NATURAL AND COMPUTATIONAL SCIENCE, DEPARTMENT OF STATISTICS

INDIVIGUAL ASSIGNMENT

ON

STATISTICS FOR BANKING & FINANCE

Submission date 10/08/2017 E.C

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1.The manager of Florida supper market, Addis Ababa, wants to estimate the mean amount spent per
shopping visit by customers. A sample of 20 customers reveals the following amounts spent.

a)Then, estimate the average amount spent per shopping visit by customers b)What is
the mean amount spent per shopping visit for that population?
c)What is the 95% confidence interval for the population mean?
d)What do these results mean?
2.A population is composed by three numbers: 2, 6 and 11. Consider all possible samples of size 2
that can be withdrawn from that population, with replacement.
a.Obtain the probability distribution of the sample mean. Compute its expected value and compare
it with the population mean. Compute its variance and compare it with the variance of the
population.
b.Obtain the probability distribution of the sample variance and compute its mean.
3.Consider a random sample of size n = 100 from the population X ~ N (8, 16). Then, obtain the
sampling distribution of the sample mean.
4.Obtain an 80% confidence interval for the mean of a normal random variable X, with variance equal to
4, based on the sample (9, 14, 10, 12, 7, 3, 11, and 12).
5.The weight (in grams) of the sugar contained in the packages of a certain brand is a random variable
normally distributed. In order to analyze the average sugar content in these packages, a random sample
of size n = 7 were collected, and the results were: (6.96, 6.80, 6.64, 7.12, 6.80, 6.88, and 7.12).
a.Find a 95% confidence interval for the true average of sugar contained in these packages.
b. How do you interpret this confidence interval?
6.In the estimation of the mean of a normal population using a 90% confidence interval, which should be
the minimum sample size so that the width of the interval is less than ⁄ , with
known?

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7.In a random sample of size n = 100 from a normal random variable, X, with standard deviation equal
to 10, the sample mean was X = 100. Obtain a confidence interval for μ with width 4.652. Applying
the same procedure to obtain confidence intervals from other samples, what would be the percentage of
confidence intervals not containing the true value of μ? 8.A mobile phone manufacturer accepts that some of
the devices are defective. In 225 mobile phones randomly selected, it was found that 12 were defective.
a.Obtain a 99% confidence interval for the true proportion, p, of defective phones.
b.Find the sample size n that is needed so that we are 99% confident that the maximum error of
the estimate of p is two percentage points.
9.In the production of the tubes containing toothpaste there is a machine that determines the diameter of the
mouth of those tubes. This diameter follows a normal distribution with a mean of 5 mm. Due to the
usage of the machine, it is necessary to control the value of the diameter regularly. In that sense, a
sample of 25 tubes was collected in which the average diameter was 5.8 mm and its corrected variance
equal to 0.9025.
a.Assuming that σ2 = 1, test the hypothesis (α = 5%) that the machine does not need to be
recalibrated, i.e., that the average diameter is in fact equal to 5 mm.
b.Redo the test performed in a) assuming that σ2 is unknown. After the adjustment of the machine, a
new sample of 30 tubes was collected in which the average diameter was 5.2 mm and the corrected
standard deviation equal to 0.8.
c.Test the hypothesis (α = 5%) that the adjustment increased the machine precision.
d.Using both samples, test the hypothesis (α = 5%) that the adjustment decreased the diameter of the
tube’s mouth by 1mm, assuming that the variance remained unchanged.
10. An industrial company has been using the value of 20 €/ton as the reference unit cost of a certain
product, known to be normally distributed. The calculation of the real cost for a random sample with 25
of these products led to an average cost of 23 € /ton and a corrected standard deviation of 6 € /ton. Using
an appropriate test and a significance level of 5%, check if there are reasons to abandon the value of 20
€/ton for the unit cost.
11.A new kind of hybrid corn is being tested. For that purpose, 8 land plots were seeded, in which the
respective weight of the crops was: (80, 79, 58, 91, 77, 82, 74, and 66).
a.Test the hypothesis μ = 75 against μ = 70, using a significance level of 5%.

