University of Notre Dame: Questions

UNIVERSITY OF NOTRE DAME
Assignment for Inference for Variances
Questions
1. To analyze the risk, or volatility, associated with investing, a sample of the eight
quarterly percent total returns was identified for eight investment mangers and are given
below.
15.0 -16.1 9.8 12.6 13.5 -2.1 -24.0 17.6
a. Compute the sample variance and sample standard deviation as measures of

volatility for the percent total returns. (2 points)
Mean = 3.2875
Sample variance = 246.4241
Sample std. dev. = 15.6979
b. Construct a 95% confidence interval for the population variance. (1 point)

107.725 - 1020.771
c. Construct a 95% confidence interval for the population standard deviation. (1

point)
10.379 - 31.950
2. Last year, the variance in the semiannual yields of overseas government bonds was  2
= .70 (this is from last year). A group of bond investors met at that time to discuss future
trends in overseas bond yields. Some expected the variability in overseas bond yields to
increase and others took the opposite view.
The following table shows the semiannual yields for 12 overseas countries this year
(Barron’s).
Country Yield (%) Country Yield (%)

Australia 3.98 Italy 4.51
Belgium 3.78 Japan 1.32
Canada 2.95 Netherlands 3.53
Denmark 3.55 Spain 3.90
France 3.44 Sweden 2.48
Germany 3.08 U.K. 3.76
a. Compute the mean, variance, and standard deviation of the overseas bond yields.
(3 points)
Mean = 3.35667
Variance = 0.68987
Std.Dev = 0.83058
b. Develop a null and alternative hypothesis to evaluate whether the variance this
year is statistically different from the variance from last year. (1 point)
Ho:  2this year = .70
Ha:  2this year ≠ .70
c. Use α = .05 to conduct the hypothesis test formulated above. What is the
conclusion? (2 points)
95% of confidence interval of variance = 0.346 - 1.989, 0.70 lies in the confidence
interval.
p-value = 0.913.
We fail to reject the null. We do not have enough data to conclude that the variance in
the bond yield is different from 0.70
3. Many smartphones have earned a bad reputation for exceptionally poor battery life.
Battery life between charges for the Motorola Droid Razr averages 20 hours when the
primary use is talk time and 7 hours when the primary use is Internet applications (The
Wall Street Journal). Since the mean hours for talk time usage is greater than the mean
hours for Internet usage, the question was raised as to whether the variance in hours of
usage is also greater when the primary use is talk time. Sample data showing battery
hours of use for the two applications follows.
Primary Use: Talking
35.8 22.2 4.0 32.6 8.5 42.5
8.0 3.8 30.0 12.8 10.3 35.5
Primary Use: Internet
14.0 12.5 16.4 1.9 9.9 5.4
1.0 15.2 4.0 4.7
a. Formulate hypotheses about the two population variances that can be used to
determine if the population variance in battery hours of use is greater for the talk
time application. (1 point)
Ho: 2talking ≤ 2internet
Ha: 2talking > 2internet
b. What are the standard deviations of battery hours of use for the two samples? (2
points)
Talking :14.1336478
Internet:5.76984498
2
c. Conduct the hypothesis test for the variance from part a: include the value of the
test statistic and the p-value. At α = 0.05 assumed (4 points)
F-Value 6.000
Degrees of Freedom, Numerator 11
Degrees of Freedom, Denominator 9
p-value 0.006
Critical F-Values (α = 0.05) -∞ - 3.102
d. Using a .05 level of significance, what is your conclusion? Explain. (2 points)

We reject the null hypothesis, i.e. We are 95% confident that the variance in
talking battery hours is greater than the variance in internet battery hours.
4. The variance in a production process is an important measure of the quality of the

processes. A large variance often signals an opportunity for improvement in the process
by finding ways to reduce the process variance. The data are available here:
nd.edu/~kkelley/Teaching/Data/Machines.sav, or in the following directory:
nd.edu/~kkelley/Teaching/Data/.
Conduct a statistical test to determine whether there is a significant difference between

the variances in the bag weights for two machines. Use a .05 level of significance. (1
point each)
a. What are the null and alternative hypotheses?

