). The survey reported that
77% of Americans, 78% of Australians, and 54% of Europeans who downloaded music
get inspired to purchase a CD or tape of the music. Suppose the survey was based on a
sample of 500 Americans, 250 Australians, and 500 Europeans.
a. At the 0.05 level of significance, determine whether there is a significant difference in
the proportion of Americans, Australians, and Europeans who get inspired to
purchase a CD or tape of the music.
b. Find the p-value in (a) and interpret its meaning.

3.

The personnel manager of a consumer product company asked a random sample of

employees how they felt about the work they were doing. The following table gives a
breakdown of their responses by gender. Do the data provide sufficient evidence to
conclude that the level of job satisfaction is related to gender? Conduct the test at the 0.10
level of significance.
Response
Very
Fairly
Not Interesting
Gender
Interesting
Interesting
Male
70
41
9
Female
35
34
11

16
Self Practices:
1.

A sample of 500 shoppers was selected in a large metropolitan area to determine various
information concerning consumer behavior. Among the questions asked was, Do you
enjoy shopping for clothing? The results are summarized in the following contingency
table:

ENJOY SHOPPING FOR CLOTHING

Yes
No
Total

GENDER
Male
Female
136
224
104
36
240
260

Total
360
140
500

a. Is there evidence of a significant difference between the proportions of males and females
who enjoy shopping for clothing at the 0.01 level of significance?
b. Find the p-value in (a) and interpret its meaning.
c. What would be your answer to (a) and (b) if 206 males enjoyed shopping for clothing?

2.

A large carpet store wishes to determine if the brand of carpet purchased is related to the
purchasers family income. As a sampling frame, they mailed a survey to people who
have a store credit card. Five hundred customers returned the survey and the results
follow:
Family
Income
High Income
Middle Income
Low Income

Brand of Carpet
Brand A
Brand B
65
80
25

32
68
35

Brand C
32
104
59

At the 5% level of significance, can you conclude that the brand of carpet purchased is
related to the purchasers family income?

17
UNIVERSITI TUNKU ABDUL RAHMAN
FACULTY OF BUSINESS AND FINANCE
TUTORIAL 9 & 10 (Question & Answer)
1.

A real estate broker claims that the median days that one of his listings stays on the
market is more than 45 days. To test this, he has collected the following random sample
of properties sold showing the days they were on the market prior to selling:
Days

50

30

70

20

30

40

60

80

The broker is unwilling to assume that the population data are normally distributed.

2.

(a)

What statistical test would you recommend be used to test this hypothesis?

(b)

Conduct the test and indicate what conclusion should be reached if we test at =
0.05?

UTAR researchers sampled private and public sector .organizations in Australia to study
the planning undertaken by their information systems departments. They asked each
sample organization how much it had spent on information systems and technology in
previous fiscal year as a percentage of the organizations total revenue. The results are
reported in the table:
Private sector
2.58
5.05
0.05
2.10
4.30
2.25
2.50
1.94
2.33

3.

Public sector
5.40
2.55
9.00
10.55
1.02
5.11
12.42
1.67
3.33

(a)

Find the rank sums for the two sectors using the Wilcoxon method.

(b)

Do the sampled populations have identical probability distributions or is the

distribution for public sector organizations located to the right of private sector
firms? Test using 0.05.

Radio advertisements have been stressing the virtues of an audiotape program to help
children learn to read. To test whether this tape program can cause a quick improvement
in reading ability, 10 children were given a nationally recognized reading test that
measures reading ability. The same 10 children were then given the tapes to listen to for
four hours spaced over a two-day period. The children then were tested again. The test
scores were as follows:

18

Child
1
2
3
4
5
6
7
8
9
10

Before
60
40
78
53
67
88
77
60
64
75

After
63
38
77
50
74
96
80
70
65
75

Use the appropriate test to test whether this tape program produces quick improvement in
reading ability. Use an 0.05.

4.

Given the following sample data:

Group 1
21
25
36
35
33
23
31
32

Group 2
17
15
34
22
16
19
30
20

Group 3
29
38
28
27
14
26
39
26

At significance level of 0.05, test whether there is a difference in the medians of the three
populations if you are not willing to make the assumption that the populations are
normally distributed?

