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1. Mr. Vijay, a retired government servant, is considering investing his money in two
proposals. He wants to choose the one that has higher average net present value and lower
standard deviations. The relevant data are given below. Can you help him choosing the
proposal?

Proposal A Net present value Chance of the

(NPV) possible outcome of
NPV
1559 0.30
5662 0.40
9175 0.30

Proposal B Net present value Chance of the

(NPV) possible outcome of
NPV

-10050 0.30

5812 0.40

20584 0.30

Answer:

To Suggest Mr. Gupta a proposal for high average net present value, first calculate
the expected (average) net present value for both the proposals.

Proposal A: Expected NPV = 1559 * 0.30 + 5662 * 0.40 + 9175 * 0.30

= 467.7 + 2264.8 + 2752.5 = Rs. 5485

 Proposal B: Expected NPV = -10050 * 0.30 + 5812 * 0.40 + 20584 * 0.30

= -3015 + 2324.8 + 6175.2 = Rs. 5485

Since the expected NPV in both the cases is same, he would like to choose the less
risky proposal. For this we have to calculate the standard deviation in both the
cases.

Standard deviation for proposal A:

NPV(Xi) Expected X-(̅̅̅̅

𝑋 ) Probability of 𝑓(𝑋 − ̅𝑋
̅̅̅ )2
NPV ( 𝑋̅ ) NPV (f)

1559 5485 -3926 0.30 46,24,042.8

5662 5485 177 0.40 12,531.6

9175 5485 3690 0.30 40,84,830.0

Total 1.00 87, 21, 404.4

∑ 𝑓(𝑋− ̅̅̅̅
𝑋 )2
SA = √ ∑𝑓
= √87,21, 404.4 = Rs. 2953. 20

Standard deviation for Proposal B :

NPV (Xi) Expected X-̅̅̅̅

𝑋 Probability of NPV(f) f (X-̅̅̅̅
𝑋 )2
̅̅̅̅)
NPV ( 𝑋

-10050 5485 -15, 535 0.30 72400867.5

5812 5485 327 0.40 42771.6

20584 5485 15,099 0.30 68393940

 1.00 140837579

∑ 𝑓(𝑋− 𝑋̅ )2
SB= √ ∑𝑓
= √14, 08,37,579 = Rs. 11,867.50

Decision: The SA & SB indicates uniform net profit for proposal A. Thus proposal
A may be chosen.

Q2

A manufacturing firm produces steel pipes in three plants with daily

production volumes of 500, 1000 and 2000 units respectively. According to
past experience, it is known that the fraction of defectives output produced by
the three plants are respectively 0.005, 0.008 and 0.010. If a pipe is selected
from a day’s total production and found to be defective, find out (a) from
which plant the pipe comes (b) what is the probability that it comes from first
plant?

Answer:

A1 : Production vol of first plant = 500 units

A2: Production vol of second plant = 1000 units

A3: Production vol of third plant = 2000 units

E = a defective item

P ( Ai / E) is the probability that the item is produced by the plant, given that the
item is defective.

P (Ai ∩ E) is the probability that the items are produced by the ith plant are
defective.

Prior Probabilities-
 500 = 1
P (A1) =
500 + 1000 + 2000 7

1000 = 2
P (A2) =
3500 7

2000 = 4
P (A3) =
3500 7

P(E/A1) = 0.005; P(E/A2)= 0.008; P(E/A3) = 0.010

Joint Probabilities

P(A1∩E) = P(A1) P (E/A1) = 1 X 0.005 = 0.005/7

7

P(A2∩E) = P(A2) P (E/A2) = 2 X 0.008 = 0.016/7

7

P(A3∩E) = P(A3) P (E/A3) = 4 X 0.10 = 0.040/7

7

P(E) = Ʃ P(Ai) P (E/Ai ) = 0.061/7

Posterior Probabilities

P(A1∩E)1 0.005/7 5
P(A1/E) = = =
P(E) 0.061/7 61

P(A2∩E)1 0.016/7 16
P(A2/E) = = =
P(E) 0.061/7 61

P(A3∩E)1 0.040/7 40
P(A3/E) = = =
P(E) 0.061/7 61
 A. Since value of P (A3/E) is more amongst posterior probabilities, it is then probable
that the defective item has been drawn from the output of the third plant.
B. The probability is from First factory is =5/61.

Que3.Explain the following:

Ans a. Probability Sampling and Non-Probability Sampling

Probability Sampling

Probability sampling refers to the selection of a sample from a population, when this selection is
based on the principle of randomization, that is, random selection or chance.

However, because units from the population are randomly selected and each unit’s selection
probability can be calculated, reliable estimates can be produced and statistical inferences can be
made about the population.