Ho: 2m1 = 2m2
Ha: 2m1 ≠ 2m2
b. What is the value of the test statistic?
F-Value 8.167
Degrees of Freedom, Numerator 24
Degrees of Freedom, Denominator 21
Critical F-Values (α = 0.05) 0.433 - 2.368
c. What is the p-value for the test of the null hypothesis?

0.00001
d. What are your conclusions from your analysis of the machines?

We reject the null hypothesis, i.e. we are 95% confident there is a significant
difference between the variances in the bag weights for two machines.
e. Which machine, if either, provides the greater opportunity for quality

improvements?
Machine 1 provides a higher opportunity for improvement as the variance is
higher as compared to that of machine 2.
5. The standard deviation of egg weights for young hens in the population is 5.3 grams
(based on a database maintained by an egg producers’ trade-group) and the standard
deviation of older hens in the population is 6.4 grams (again, from the database). An egg
producer who uses free-range and organic methods seeks to understand the variability of
the eggs produced in such a manner (realizing that this method of egg production may
well have a different variability than standard production). The rationale of this is
because of the labeling mandates of the way in which “small”, “medium,” and “large”
egg labels can be used (and if young hens are cost effective).
a. The egg producer collected data from 101 young hens and found that the standard
deviation was 6.2 grams. State the null and alternative hypotheses to test if the
variance of the eggs of young hens is equal to the variance of young hens of the
population in general. (1 point)
i. What is/are the critical value(s) for the test of the null hypothesis at a .05
level of significance? (1 point)
ii. What is the value of the test statistic for the test of the null hypothesis? (1
point)
iii. Is there a statistical difference between the variances? Explain. (2 points)
iv. What is the 95% confidence interval for the population variance of this
particular egg producer’s young hens? (1 point)
b. The egg producer also has 61 older hens whose eggs have a standard deviation of
5.8 grams. State the null and alternative hypotheses to test if the variance of his
older hens’ eggs is less than the variance of older hens of the population in
general. (1 point)
i. What is/are the critical value(s) for the test of the null hypothesis at a .05
level of significance? (1 point)
ii. What is the value of the test statistic for the test of the null hypothesis? (1
point)
iii. Is the variance of this egg producer’s older hens’ eggs statistically less
than the variance of the population in general? Explain. (2 points)
iv. What is the 95% confidence interval for the population variance of this
particular egg producer’s older hens? (1 point)
c. Now, the egg producer is interested in comparing variances in egg weights from
older and younger hens for the free-range style of farming. State the null and
alternative hypotheses to test the equality of population variances (for the free-
range hens). (1 point)
i. What is the value of the test statistic for the test of the null hypothesis? (1
point)
ii. What is the critical value for  = .05? (1 point)
iii. What is the conclusion? Explain. (2 points)

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UNIVERSITY OF NOTRE DAME

Assignment for Inference for Variances

15.0 -16.1 9.8 12.6 13.5 -2.1 -24.0 17.6

a. Compute the sample variance and sample standard deviation as measures of

b. Construct a 95% confidence interval for the population variance. (1 point)

c. Construct a 95% confidence interval for the population standard deviation. (1

Country Yield (%) Country Yield (%)

d. Using a .05 level of significance, what is your conclusion? Explain. (2 points)

4. The variance in a production process is an important measure of the quality of the

Conduct a statistical test to determine whether there is a significant difference between

a. What are the null and alternative hypotheses?

c. What is the p-value for the test of the null hypothesis?

d. What are your conclusions from your analysis of the machines?

e. Which machine, if either, provides the greater opportunity for quality

iii. Is there a statistical difference between the variances? Explain. (2 points)

ii. What is the critical value for  = .05? (1 point)

iii. What is the conclusion? Explain. (2 points)

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