19
Self Practices:
1.

Eight professional food writers have been asked to rate the taste characteristics of a meat
dish prepared first by flame grilling and then by charcoal grilling. After each of the dishes
is prepared it is rated on a scale from 1 to 5 with 1 being best and 5 being worst.
The results of the rating were:
Writer Flame Charcoal
A
5
1
B
4
2
C
1
2
D
4
3
E
3
1
F
4
4
G
4
5
H
2
3

di
4
2
1
1
2
0
1
1

|di|
4
2
1
1
2
0
1
1

The Wilcoxon signed rank test for paired samples is used to test the hypotheses
H 0 : M d 0 vs H1 : M d 0

2.

(a)

At the 0.05 significance level, what are the critical values?

(b)

What is the calculated test statistic, W?

(c)

State the appropriate conclusion, using the 0.05 significance level and the
calculated test statistic.

Consider the following data for two paired samples:

Case Number
1
2
3
4
5
6
7
8

Sample 1
258
197
400
350
237
400
370
130

Sample 2
304
190
500
340
250
358
390
100

Test the following null and alternative hypotheses at 0.05 level.

H0: There is no difference between the two populations distributions.
H1: There is a difference between the two populations distributions.
3.

Under what conditions should a decision maker use a nonparametric statistical procedure?

4.

Differentiate between the Wilcoxon signed rank test and the Wilcoxon rank sum test, and
explain the circumstances under which each should be applied.

20
UNIVERSITI TUNKU ABDUL RAHMAN
FACULTY OF BUSINESS AND FINANCE
TUTORIAL 11 & 12 (Question & Answer)
1.

An agent for a residential real estate company in a large city would like to be able to
predict the monthly rental cost for apartments based on the size of the apartment as
defined by square footage. A sample of 25 apartments in a particular residential
neighborhood was selected, and the information gathered revealed the following:

Table 1
SUMMARY OUTPUT
Regression Statistics
Multiple R
0.850060796
R Square
0.722603356
Adjusted R
Square
0.710542633
Standard Error
194.5953946
Observations
25
ANOVA
df
1

SS
2268776.545

MS
2268777

Residual
Total

23
24

870949.4547
3139726

37867.37

Intercept
Size

Coefficients
177.1208202
1.065143906

Standard
Error
161.0042766
0.137608412

Regression

a.
b.
c.
d.

2.

t Stat
1.1001
7.740398

F
59.91376

Significance
F
7.52E-08

P-value
0.28267
7.52E-08

Lower 95%
-155.941
0.78048

Upper
95%
510.1831
1.349808

State the simple linear regression model.

Interpret the meaning of and in this problem.
Predict the monthly rental cost for an apartment that have 1000 square feet?
Your friend Jim and Jennifer are considering signing a lease for an apartment in this
residential neighborhood. They are trying to decide between two apartments, one with
1000 square feet for a monthly rent of $1275 and the other with 1200 square feet for a
monthly rent of $1425. What would you recommend to them? Why?

In Question 1, an agent for a real estate company wanted to predict the monthly rent for
apartments based on the size of the apartment. The following is the residual analysis for
these data.

21
Figure 1

Residuals

Size Residual Plot

500
400
300
200
100
0
-100 0
-200
-300
-400
-500

500

1000

1500

2000

2500

Size

Based on the results obtained, determine the adequacy of the fit of the model.

3.

Suppose you want to develop a model to predict assessed value based on heating area. A
sample of 15 single-family houses is selected in a city. The assessed value (in thousands
of dollars) and the heating area of the houses (in thousands of square feet) are recorded
with the following results:

Table 3
SUMMARY OUTPUT
Regression Statistics
Multiple R
0.811996
R Square
0.659337
Adjusted R
Square
0.633132
Standard Error
2.918928
Observations
15
ANOVA
df
Regression
Residual
Total

Intercept
Heating Area

1
13
14

SS
214.3742
110.7618
325.136

Coefficients
51.91534
16.63337

Standard
Error
5.562521
3.316021

MS
214.3742
8.520139

F
25.16088

Significance
F
0.000236

t Stat
9.33306
5.016062

P-value
3.98E-07
0.000236

Lower 95%
39.89825
9.469542

Upper
95%
63.93243
23.7972

a. State the simple linear regression model.

b. Interpret the meaning of and in this problem.
c. Use the regression equation developed in (a) to predict the assessed value for a house
whose heating area is 1750 square feet.
d. Determine the standard error of the estimate.
e. Determine the coefficient of determination r2 and interpret its meaning in this
problem.