Approaches to Assigning Probabilities…

There are three ways to assign a probability, P(Oi ), to an outcome, Oi , namely:

Classical approach: based on equally likely events.

Relative frequency: assigning probabilities based on experimentation or historical data.

Subjective approach: Assigning probabilities based on the assignor’s (subjective) judgment.

Non-Probability Sampling

Non-probability sampling is a method of selecting units from a population using a subjective

(i.e. non-random) method. Since non-probability sampling does not require a complete survey
frame, it is a fast, easy and inexpensive way of obtaining data.

Advantages of Non-Probability Sampling

1. Possibility to reflect the descriptive comments about the sample

2. Cost-effectiveness and time-effectiveness compared to probability sampling
3. Effective when it is unfeasible or impractical to conduct probability sampling
Disadvantages of Non-Probability Sampling

1. Unknown proportion of the entire population is not included in the sample group i.e. lack
of representation of the entire population
2. Lower level of generalization of research findings compared to probability sampling
3. Difficulties in estimating sampling variability and identifying possible bias

b. Systematic sampling and Cluster Sampling

Ans. Systematic sampling :

Systematic sampling is a type of probability sampling method in which sample members from a
larger population are selected according to a random starting point but with a fixed, periodic
interval.

This interval, called the sampling interval, is calculated by dividing the population size by the
desired sample size.

Cluster Sampling:

In cluster sampling, researchers divide a population into smaller groups known as clusters. They
then randomly select among these clusters to form a sample. Cluster sampling is a method of
probability sampling that is often used to study large populations, particularly those that are
widely geographically dispersed.

c. Advantages of Probability Sampling over Non-probability Sampling

Ans. Generally, nonprobability sampling is a bit rough, with a biased and subjective process.
This sampling is used to generate a hypothesis. Conversely, probability sampling is more
precise, objective and unbiased, which makes it a good fit for testing a hypothesis.

d• Census vs. sample

What is a census (complete enumeration)?

A census is a study of every unit, everyone or everything, in a population. It is known as a complete

enumeration, which means a complete count.

When the population is large, applying the census method would be difficult.

What is a sample (partial enumeration)?

A sample is a subset of units in a population, selected to represent all units in a population of

interest. It is a partial enumeration because it is a count from part of the population.

Information from the sampled units is used to estimate the characteristics for the entire population of
interest.

e. Primary and Secondary Data

Data that has been generated by the researcher himself/herself, surveys, interviews, experiments,
specially designed for understanding and solving the research problem at hand.

Secondary data

Using existing data generated by large government Institutions, healthcare facilities etc. as part
of organizational record keeping. The data is then extracted from more varied datafiles. In
published form, secondary data is available in research papers, newspapers, magazines,
government publication, international publication, and websites.

SET-II

4. A report says that 80% of India’s females aged 15-59 are not currently
engaged in the workforce. A national agency has an opinion that this
percentage may be even more. To validate its opinion, the agency did a survey
of randomly chosen 1200 females of the age group 15-59 from the different
parts of the country and found 228 females working. Do the figures of the
survey help the agency in validation of its opinion?

Answer:

According to report, 80% of females are non working i.e. 20% are working.

So, with the help of data of 1200 females, the working females should be 20% of
1200 females i.e.

1200*20%=240 females.

But, in the agency’s survey it is found that 228, females are working out of 1200
females which is 19%.

Therefore, agency can validate its opinion on the grounds of survey that 81% of
females aged 15-59 are not working.
Q5. What is regression analysis? Explain steps of performing regression
analysis in detail?
The following data shows the yearly sales (in million Rs.) of A2Z- corporation
for the last nine years. Develop a regression model.

Year 2011 2012 2013 2014 2015 2016 2017 2018 2019
Sale 2.3 5.3 5.1 3.5 3.4 2.7 2.8 4.1 2.9
Answer:
Regression analysis is a set of statistical methods used for the estimation of relationships
between a dependent variable and one or more independent variables. It can be utilized to assess
the strength of the relationship between variables and for modeling the future relationship
between them.

In order to understand regression analysis fully, it’s essential to comprehend the following terms:

• Dependent Variable: This is the main factor that you’re trying to understand or predict.
• Independent Variables: These are the factors that you hypothesize have an impact on your
dependent variable.

As an outcome of regression analysis, we get a mathematical equation often called a regression

equation.

Y = a + bX

α and β in the above equations are parameters and they remain constant as x and y changes.

Y is your Sales, the ‘a’ is the intercept and the ‘b’ is the slope.

By determining the values of “α” and “β” we can calculate the value of “y” for a given value of
“x”.