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 b.Compute the probability of committing a type II error in the test in a), assuming that the standard
deviation of the universe (σ) is equal to 3. Also compute the power of the test.
12.Consider a sample of size 25 withdrawn from a random variable X ~ N (μ, 25) and two

hypotheses for μ: : μ = 12 versus : μ = 15. Compute the probability of committing the

50%. In a random sample of 40 balls withdrawn (with replacement) from that box, 15 were white.
a.Test the hypothesis that the proportion of white balls is 0.275 for a significance level of 5%.
What is the value of p?
b.Redo the test performed in a) for α = 10%.
c.Test the hypothesis that the proportion of white balls is 0.5 (using α = 5%) and compute the value
of β. Compare these results with the ones obtained in a).
15.Consider two independent random variables (X and Y) with = = 1 and suppose we want to test (with a
right-tailed critical region) the hypothesis: = for a significance level of 10%.
a.Obtain the critical region for samples of size
b. Assuming that - = 0.5, determine the sample size n such that the probability of rejecting H0: =
is 90%.
16.The market price of a particular product is subject to large and frequent fluctuations around its mean
value (10), which is relatively stable. It is assumed that this price follows approximately a normal
distribution. The value assumed for the variance of the distribution is such that there is 95% probability
that the price lies in the interval (4.12, 15.88). If the true value of the variance is greater, the market
conditions tend to become critical.
a.In a sample with 16 observations of that price, the following statistics were computed:
̅ = 13 and =10. What can you conclude?

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 b.Recently, the rules governing the operation of the market were changed with the aim of reducing the
price fluctuations. A new sample (with 13 observations) was then collected
and the following results were obtained: ̅= 11 and = 9. Do you think that these
changes were effective?
17.The proportion p of defective parts produced by a machine is 0.05 when the machine is working
properly, but it increases to 0.1 when the machine is not well calibrated.
a.For a random sample of 100 parts, compute the probability of committing the two types of error,
taking the proportion of defective parts in the sample equal to 0.08 as the critical value.
b.What should be the sample size so that a proportion of defective parts in the sample equal to 0.08 leads
to the conclusion that the machine is not well calibrated, assuming a significance level of 5%?
18.Suppose you decided to make a bet with a colleague about the average score in the 1st test of Statistics.
Your guess for the average score was 8 points and that of your colleague was 10 points. Impressed with
the number of students, and not being interested in making many calculations, you had the idea to
statistically test the value you had proposed for the average, based on a random sample with the grades
of 30 students. It was decided that you would lose the bet if your hypothesis was rejected. In the sample
withdrawn, the sum of the grades was 273. Knowing that the actual variance of the grades is equal to 16
and having convinced your colleague to accept a significance level of 2.5%, answer the following
questions:
a.Who won the bet?
b.Do you think that this game was "fair" in the sense that the probability of each of the players losing
unfairly is equal? Identify those probabilities.
c.Compute α and β such that the game is “fair”.
d.Find the lowest significance level for which the null hypothesis would be rejected.
19.On a yoghurt production line, the packaging filling machinery has recently been subject to problems and
retailers have been complaining that the yoghurt pots have systematically less 10 cl of yogurt than what
is indicated as the standard content (125 cl). The company is ready to send to one of its main customer’s
one order of thousands of yoghurts pots, but before it will check whether there is any basis for the
complaints. Knowing that the content of yogurt

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 in each pot can be considered as a normal random variable with standard deviation equal to 30 cl,
answer the following questions, taking into account that:
- if the company sends the order and the average content of each yogurt pot is actually equal to 115 cl, the
retailer promptly returns the order, which results in a loss of 2000 hundreds of € to the company;
- if the company does not send the order, because it erroneously believes that the actual content is 115 cl, then
this will result in a loss of 1750 hundreds of €.
a.For a sample of 64 yoghurt pots, what is the significance level (0.05 or 0.1) that minimizes the
weighted cost of the decision?
b. Assuming the 10% level of significance, what is the sample size that makes the probability of
committing type II error equal 0.025?
20.It is known that, during the summer, the number of daily visitors to an amusement park is a normal
random variable with standard deviation equal to 1000 visitors per day. In a sample with five days, the
number of visitors to the park was: 6000, 12500, 10100, 11100 and 9800.
One of the park administrators believes that the daily average number of visitors during the summer is
10000 while the commercial director argues that this average is 11000.
a.If you use a 5% significance level, who do you think is right?
b.The commercial director considered the test "very strange", stating:
i. “Given the significance level used, it is more likely that the administrator wins
without being right than I win when the administrator is right”;
ii. “I very much doubt that the true variance is the one used”. Justify properly each
one of these arguments.
21.A simple random sample of size 100 is selected from a population with p=0 .40.
a.What is the expected value of ̅ ?
b.What is the standard error of ̅?
c.Show the sampling distribution of ̅.
d.What does the sampling distribution of show ̅?
22.A population proportion is 0.40. A simple random sample of size 200 will be taken and the sample
proportion will be used to estimate the population proportion.
a.What is the probability that the sample proportion will be within 0.03 of the population
proportion?

