QUANTATITIVE 1

BY MR.
TANDUN PROMIS WHATSAPP-672474630 QUANTITATIVE TECHNIQUES I
COURSE CODE: ACC112 QUANTITATIVE TECHNIQUES

OF MANAGEMENT I
INSTRUCTOR: Mr. TANDUN PROMIS
The objective this course is to teach student how to applied mathematical formulas and
equations to financial problems, market modeling and data analysis. Moreover, with this
strategy, financial professionals can better understand business performance, including
profitability and growth potential.
COURSE OUTLINE
CHAPTER ONE: INTRODUCTION TO FINANCIAL MATHEMATICS
1.1. Definitions
1.2. Basic notions
1.2.1. Simple interest
1.2.2. Determination of acquired value
1.2.3. Determination of commercial value and the rational actual value
1.2.4. Proportional rate and effective rate
1.3. Calculation of the average rate of a series of simultaneous investments
CHAPTER TWO: INTRODUCTION TO STATISTICS
2.1. Statistical series with one variable
2.1.1. Terminology
2.1.2. Graphical representation of data
2.1.3. Measures of central tendency and measures of dispersion
2.1.3.1. The mean
2.1.3.2. The mode
2.1.3.3. The median
2.1.3.4. The standard deviation
2.1.3.5. Quartiles
2.1.3.6. Coefficient of variation
2.2. Statistical series with two variables
2.2.1. Terminology
HIGHER INSTITUTE FOR PROFESSIONALISM AND EXCELLENCE (HIPTEX) ACADEMIC 2023-2024 Page 1
BY MR. TANDUN PROMIS WHATSAPP-672474630 QUANTITATIVE TECHNIQUES I
2.2.2. Scatter plot
2.2.3. Correlation coefficient and linear regression
2.2.4. The least square method
CHAPTER ONE
INTRODUCTION TO FINANCIAL MATHEMATICS
1.1. DEFINITIONS
Financial Mathematics is the application of mathematical methods to financial problems. (Equivalent
names sometimes used are quantitative finance, financial engineering, mathematical finance, and
computational finance.) It draws on tools from probability, statistics, stochastic processes, and
economic theory. Traditionally, investment banks, commercial banks, hedge funds, insurance
companies, corporate treasuries, and regulatory agencies apply the methods of financial mathematics
to such problems as derivative securities valuation, portfolio structuring, risk management, and
scenario simulation. Industries that rely on commodities (e.g. energy, manufacturing) also use financial
mathematics. Quantitative analysis has brought efficiency and rigor to financial markets and to the
investment process and is becoming increasingly important in regulatory concerns.
1.2. BASIC NOTIONS

1.2.1. Simple interest
The simple interest rate is the interest that a FRS earns during a period, which is to say in general,
the year. Thus a rate t = 8% = 0.08 means that 1FRS earns (or produces) an interest of 0.08FRS for
a year. From this simple definition, follows the rule to calculate the interest produced by a capital
C during n periods. Indeed, it suffices to multiply the interest rate t by C and by n, which gives the
Fundamental Formula of simple interest:
I: Interest produced by C during n periods;

C: loaned capital;
n: number of time units (n years);
t: the simple interest rate, for one year.
The formula (1) differs from the formula that we usually find in some works of financial
mathematics, namely the following formula:
Indeed, the difference between the formulas (1) and (2) comes from the fact that: -in formula (1),
the interest rate is taken for its true mathematical value, namely, for example, if t = 7% we will
take t = 0, 07; -in formula (2), the interest rate is not taken for its true mathematical value , i.e. for
example, for t = 7% we will take the value t = 7, given that the product n x C x t is already divided
by 100.
Formula (1) gives the interest I that the borrower must pay, after n years: I= n x C x t. The
calculation of simple interest only intervenes, in principle, for the short term, that is to say, for
periods of less than one year (a few days or a few months) because, as we will see, in the 2nd part,
for periods which exceed the year, one calculates, usually, compound interest. Under these
conditions, and for short-term durations, counted in months, fortnights, days, etc., we use formulas
which are deduced from formula (1)
A. Periods counted in months
If the duration is expressed in months, n months, for example, as n months equivalent to (n / 12)
years, the fundamental formula (1) becomes:
B. Periods counted in fortnights:

If the duration is expressed in fortnights, n fortnights, for example, as n fortnights equivalent to (n
/ 24) years, the fundamental formula (1) becomes:
C. Periods counted in days:

