ISOM 2500 Business Statistics

Fall 2021/2022 – Quiz 2 Prof. Kohei Kawaguchi

Time Allowed: 80 Minutes (7:00pm - 8:20pm)

Student Name: _________________________________

Student ID #: __________________________________

Section: L4

Read the following instructions very carefully before you start the quiz.

a. There are 20 multiple-choice questions. Choose the best answer for each question.
The total point of this quiz is 20 points.
b. It is your responsibility to check that your question booklet consists of 12 printed
pages, including this cover page.
c. Submit both the multiple-choice answer sheet and this question booklet when
you are done with the quiz.
d. Please read the academic integrity declaration below and sign.

Academic Integrity Declaration

I declare that the answers submitted for this quiz are my own work. I understand that
sanctions will be imposed if I am found to have violated the University’s regulations
governing academic integrity.

Student's Signature: ______________________________________

Do NOT open this question booklet unless you are told to do so.

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1. A shipment of 20 DVDs has arrived at a video rental store. Based on past experience,
the manager knows that 10% of all new DVDs sent to the store have a visible defect.
Among all the DVDs with a visible defect, 80% play with no loss in quality. If one new
DVD is selected at random from among those sent to the store, what is the probability of
selecting a DVD that has a visible defect and plays with no loss in quality? (Round your
answer to 2 decimal places.)
A) .08
B) .90
C) .80
D) .02

[Q2-Q3]
The weights of boxes of cereal filled at a plant, X, have an expected value of 30 ounces
and a standard deviation of 1.5 ounces. The weight of any box is considered to be
independent of the weight of any other box. For shipping purposes, 24 boxes are packaged
together.

2. Determine the standard deviation of the weight of a package of 24 boxes.

A) 7.35 ounces
B) 720 ounces
C) 864 ounces
D) 54 ounces

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3. Find the probability that the weight of a package of 24 boxes is greater than 710
ounces.

[Note: Complete Z table is provided in the last page, below is for your reference]

A) 0.2835
B) 0.0988
C) 0.0869
D) 0.9131

[Q4-Q5]
A manufacturer of laptop computers sells two principal models. Define X = sales of
Model I next quarter and Y = sales of Model II next quarter. The marketing staff
estimates that the joint probabilities are

Y
X 200,000 300,000 400,000
100,000 0.100 0.110 0.135
200,000 0.115 0.145 0.085
300,000 0.135 0.085 0.090

4. What is the expected number of units sold for Model II?

A) 296,000
B) 352,000
C) 284,000
D) 314,000

5. What is the expected number of total units sold for Models I and II together?
A) 352,000
B) 296,000
C) 492,500
D) 548,500
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6. Let X be a discrete random variable with its probability distributions summarized as
below.

x Pr (X=x)
1 0.5
2 0.2
3 0.3

Find the variance of X.

A) 1.80
B) 0.76
C) 0.87
D) 0.58

[Q7-Q8]
Suppose we have two random variables X and Y, and Var(X) = 1, Var(Y) = 5
7. Find the variance of 2X−3Y, i.e., Var(2X−3Y), when X and Y are independent.

A) 60

B) 49

C) 36

D) 76

8. Find the variance of 2X−3Y, i.e., Var(2X−3Y), when the correlation between X
and Y is 0.4, i.e., Corr(X,Y)=0.4

A) 38.267

B) 49.256

C) 56.742

D) 77.258

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 [Q9-Q10]
Here are summaries of returns of two single stock portfolios (risk free rate= 0.01)
mean variance standard
deviation
IBM 0.10 2.00 1.41
Apple 0.20 2.24 1.50

9. What is the Sharpe ratio of IBM?

A) 0.127
B) 0.064
C) 0.725
D) 0.624

10. Given that the covariance between the return of IBM and Apple is 1, what is the
expected return and standard deviation of a portfolio where you invest 0.3 share of
IBM and 0.7 share of Apple, i.e. 0.3 IBM+0.7Apple?

