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Quants

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360 views18 pages

Quants

Uploaded by

mundrasawan03
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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An analysis of advertising expenses and gross sales for FlatCola Cybersystems produced the following

regression equation:

Sales = 684,402 + 84.623*Advertising,

where both Sales and Advertising are measured in dollars.

In a month in which $12,500 is spent on advertising, what is the average amount predicted for the
company’s gross sales (rounded to the nearest hundred)?

$84,600

 $685,500

 $1,742,200

 $8,555,100
19.

FlatCola Cybersystems must decide whether to develop a new security software suite. If the
development succeeds, the return on the product may be large or small, depending on whether they
can bring the completed product to market ahead of their competitors, allowing them to dominate
the market. If the development does not succeed, it may still produce valuable innovations that
would partially offset the costs of product development. The tree below summarizes the decision.

What is the expected monetary value of developing the new software?

$1.502 million - Wrong

 $1.324 million

 $1.224 million

 $1.200 million
25.

The regression analysis describes the relationship of sales of Red Banjo Lager (in pints) with the
independent variables of the number of customers and the win-loss percentage of the local baseball
team. Compare this multiple regression to the simple regressions with high temperature and number
of customers as the independent variables.

Which of the following is the most likely reason for the dramatic rise in the P-value for the number of
customers in the multiple regression?

Heteroscedasticity

 Homoscedasticity

 Multicollinearity

 Nonlinearity

27.

The manager of Red Banjo Brewing Company must decide whether or not to launch a new sweet
beer offering, Honey Ale. The success of Honey Ale depends greatly on how the public responds to a
different kind of beer than they are used to. An initial decision analysis based on existing data
concludes that the expected monetary value (EMV) of launching the new brew is $11,500. For
$15,000, Red Banjo can hire a firm that will help them to learn more about how their customers
might receive their new product. The EMV (assuming it is free) of buying this sample information for
this decision is $25,000. The tree below summarizes Red Banjo’s decision.

Based on EMV alone, what should the manager do?

Hire the research firm.

 Not hire the research firm, and launch Honey Ale.

 Not hire the research firm, and not launch Honey Ale.

 There is not enough information to answer the question based on EMV alone.
34.

The scatter plot and regression line below characterize the relationship between the daily high
temperature (in degrees Fahrenheit) and the consumption of IPA beer (in pints) at Red Banjo
Brewing.
Which of the following statements define residual errors?

The shortest (perpendicular) distances from the data points to the regression line.

 The vertical distances from the data points to the regression line.

 The shortest distance from each data point to the closest neighboring point.

 The horizontal distances from the data points to the vertical axis.

39.
A histogram showing the selling prices of 35 properties in Brahminton is presented below. The
advertising department of one realtor notices that the property at 38 Longleaf Pine Road seems very
different from the rest.

Which of the following is the best description and response to this data point?

It is an outlier and clearly is a mistake. Delete it from the graph.

 It is an outlier and clearly represents an outstanding property. Feature it as a typical


Ravenweyr Realty offering.

 It is an outlier. Investigate what makes it different, but don’t delete it.

 It is the maximum value, but not an outlier. Don’t delete it.

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