Regression analysis is a predictive modelling technique, used to analyse the cause and effect. It is
primarily used for:

• Prediction and Forecasting

• Inferring relationships between the independent and dependent variables.

Steps in Regression Analysis

1. Decide on purpose of model and appropriate dependent variable to meet that purpose.
2. Decide on independent variables.
3. Estimate parameters of regression equation.
4. Interpret estimated parameters, goodness of fit and qualitative and quantitative assessment of
parameters.
5. Assess appropriateness of assumptions.
6. If some assumptions are not satisfied, modify and revise estimated equation.
7. Validate estimated regression equation.

Regression Model:-

Year (X-X̅)*(y-
Year Sale (Y) X² Y² XY (X-X̅) (y-ӯ) (X-X̅)²
(X) ӯ)
2011 0 2.3 0 5.29 0 -4 -1.27 5.07 16
2012 1 5.3 1 28.09 5.3 -3 1.73 -5.20 9
2013 2 5.1 4 26.01 10.2 -2 1.53 -3.07 4
2014 3 3.5 9 12.25 10.5 -1 -0.07 0.07 1
2015 4 3.4 16 11.56 13.6 0 -0.17 0.00 0
2016 5 2.7 25 7.29 13.5 1 -0.87 -0.87 1
2017 6 2.8 36 7.84 16.8 2 -0.77 -1.53 4
2018 7 4.1 49 16.81 28.7 3 0.53 1.60 9
2019 8 2.9 64 8.41 23.2 4 -0.67 -2.67 16
36 32.1 204 123.55 121.8 0 -0.03 -6.60 60.00

X̅ = ƩX/N= 4

ӯ= ƩY/N= 3.57

Regression
Equation= Ŷ=a + bX

= -6.60 = -0.11
b= (X-X̅)*(y-ӯ) / (X-X̅)²
60

a.
a= ӯ - b X̅= 3.57 – (-0.11)(4) = 4.0

Ŷ= 4.0 + (-0.11)X = 4.0 - 0.11 X

6. Four observers determine the moisture content of samples of a powder,
each man taking a sample from each of six consignments. Their assessments
are given below:
observation Consignments
1 2 3 4 5 6
1 9 10 9 10 11 11
2 12 11 9 11 10 10
3 11 10 10 12 11 10
4 12 11 11 14 12 10

Discuss whether there is any significant difference between consignments.

(Useful data: Ftab(5,15):2.96, Ftab(3,15):3.29)

Answer:
Here we will apply ANOVA A two way classification, as we have two factors. One is consignment
and the other is observer.

Step -1: Null Hypothesis Ho 1: There is no difference in the yield between treatments (rows).

Null Hypothesis Ho 2: There is no difference in the yield between blocks (coloum).

Step 2: Test Statistics (Calculating F ratio), as the given data is really larger, let us subtract all
values given by 10 make them simpler for calculation ease.

Consignment
Observer 1 2 3 4 5 6 Total
1 -1 0 -1 0 1 1 0
2 2 1 -1 1 0 0 3
3 1 0 0 2 1 0 4
4 2 1 1 4 2 0 10
 Total 4 2 -1 7 4 1 GT=17

17² 289
Correction factor(C.F) = = = 12.04
24 24
Total S.S. = (-1)2 + (2)2 + (1)2 + (2)2 + …..+ (1)2 + (0)2 + (0)2 + (0)2 – CF

= 43 – 12.04 = 30.96

S.S. between consignment =

(4)² (2)² (-1)² (7)² (4)² (1)²

+ + + + + - 12.04
4 4 4 4 4 4

= 4 + 1 + 0.25 + 12.25 + 4 + 0.25 – 12.04

= 21.75 – 12.04

=9.71

S.S. between observers=

(0)² (3)² (4)² (10)²

+ + + - CF
6 6 6 6

9+16+100
= - 12.04
6
= 20.83 – 12.04

= 8.79

S.S. due to error = Total S.S. –S.S. between consignment- S.S. between observers

= 30.96 – 9.71 – 8.79

= 12.46

ANOVA Table

Sum of Mean sum of

d.f. F
Source of Variation Squares Squares
Between columns F 5,15 = 1.94/0.83 =
(consignment) 9.71 5 9.71/5=1.94 2.34
 F 3,15 = 2.93/0.83 =
Between Rows (Observers) 8.79 3 8.79/3=2.93 3.53
Error 12.46 15 12.46/15=0.83
Total 30.96 23

The total value of F at 5% level for 5 & 15 d.f. = 2.96

Since calculated value of F for consignments is less than the table, we accept the null
hypothesis and conclude that there is no significant difference between consignments.