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 b.What is the probability that the sample proportion will be within 0.05 of the population
proportion?
23.Assume that the population proportion is .55. Compute the standard error of the proportion, for sample
sizes of 100, 200, 500, and 1000. What can you say about the size of the
standard error of the proportion as the sample size is increased?
24.The population proportion is 0.30. What is the probability that a sample proportion will be
within .04 of the population proportion for each of the following sample sizes?
a.n =100
b. n =200
c.n =500
d. n =1000
e.What is the advantage of a larger sample size?
2.A machine is adjusted to produce pipes of a certain length, but the actual length varies from
one pipe to another. The length of those pipes can be taken as a normal random variable. A
sample of 16 pipes was collected and the length of each pipe recorded. The results obtained for this
sample were as follows:∑ = 80 cm and ∑
a.Estimate the true mean of X using a 95% confidence interval.
b.Assume that the true variance is equal to the estimate obtained in the sample above.
Obtain a new 95% confidence interval for the mean of X. How do you justify the difference in
the width of the confidence intervals?
c.Answer again question b), assuming now that the sample size was n = 25 (with the same
sample mean).
d. Find a one-sided 95% confidence interval that is a lower bound for the average length of those
pipes.
3.How large a sample should be selected to provide a 95% confidence interval with a margin of error
of 10? Assume that the population standard deviation is 40.
25.The range for a set of data is estimated to be 36.
a.What is the planning value for the population standard deviation?
b.At 95% confidence, how large a sample would provide a margin of error of 3?
c.At 95% confidence, how large a sample would provide a margin of error of 2?

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26.The average cost of a gallon of unleaded gasoline in Greater Cincinnati was reported to be $2.41 (The
Cincinnati Enquirer, February 3, 2006). During periods of rapidly changing prices, the newspaper
samples service stations and prepares reports on gasoline prices frequently. Assume the standard
deviation is $.15 for the price of a gallon of unleaded regular gasoline, and recommend the appropriate
sample size for the newspaper to use if they wish to report a margin of error at 95% confidence.
a.Suppose the desired margin of error is $.07.
b.Suppose the desired margin of error is $.05.
c.Suppose the desired margin of error is $.03.
27.Annual starting salaries for college graduates with degrees in business administration are
generally expected to be between $30,000 and $45,000. Assume that a 95% confidence interval
estimate of the population mean annual starting salary is desired. What is the planning value for the
population standard deviation? How large a sample should be taken if the desired margin of error is
a.$500?
b. $200?
c. $100?
d.Would you recommend trying to obtain the $100 margin of error? Explain.
28.An online survey by ShareBuilder, a retirement plan provider, and Harris Interactive reported that 60% of
female business owners are not confident they are saving enough for retirement (SmallBiz,Winter 2006).
Suppose we would like to do a follow-up study to determine how much female business owners are
saving each year toward retirement and want to use $100 as the desired margin of error for an interval
estimate of the population mean. Use $1100 as a planning value for the standard deviation and
recommend a sample size for each of the following situations.
a.A 90% confidence interval is desired for the mean amount saved.
b. A 95% confidence interval is desired for the mean amount saved.
c. A 99% confidence interval is desired for the mean amount saved.
d.When the desired margin of error is set, what happens to the sample size as the confidence level is
increased? Would you recommend using a 99% confidence interval in this case? Discuss.

