BOTSWANA ACCOUNTANCY COLLEGE

Computing and Information Systems

CIS227 Quantitative Analysis for Business

Hand in Date: 24th May 2011

Mmoloki Kaisara CIS10-189 Jan – June 2011

Section A

Question 1

a)
i. Discrete Probability Distributions assume that the outcomes of a random variable under
study can take on only specific (usually integer) values. So a simple example to
demonstrate the idea of a discreet probability distribution would be a score obtained in a
single roll of a fair dice. This variable can take six disnct values 1,2,3,4,5, or 6, and the
probability associated with each of these values is 1/6.

Discreet probability distributions are used to refer to the set of probabilities associated
with the distinct random variable values resulting from a particular type of experiment.
Two common discrete probability distribution functions are:
 Binomial probability Distribution
 Poisson probability Distribution

ii. Continuous Probability Distributions – a continuous random variable can take any
value( as opposed to only discrete variable values) in an interval. Examples of continuous
random variables include length of time it takes to complete a task, policy claim values,
sales volumes e.t.c The two common Continuous probability distributions are:
 Normal Probability Distribution
It has the following properties
a. Smooth Bell Shaped Curve
b. Symmetrical about the mean value, µ
c. The tails of the curve are asymptotic(No zero probability to any given
problem)
d. The Total Area under the curve is equal to 1.
e. The distribution is described by two parameters: a mean (µ), and a standard
deviation (σ)
 Standard Normal Distribution has the following properties:
a. A Mean equal to 0(µ=0)
b. Standard deviation equal to 1(σ=1)

b) Marginal Probability Distribution is the probability of only a single event B occurring. It is

normally written as P(B)

Mmoloki Kaisara CIS10-189 Jan – June 2011

Question 2

a. Student-t distribution

The student-t distribution is similar to the z-distribution. It is also called t-distribution. The t-
distribution is bell shaped and symmetrical around the mean of zero. It does not have a constant
standard deviation(which the z-distribution have). The t-distribution is exact when the underlying
population is normal and close to approximation otherwise. The formula for the student-t
distribution is written as

x−μ
t (n−1)=
s
√n
Where (n-1) is called degree of freedom.
The student-t Distribution is used where the population standard deviation is not known
and needs to be estimated from sample standard deviation

b. Permutations

Permutations of a set are an arrangement of objects in a definite order. Permutations are the
number of distinct ways of arranging a subset of n objects where order is important.

The formula
The number of distinct ways of arranging r objects, selected from a group of n objects where
order is important is given by.

n!
nPr=
( n−r )

Where n!= n factorial =n ( n−1 )( n−2 ) ( n−3 ) · ·· · 3· 2 ·1

r= number of object selected at a time
n= Total number of objects from which to select

Example 1

Let A ={a,b,c}
Find the permutations of set A
A consist of three letter a,b,c. There are three ways we can arrange the letters in blanks.
___ ___ ____
We may choose a,b or c. Having selected the first letter, there are two letters left for the second
blank and finally one for the last blank. Schematically we have:
3 2 1
We conclude that there are 3·2·1, or 6 permutations of set A using a generalized multiplication
principle. By generalized multiplication principle, there are

Mmoloki Kaisara CIS10-189 Jan – June 2011

 n ( n−1 )( n−2 ) ( n−3 ) · ·· · 3· 2 ·1

Example 2

Computation of P(4,2) and interpretation of results.

4! 4 ! 4 ∙ 3 ∙2 ∙1
P(4,2)= = = =12
( 4−2 ) ! 2 ! 2∙1

Example 3

Find a number of ways a chairman, a vice chairman, a secretary and a treasure can be
chosen from a committee of eight members.

8! 8 ! 8 ·7 · 6 ·5 · 4 · 3 ·2 · 1
P(8,4)= = = =1680
( 8−4 ) ! 4 ! 4 · 3 ·2 · 1

c. Combinations
Combinations is a number of different ways of arranging a subset of r objects selected
from a group of n objects where order is not important.

Each separate grouping of r objects out of n objects is called a combination.

The formula is written as:

n!
nCr=
r ! ( n−r ) !
n!= n factorial = n(n-1)(n-2)(n-3)….3.2.1
r!=r(r-1)(r-2)(r-3)….3.2.1
r= number of object selected at a time
n= total number of objects from which to select

Example 1

Find the values of

i. C(7,4)

7!
7C4=
[4 ! (7−4 ) !]

Mmoloki Kaisara CIS10-189 Jan – June 2011

 (7.6.5 .4 .3 .2 .1)
=
[ ( 4.3 .2 .1 )( 3.2 .1 ) ]

7!
=4!3!

5040
=
144

=35 Combinations

It can be calculated in excel using the formula

=combin(number, number chosen)

It can also be calculated in probability

1
= =0.029
35

Question 3.

a)

Solution.

Step 1.

i. Setting up the null and alternative hypotheses

H0 : µ = 1800

H1 : µ > 1800

ii. Calculate the test statistic

x−Ho 1950−1800
z=
σ /√ n
= 500/√ 40 =1.897

iii. Setting the Rejection Area

Since Z>1.96 we need to put all of α in the right tail. Thus

R : Z > 1.96

Mmoloki Kaisara CIS10-189 Jan – June 2011

 iv. Conclusion

We can see that 1.897 < 1.96, thus our test statistic is not in the rejection region.
Therefore we fail to reject the null hypothesis. We cannot conclude anything
statistically significant from this test, and cannot tell the insurance company whether
or not they should be concerned about their current policies.

Question 3

b)

Solution.

i. Setting the null and alternative hypotheses.

H0: µ ≥ 30
H1: µ < 30

ii. Calculation of Test Statistic

x−H 0 20−30
z= = =-3.727
σ / √ n 6 /√ 5

iii. Setting the rejection Area

Looking at the above result we need to put all of α in the left tail. Thus

R: Z < -1.28

iv. Conclusion
We can see that -3.727 < -1.28, thus our test statistic is in the rejection region.
Therefore we reject the null hypothesis in favor of the alternative. We can conclude
that the mean is significantly less than 30, thus I have proven that the mean time to
find a parking space is less than 30.

SECTION B

Question 4

i. 0.1587

Mmoloki Kaisara CIS10-189 Jan – June 2011

 =1-NORMDIST(120,90,30,true)

Screen dump

ii. 0.9987

Excel Formula
=NORMDIST(180,90,30,TRUE)

Screendump

Mmoloki Kaisara CIS10-189 Jan – June 2011

 iii.

iv. 101.56

Excel Formula
=norminv(0.65,90,30)

Mmoloki Kaisara CIS10-189 Jan – June 2011

 Question 5

a) All the 6 general equity unit trust will perform better.

n=6
p=.80
q=.20
Thus P(r=6)=6 C 6 (0.80)6 (0.20)0

=(1)(0.2621)(0)

=0.2621

Excel Formula

=BINOMDIST(6,6,0.08,false)

Screen Dump

b) At least 2 performed worse than overall BSE share index

Mmoloki Kaisara CIS10-189 Jan – June 2011

 1-P ¿)

n=6
p=.80
q=.20

Excel Formula

=1-Binomdist(1,6,0.2,true)

Screen Dump

REFERENCES

Mmoloki Kaisara CIS10-189 Jan – June 2011

 1. Wegner, T,2007,’Applied Business Statistics’, Second Edition, Juta, South Africa, pp147 – 209
2. Bancroft, Gordon,1988,’ Maths and Statistics’, Second Edition, Mc Graw Hill, UK, pp224-233

Mmoloki Kaisara CIS10-189 Jan – June 2011