Fall: 2018-2019 Assignment

Fall- 2018-2019
Individual Assignment
TEST INFORMATION

Course Code: BUS 333 Course Title: Decision Analysis

Due Date: 20 November, 2018 Instructor(s): Dr. Nancy Ibrahim
Number of Pages: 3

STUDENT INFORMATION

Student Name

ID Number

ASSIGNMENT GUIDED INSTRUCTIONS

1. All questions are compulsory.
2. Assignments can only be accepted in typed format, hand written assignments are not accepted.
3. Assignments should be uploaded on MOODLE, either in Word or in Excel Format.
4. Assignments should be uploaded on MOODLE before or on 17 November, 2018.

FOR INSTRUCTOR’S USE ONLY

Item Total

Question no. A B C
CLO’s SK4 SK4 SK4
Addressed
Marks 10 5 5 20
allocated
Marks
obtained
Marks
obtained
(words)

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 Fall: 2018-2019 Assignment

Question A (10 Marks)

The prices of Rawlston, Inc. stock (y) over a period of 12 days, the number of shares (in 100s) of
company's stocks sold (x1), and the volume of exchange (in millions) on the New York
Stock Exchange (x2) are shown below.

Day (y) (x1) (x2)

1 87.50 950 11.00
2 86.00 945 11.25
3 84.00 940 11.75
4 83.00 930 11.75
5 84.50 935 12.00
6 84.00 935 13.00
7 82.00 932 13.25
8 80.00 938 14.50
9 78.50 925 15.00
10 79.00 900 16.50
11 77.00 875 17.00
12 77.50 870 17.50

Excel was used to determine the least-squares regression equation. Part of the computer
output is shown below.

ANOVA
df SS MS F Significance F
Regression 2 118.8474 59.4237 40.9216 0.0000
Residual 9 13.0692 1.4521
Total 11 131.9167

Coefficients Standard Error t Stat P-value

Intercept 118.5059 33.5753 3.5296 0.0064
(x1) -0.0163 0.0315 -0.5171 0.6176
(x2) -1.5726 0.3590 -4.3807 0.0018
Required:
a. Use the output shown above and write an equation that can be used to predict the price of the
stock. (2.5 marks)
b. Interpret the coefficients of the estimated regression equation that you found in Part a.
(2.5 marks)
c. At 95% confidence, determine which variables are significant and which are not. (2.5 marks)
d. If in a given day, the number of shares of the company that were sold was 94,500 and the
volume of exchange on the New York Stock Exchange was 16 million, what would you expect
the price of the stock to be? (2.5 marks)

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 Fall: 2018-2019 Assignment
a) equation: y=118.5059-0.0163*x1-1.5726*x2

b)interpretation of coefficient of x1: if y will decrease by 0.0163 per unit increase in

x1 keeping x2 constant

interpretation of coefficient of x2: if y will decrease by 1.5726 per unit increase in x2

keeping x1 constant

c)p value of x2 is less tha 0.05 whrere as p value of zx1>0.05 so we can say that At
95% confidence, X2 is significant and x1 is not.

d)x1=945 in 100's , x2=16 million

y=118.5059-0.0163*945-1.5726*16=77.9408

(a)

The regression equation is

price= 118.5059-0.0163*x1-1.5726*x2

(b)

For each unit increase in stock sold (x1), price decrease by 0.0163 units keeping all
other things constant.

For each unir increase in x2, price decrease by 1.5726 units keeping all other things
constant.

(c)

P-value of the X1 is 0.6176. Since p-value is greater than 0.05 so this coeffcient is
significant to the model.

P-value of the X2 is 0.0018. Since p-value is less than 0.05 so this coeffcient is not
significant to the model.

(d)

Here we have X1= 945, X2 = 16 so required predicted price is

price= 118.5059-0.0163*945-1.5726*16 = 77.9408

So required predicted value is $77.94.

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 Fall: 2018-2019 Assignment
The Dependent variable is stock price which is y and the independent variables are
x1 and x2 which are stocks sold and volume of stock on NYSE. Y depend on x1 and
x2 because the stock price is determined using both stock sold and volume of stocks
on NYSE.
What is the equation?
The equation is y=118.51-0.016x1-1.57x2

If on a given day, the number of shares of the company that were sold was 94,500
and the volume of exchange on the New York Stock Exchange was 16 million, what
would you expect the price of the stock to be? Will the prediction be accurate?
Explain
By plugging x1=945 and x2=16 into the equation y= stock price= 77.94, the
prediction should be accurate because all the variables(x1=945 and x2=16 ) are in
the range of the variables used in the regression model and we have a high r^2.
What do the coefficients of the estimated regression line indicate? Explain.
y will decrease by 0.0163 per unit increase in x1 keeping x2 constant and y will
decrease by 1.5726 per unit increase in x2 keeping x1 constant. The number of
shares of company's stocks sold are negatively associated with price of the stock.
The volume of exchange on NYSE are also negatively associated with the price of
the stock.

Compute the coefficient of determination (R2) and fully interpret its meaning.
According to the table above r^2=0.90 which mean that the model has a good fit,
which mean that more variance is accounted by the regression model and that the
data point are closer to the fitted regression line.

Is the model significant?The model is significant because F is almost equal to 0

which is less than alpha 0.05
Are the coefficients significant? The intercept and x2 are significant because their p-
value =0 which is less than alpha 0.05 while x1 is non-significant because its p-
value= 0.62 which is bigger than alpha =0.05

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 Fall: 2018-2019 Assignment
Question B (5 Marks)

The average starting salary of students who graduated from colleges of Business in 2009 was
$48,400. A sample of 100 graduates of 2010 showed an average starting salary of $50,000.
Assume the standard deviation of the population is known to be $8,000. We want to
determine whether or not there has been a significant increase in the starting salaries.
Required:
a. State the null and alternative hypotheses to be tested. (1 mark)
b. Compute the test statistic. (1 mark)
c. The null hypothesis is to be tested at 95% confidence. Determine the critical value
for this test. (1 mark)
d. What do you conclude? (1 mark)
e. Compute the p-value. (1 mark)

 1. State the null and alternative hypotheses to be tested.

Ho: μ ≤ 48,400
Ha: μ > 48,400

 2. Compute the test statistic.

Answer: 2

 3. The null hypothesis is to be tested at 95% confidence. Determine the

critical value for this test (to 2 decimals).

Answer: 1.65

 4. What do you conclude?

We reject Ho (there has been a significant increase in the starting salaries)

 5. Compute the p-value (to 4 decimals).

%

Answer: 0.0228

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 Fall: 2018-2019 Assignment
Question C (5 Marks)

Consider the following annual series on the number of people assisted by a county human
resources department.

Year People (in 100s)

1 22
2 24
3 28
4 24
5 22
6 24
7 20
8 26
9 24
10 28
11 26
Required:
a. Prepare 3-year moving average values to be used as forecasts for periods 4 through 11.
Calculate the mean squared error (MSE) measure of forecast accuracy for periods 4
through 11. (2 marks)
b. Use a smoothing constant of .4 to compute exponential smoothing values to be used as
forecasts for periods 2 through 11. Calculate the MSE. (2 marks)
c. Compare the results in Parts a and b. (1 mark)

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