22
f. Determine the adequacy of the model in (a) based on the following residual plot.
Heating Area Residual Plot
6

Residuals

4
2
0
-2 0

0.5

1.5

2.5

-4
-6
Heating Area

g. At the 0.05 significance level, is there evidence to conclude that there is a

significance effect of heating area on assessed value?

Self- Practice:
1.

Fitting a straight line to a set of data yields the following regression equation:
^

Y i 16 0.5 X i

a. Interpret the meaning of the Y intercept .

b. Interpret the meaning of the slope .
c. Predict the average value of Y for X = 6.

2.

Suppose that you are testing the null hypothesis that there is no relationship between two
variables X and Y. From your sample of n = 18 you determine that = 4.5 and
SE =1.5
a. What is the value of the t-test statistic?
b. At the 0.05 level of significance, what are the critical values?
c. Based on your answers to (a) and (b), what statistical decision should be made?
d. Set up a 95% confidence interval estimate of the population slope

3.

In Question 1, an agent for a real estate company wanted to predict the monthly rent for
apartments based on the size of the apartment. Using the computer output you obtained
(Table 1) to solve that problem,
a. At the 0.05 level of significance, is there evidence of a linear relationship between the
size of the apartment and the monthly rent?
b. Set up a 95% confidence interval estimate of the population slope .

23
UNIVERSITI TUNKU ABDUL RAHMAN
FACULTY OF BUSINESS AND FINANCE
TUTORIAL 13 (Question & Answer)

1.

The district sales manager of a major automobile manufacturer is studying car sales.
Specifically, he would like to determine what factors affect the number of cars sold at a
dealership. To investigate, he randomly selects 12 dealers. From these dealers he obtains
the number of cars sold last month, the minutes of radio advertising purchased last
month, the number of full-time salespeople employed in the dealership, and whether the
dealer is located in the city. The regression equation obtained from the survey is as
follows:
= 31.1328 + 2.1516adv + 5.0140sales + 5.6651city
SE: (13.40) (0.8049)
(0.9105)
(6.332)
Where:

= number of cars sold last month

adv
= the minutes of radio advertising purchased last month
sales = the number of full-time salespeople employed in the dealership
city
= 1 if the dealer is located in the city
0 if the dealer is not located in the city
(a) How many cars would you expect to be sold by a dealership employing 20
salespeople, purchasing 15 minutes of advertising, and located in a city?
(b) The results for the Analysis of Variance is given as follows:
Source
Regression
Error
Total

df
3
8
11

SS
MS
5504.4 1834.8
420.2
52.5
5924.7

Conduct a global test of hypothesis to determine the significance of estimated

equation model with = 0.05.
(c) Conduct a test of hypothesis for the individual regression coefficient. Would you
consider deleting any of the independent variable? Let = 0.05.

2. One of the most common questions of prospective house buyers pertains to the average cost of
heating in dollars (Y). To provide its customers with information on that matter, a large real
estate firm used the following 4 variables to predict heating costs: the daily minimum outside
temperature in degrees of Fahrenheit (X1), the amount of insulation in inches (X2), the number
of windows in the house (X3), and the age of the furnace in years (X4). Given below are the
Excel outputs of two regression models.

24
Table 2
Model 1
Regression Statistics
R Square
0.8080
Adjusted R Square
0.7568
Observations
20
ANOVA
df
SS
MS
F
Significance F
Regression
4
169503.4241 42375.86 15.7874 2.96869E-05
Residual
15
40262.3259 2684.155
Total
19
209765.75
Coefficients Standard Error
t Stat
p-value Lower 90.0% Upper 90.0%
Intercept
421.4277
77.8614
5.4125 7.2E-05
284.9327
557.9227
X1 (Temperature)
-4.5098
0.8129
-5.5476 5.58E-05
-5.9349
-3.0847
X2 (Insulation)
-14.9029
5.0508
-2.9505
0.0099
-23.7573
-6.0485
X3 (Windows)
0.2151
4.8675
0.0442
0.9653
-8.3181
8.7484
X4 (Furnace Age)
6.3780
4.1026
1.5546
0.1408
-0.8140
13.5702