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29.The travel-to-work time for residents of the 15 largest cities in the United States is reported in the 2003
Information Please Almanac. Suppose that a preliminary simple random sample of residents of San
Francisco is used to develop a planning value of 6.25 minutes for the population standard deviation.
a.If we want to estimate the population means travel-to-work time for San Francisco residents with a
margin of error of 2 minutes, what sample size should be used? Assume 95% confidence.
b.If we want to estimate the population mean travel-to-work time for San Francisco residents with a
margin of error of 1 minute, what sample size should be used? Assume 95% confidence.
30.During the first quarter of 2003, the price/earnings (P/E) ratio for stocks listed on the New York Stock
Exchange generally ranged from 5 to 60 (The Wall Street Journal, March 7, 2003). Assume that we
want to estimate the population mean P/E ratio for all stocks listed on the exchange. How many stocks
should be included in the sample if we want a margin of error of 3?, Use 95% confidence.
35.The Consumer Reports National Research Center (CNBC) conducted a telephone survey of 2000 adults
to learn about major economic concerns. Results showed 1760 respondents believe the future health of
Social Security is a major concern.
a)What is the point estimate of the population proportion?
b)Calculate the margin of error at 90% confidence.
c)Construct a 90% confidence interval for the population proportion.
d)Construct a 95% confidence interval.
36. According to statistics reported on CNBC, 46 out of 200 vehicles were uninsured, then:
a)Provide the point estimate for the proportion of uninsured vehicles.
b)Develop a 95% confidence interval for the population proportion.
37.Towers Perrin surveyed 1100 employees about job dissatisfaction. Assume "Yes" indicates strong
dislike.
a)Find the point estimate for the proportion of employees who strongly dislike their jobs.
b)Determine the margin of error at 95% confidence.
c)Construct a 95% confidence interval.
d)Interpret the survey’s implications for employers.

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38.A Thomson Financial study of 162 companies showed 104 beat profit estimates, 29 matched, and 29
fell short.
a)Estimate the proportion that fell short.
b)Calculate the margin of error and 95% CI for the proportion that beat estimates.
c)Determine the sample size needed for a margin of error of 0.05.
39.In 2003, 15.6% of people lacked health insurance. A committee wants to update this estimate.
a)Recommend a sample size for a 95% CI with a 0.03 margin of error.
b)Repeat for a 99% CI.
40.A Mercer survey of 800 companies found 52% likely to require higher employee healthcare
contributions in 2009.
a)Compute the margin of error.
b)Construct a 95% confidence interval.
41.A survey of 1400 youths (ages 12–17) found 9% chose MySpace as their favorite site. Then, calculate the
margin of error and 95% CI for this proportion. A presidential campaign poll sampled 491 voters.
Assume p∗=0.50 and 95% confidence.
a)Find the planned margin of error.
b)Recommend sample sizes for surveys with the following margins of error:
Survey Margin of Error
September 0.04
October 0.03
Early November 0.02
Pre-Election Day 0.01

42.A survey of 1500 wealthy individuals reported: 53% lost ≥25% portfolio value, 31% save more for
retirement, and 5% donated ≥$25,000 to charity. Then,
a)Construct 95% CIs for each proportion.
b)Compare margins of error and explain why p∗=0.50 is often used.
43.A survey of 54 discount brokers found a mean trade price of 33.77, σ = 33.77(σ = 15).
a)Compute the 95% margin of error.
b)Develop a 95% CI for the mean price.

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44.A sample of 64 families at Niagara Falls spent a mean of 252.45/day(s=252.45/day(s=74.50).
a)Construct a 95% CI for the mean daily expenditure.
b)Does this differ from the AAA’s reported mean of $215.60?
45.AARP reported an average annual expenditure of 1873 on restaurants on restaurants (n = 80, s =550).
a)Calculate the 95% margin of error.
b)Construct a 95% CI.
c)Estimate total spending by all Americans aged 50+.
d)If the data are right-skewed, would the median be greater or less than $1873?
46.A sample of 30 NYSE companies provided the following data:

Then,
a)Estimate the population P/E ratio and construct a 95% CI.
b)Is the market overvalued (P/E > 20)?
c)Estimate the proportion of dividend-paying companies. Is the sample size sufficient for a normal
approximation?
47.US Airways studied time to schedule award flights by phone (n = 150).
a)Find the sample mean time.
b)Construct a 95% CI for the mean time.
c)If agents work 7.5 hours/day, estimate daily capacity.
d)Justify the shift to an online system.
48.A survey of 200 executives measured time wasted locating misplaced items.
a)Estimate the mean wasted minutes per day.

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 b)Calculate the sample standard deviation.
c)Construct a 95% CI for the mean.
49.Mileage tests for a car model desire a 98% CI with a 1 MPG margin of error (σ = 2.6). Determine the
required sample size.
50.Consider the following hypothesis test:
51.Consider the following hypothesis test:

52.Consider the following hypothesis test:

53.Consider the following hypothesis test:

54.Consider the following hypothesis test:

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55.Consider the following hypothesis test:

56.Consider the following hypothesis test:

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