Topics: Descriptive Statistics and Probability

2
1. Look at the data given below. Plot the data, find the outliers and find out μ,σ ,σ

Name of company Measure X

Allied Signal 24.23%
Bankers Trust 25.53%
General Mills 25.41%
ITT Industries 24.14%
J.P.Morgan & Co. 29.62%
Lehman Brothers 28.25%
Marriot 25.81%
MCI 24.39%
Merrill Lynch 40.26%
Microsof 32.95%
Morgan Stanley 91.36%
Sun Microsystems 25.99%
Travelers 39.42%
US Airways 26.71%
Warner-Lambert 35.00%
SOLUTION:

Name of Measure
Sr. No. company X (x - mu) (x - mu)^2
0.00817457
Allied Signal 0.2423
1 -0.090413333 1
0.00599282
Bankers Trust 0.2553
2 -0.077413333 4
0.00618005
General Mills 0.2541
3 -0.078613333 6
0.00833812
ITT Industries 0.2414
4 -0.091313333 5
0.00133322
J.P.Morgan & Co. 0.2962
5 -0.036513333 4
0.00252137
Lehman Brothers 0.2825
6 -0.050213333 9
7 Marriot 0.2581 -0.074613333 0.00556715
0.00788780
MCI 0.2439
8 -0.088813333 8
0.00488414
Merrill Lynch 0.4026
9 0.069886667 6
10 Microsof 0.3295 -0.003213333 1.03255E-05
11 Morgan Stanley 0.9136 0.580886667 0.33742932
Sun 0.00530178
0.2599
12 Microsystems -0.072813333 2
13 Travelers 0.3942 0.061486667 0.00378061

Questions referred to from Aczel A., Sounderpandian J., Complete Business Statistics (7ed.)
 14 US Airways 0.2671 -0.065613333 0.00430511
0.00029882
Warner-Lambert 0.35
15 0.017286667 9
0.40200525
Total =
4.9907 Σ ( x - mu)^2 = 7
0.332713 0.16370
mu =
3 σ^2 = 0.02680035 σ= 8

Solution Summary:

μ , = 0.3327

σ = 0.1637
2
σ = 0.0268

2.

Answer the following three questions based on the box-plot above.

(i) What is inter-quartile range of this dataset? (please approximate the numbers) In one
line, explain what this value implies.
(ii) What can we say about the skewness of this dataset?
(iii) If it was found that the data point with the value 25 is actually 2.5, how would the new
box-plot be affected?
ANSWERS:
1. Interquartile range (IQR) = 12.5 – 5 = 7.5
This implies that the middle 50% of the data lies between 5 and 12.5.

2. The dataset is right skewed, which means that the data is more concentrated towards the lef
and the right tail is longer.

Questions referred to from Aczel A., Sounderpandian J., Complete Business Statistics (7ed.)
 3. If it was found that the data point with the value 25 is actually 2.5, the new box-plot will be
affected in the following ways:
 The median will move slightly towards the lef.
 The Q3 will move towards the lef.
 Tne box-plot will no longer have any outliers.

3.

Answer the following three questions based on the histogram above.

(i) Where would the mode of this dataset lie?
(ii) Comment on the skewness of the dataset.
(iii) Suppose that the above histogram and the box-plot in question 2 are ploted for the
same dataset. Explain how these graphs complement each other in providing
information about any dataset.

ANSWERS:

1. The mode of this dataset will lie between 4 to 8.

2. The dataset is right skewed, which means that the data is more concentrated towards the lef and
the right tail is longer.

3. ?

Questions referred to from Aczel A., Sounderpandian J., Complete Business Statistics (7ed.)
 4. AT&T was running commercials in 1990 aimed at luring back customers who had switched to one
of the other long-distance phone service providers. One such commercial shows a businessman
trying to reach Phoenix and mistakenly getting Fiji, where a half-naked native on a beach
responds incomprehensibly in Polynesian. When asked about this advertisement, AT&T admited
that the portrayed incident did not actually take place but added that this was an enactment of
something that “could happen.” Suppose that one in 200 long-distance telephone calls is
misdirected. What is the probability that at least one in five atempted telephone calls reaches
the wrong number? (Assume independence of atempts.)

ANSWER:

The probability of call being misdirected = 1/200 = 0.005

The probability of call not being misdirected = 1 – 0.005 = 0.995

The probability that at least one in five atempted telephone calls reaches the wrong number =
1 - The probability that no atempted call reaches the wrong number

= 1 – ((0.995) ^5)

= 0.0248

5. Returns on a certain business venture, to the nearest $1,000, are known to follow the following
probability distribution
x P(x)
-2,000 0.1
-1,000 0.1
0 0.2
1000 0.2
2000 0.3
3000 0.1

(i) What is the most likely monetary outcome of the business venture?
(ii) Is the venture likely to be successful? Explain
(iii) What is the long-term average earning of business ventures of this kind? Explain

Questions referred to from Aczel A., Sounderpandian J., Complete Business Statistics (7ed.)
 (iv) What is the good measure of the risk involved in a venture of this kind? Compute this
measure

ANSWERS:

1.

x P(x) x . P(x)
-2,000 0.1 -200
-1,000 0.1 -100
0 0.2 0
1000 0.2 200
2000 0.3 600
3000 0.1 300
Σ(x . P(x)) = 800

The most likely monetary outcome of the business venture is $ 800.

2. The venture is likely to be successful because the probability of the venture having a return on
investment is 0.6 (0.2 + 0.3 + 0.1).

3.

Questions referred to from Aczel A., Sounderpandian J., Complete Business Statistics (7ed.)