Model 2
Regression Statistics
R Square
0.7768
Adjusted R Square
0.7506
Observations
20
ANOVA
df
SS
MS
F
Significance F
Regression
2 162958.2277 81479.11 29.5923 2.9036E-06
Residual
17
46807.5222 2753.384
Total
19
209765.75
Coefficients Standard Error t Stat
p-value Lower 95% Upper 95%
Intercept
489.3227
43.9826 11.1253 3.17E-09
396.5273
582.1180
X1 (Temperature)
-5.1103
0.6951 -7.3515 1.13E-06
-6.5769
-3.6437
X2 (Insulation)
-14.7195
4.8864 -3.0123 0.0078
-25.0290
-4.4099

a. Referring to Table 2, the estimated value of the partial regression parameter 1 in

Model 1 means that
b. Referring to Table 2, what can we say about Model 1?
c. Referring to Table 3, test whether the amount of insulation has a negative linear effect
on average heating costs at the = 0.01 level of significance using Model 1?
d. Referring to Table 2, what is the 90% confidence interval for the expected change in
average heating costs as a result of a 1 degree Fahrenheit change in the daily
minimum outside temperature using Model 1?
e. Referring to Table 2 and allowing for a 1% probability of committing a Type I error,
what is the decision and conclusion for the test as below:
H 0 : 1 2 3 4 0 vs. H1 : At least one j 0, j 1, 2,

, 4 using Model 1?

f. Referring to Table 2, did number of windows in the house and the age of the furnace
significantly influence the average cost of heating at a significance level of 0.01?

25
Self test exercises:
1.

Question 16.56 (Weiers (2005), p. 731)

2.

Question 16.57 (Weiers (2005), p. 731)

3.

Question 16.65 (Weiers (2005), p. 736)

26
UNIVERSITI TUNKU ABDUL RAHMAN
FACULTY OF BUSINESS AND FINANCE
TUTORIAL 14 (Question & Answer)
1.

For this problem use the following payoff table:

Action
Event
1
2

A
50
200

B
100
125

The probability of event 1 is 0.5 and the probability of event 2 is also 0.5
(i) Compute the expected monetary value (EMV) for actions A and B.
(ii) Compute the expected opportunity loss (EOL) for actions A and B.
(iii) Explain the meaning of the expected value of perfect information (EVPI) in this
problem.
(iv) Based on the results of (i) or (ii), which action would you choose? Why?
(v) Compute the coefficient of variance for each action.
(vi) Compute the return-to-risk ratio (RRR) for each action.
(vii) Based on the (v) and (vi), what action would you choose? Why?
(viii) Compare the results of (iv) and (vii) and explain any differences.

2.

In the following payoff table:

Action
Event
1
2
3

A
50
300
500

B
10
100
200

Suppose P(E1), the probability of event 1, is equal to 0.8, P(E2), the probability of event
2, is equal to 0.1, and P(E3), the probability of event 3, is equal to 0.1. Suppose that
P(F|E1) = 0.2, P(F|E2) = 0.4, and P(F|E3) = 0.4 and event occurs.
(i)

Revise the probabilities P(E1), P(E2) and P(E3) in light of this information.
Based on these revised probabilities
(ii) Compute the expected monetary value (EMV) for actions A and B.
(iii) Compute the expected opportunity loss (EOL) for actions A and B.
(iv) Explain the meaning of the expected value of perfect information (EVPI) in this
problem.
(v) Based on the results of (ii) or (iii), which action would you choose? Why?
(vi) Compute the coefficient of variance for each action.
(vii) Compute the return-to-risk ratio (RRR) for each action.
(viii) Based on the (vi) and (vii), what action would you choose? Why?
(ix) Compare the results of (v) and (viii) and explain any differences.

27
Self test exercises:
1.

Question 19.36 (Weiers (2005), p. 877)

2.

Question 19.38 (Weiers (2005), p. 877)