A) 0.17; 1.697
B) 0.17; 0.331
C) 1.303; 2.255
D) 0.17; 1.303

[Q11-Q12]
You are now taking the ISOM 2500 quiz 2 with 17 MC questions. Each question has
only one correct answer out of 4 choices. Suppose you simply answers each question by
random guess

11. What is the probability of getting 3 questions answered correctly?

[Hint: 𝐶117 =17, 𝐶217 =136, 𝐶317 =680, 𝐶417 =2380, 𝐶517 =6188]
A) 0.043
B) 0.114
C) 0.189
D) 0.221
E) 0.191
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12. What is the standard deviation of the total number of correctly answered questions?
A) 1.785
B) 2.562
C) 1.256
D) 1.365

13. A large bank determines that 70% of the loans that it approves are to individuals
(for cars, homes, etc.) and 30% are to small businesses. Among the loans to
individuals, 10% end up in default, 85% are re-paid on-time, and 5% are re -paid,
but are late. Among the loans to small businesses, 15% end up in default, 70% are
re-paid on-time, and 15% are re-paid, but are late.
The bank manager selects one loan at random and finds that it ended up in
default. What is the probability that the loan was to a small business? (Round
your answer to 4 decimal places.)
A) 0.6429
B) 0.4000
C) 0.3913
D) 0.1809
E) 0.3000

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14. The heights of North American women are normally distributed with a
population mean of 64 inches and a population standard deviation of 2 inches.
What is the probability that a randomly selected woman is taller than 66
inches?
[Note: Complete Z table is provided in the last page, below is for your reference]

A) 0.1587
B) 0.1658
C) 0.2563
D) 0.1125

15. The number of pages printed before replacing the cartridge in a laser printer is
normally distributed with a mean of 11,500 pages and a standard deviation of 800
pages. A new cartridge has just been installed.

The manufacturer wants to provide guidelines to potential customers advising them

of the minimum number of pages they can expect from each cartridge. How many
pages should it advertise if the company wants to be correct 99% of the time?
[Note: Complete Z table is provided in the last page, below is for your reference]

A) 11,500
B) 22,300
C) 9,636
D) 8,400

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16. When parking a car in a downtown parking lot, drivers pay
according to the number of hours. The probability distribution of the
number of hours cars are parked has been estimated as follows.

x 1 2 3 4
P(x) .2 .2 .3 .3

The cost of parking is $2.50 per hour. Calculate the mean of the amount
of revenue each car generates.

A) 2.7

B) 2.50

C) 6.75

D) 5.65

17. William planned a hiking trip to Spain and tomorrow he is going to hit on the road.
Unfortunately, the weatherman has predicted snow for tomorrow. We have the
following information:
In recent years, it has snowed only 4 days each year (Suppose there are 365 days
per year). When it actually snows, the weatherman correctly forecasts snow 90% of
the time; when it doesn't snow, he incorrectly forecasts snow 5% of the time. What
is the probability that it will snow on the day of William’s hiking trip starts given a
forecast for snow by the weatherman?

A) 0.9
B) 0.5
C) 0.13
D) 0.16

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 [Q18- Q19]

An automobile dealer has taken a survey of 500 drivers. The drivers were classified
as Young (16-30) and Old (31 or older), and according to their vehicle preference
(SUV or Compact). The results of the survey are summarized in the following
table:

Vehicle Preference

SUV Compact

Age Young 200 80 280

Old 150 70 220

350 150 500

18. If a randomly selected driver in this survey is old, what is the probability that
the driver will have a preference for SUVs? (Round your answer to 4 decimal
places.)
A) 0.2857
B) 0.4667
C) 0.3182
D) 0.6818

19. Based on this data, which conclusion given below is accurate?

A) 80% of the drivers are young and prefer compacts.
B) The data indicate that age and vehicle preference are independent.
C) The data indicate that age and vehicle preference are not independent.
D) Among the drivers who prefer compacts, more than 50% are old.

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20. The Empirical Rule states that 99.7% of data observed following a normal
distribution lies within how many standard deviations of the mean?
A) 1
B) 2
C) 3
D) 1.5
E) None of the above

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