If the duration is expressed in days, n days, for example, as n equivalent days (n / 360) years (the
commercial year being 360 days), the fundamental formula (1) becomes:
The simple interest formulas (1), (3), (4) and (5) are relations between the 4 parameters, I (simple
interest), C ( loaned capital), n (number of time units) and t ( simple interest rate ); they make it
possible, consequently, to solve four different problems: determining one parameter, knowing the
three others. To do this, and in the case of durations counted for example in days, one of the
following 4 expressions is used:
Example 1: Calculate the simple interest that produces a capital of 50000.00FRS placed at interest
simple, at the annual rate of 7%, from April 5 to October 16 of the same year:
Example 2: What capital should be invested, at the simple interest rate of 5% per year, for 25 days
to have an interest of 350.00FRS?
Example 3: What simple interest rate t should be applied so that a capital of an amount equal to
15,000.00FRS lent for 80 days produces an interest of 300.00FRS?
Example 4: After how long does a capital of 10,000.00FRS placed at the simple interest rate of
6.5%, per year, produce an interest of 325.00FRS?
1.2.2. DETERMINATION OF ACQUIRED VALUE AND CURRENT VALUE.
1.2.2.1. Definition of acquired value (future value)
The acquired value CA or Cn , by a capital invested at a simple interest rate, during n periods is
equal to the invested capital C increased by the interest produced I. The acquired value is given, by
the following formulas:
CA or C n: Earned value;
I: Interest produced during n periods;
C: Capital invested or loaned;
n: number of investment periods;
t: the simple interest rate, for a period.
This last formula (10) becomes, in the case of periods counted, respectively, in months or in days:
A. Periods counted in months:
B. Periods counted in days:
As for the simple interest formulas (3), (4) and (5), the acquired value formulas (11) and (12), at
simple interest, are relations which link the 4 parameters C, Cn , t and n; they allow, consequently,
to solve four different problems: Determine a parameter knowing the 3 others; to do this, we have
recourse to the series of the 4 following formulas :
A.1. Periods counted in months:
B.1. Periods counted in days:
Example 5: What is the value acquired by a capital of 20,000.00FRS loaned, for 35 days, at the
simple annual interest rate of 7%?
Example 6: What simple interest rate must be applied so that a capital of 15,000FRS lent for 74
days has an acquired value, at the end of the loan, equal to 15 231FRS?
Example 7: What capital should be invested at the simple interest rate of 5% for 7 months to have
an acquired value of 25,367FRS?
1.2.2.2. Definition of the current value (present value)
As we did for the earned value, we can define the present value Ca, of a capital which reaches the
value C after an investment, at a simple interest rate t, for n periods, by the formula simple:
In this relation, C plays the role of an acquired value and Ca that of the invested or loaned capital
since we started from the fundamental relation of simple interest: C = Ca (1 + nt) to establish this
last relation. With always:
Ca: Current value;
C: Capital value after n investment periods;
n: number of placement periods;
t: the simple interest rate, for a period.
This formula of the present value of a capital becomes, in the case of given periods, respectively,
in months or in days:
B. Periods counted in months:
As for the acquired value formula, the present value formula, with simple interest, is a relation
which links the 4 parameters C, C a , t and not ; it therefore makes it possible to solve four
different problems: Determine a parameter knowing the 3 others.
B. Periods counted in months:
Example 9: A capital invested, for 5 months, at a simple interest rate of 6%, reaches a value of
15,000.00FRS, what is its current value?
Example 10: What simple interest rate should be applied for a capital of 20,000FRS loaned for 60
days has a present value, at the start of the loan, equal to 18,181.82FRS?
1.2.3. DETERMINATION OF COMMERCIAL VALUE AND THE RATIONAL ACTUAL
VALUE
The service rendered by the bank to its client by granting him an advance on the basis of the bill has a
price. This price is called a commercial discount. The commercial discount is the interest produced by
the face value of the note, at a simple interest rate, called the discount rate, during the period between
the date of discount and the date of sale deadline. From this simple definition, follows the rule for
calculating the discount produced by a commercial paper. In fact, it suffices to apply the fundamental
formula of simple interests:
With - E: Commercial discount produced by the commercial paper;

- VN: nominal value of the bill of exchange;
- n: discount period;
- t: discount rate.
The discount transaction is a short-term transaction; the duration is expressed as a number of days
between the date of discounting and the effect of the discount due date, if n is the number of days
(there are 360 days in a commercial year) the formula for calculating the commercial discount
becomes:
The discount transaction is a commercial transaction and not a credit transaction, so we apply the same
simple interest calculation formula but we speak of discount and discount rate instead of interest and
interest rate. Formula (3) is a relation between the 4 variables: E (the discount), VN (the nominal
value), n (the duration of the discount in days) and t (the discount rate); it makes it possible to solve 4
different problems: calculate one of these variables knowing the 3 others. To do this we use the
following relations:
Example 1: Calculate the discount produced by a bill of exchange with a nominal value of
40,000.00FRS due November 30, if it is discounted on October 5 of the same year at the discount rate
of 12%.
Example 2: Calculate the nominal value of a commercial paper which discounted at 9%, for a period
of 65 days, costs a discount of 345.25 FRS.
Example 3: Calculate the duration of the maturity of a commercial bill of nominal value for an
amount of 5,000.00FRS, which is discounted at 9%, produces a discount of 75.00 FRS.
Example 4: Calculate the discount rate of a commercial paper with a nominal value of 15,000.00FRS,
which is discounted for a period of 60 days, produces a discount of 250FRS.
1.2.3.1. CURRENT COMMERCIAL VALUE (Present value)
The face value is the value of the note on its maturity date, but on the discount date, the note is worth
less. Indeed the discount is retained immediately by the bank, which gives the customer the difference
between the nominal value of the bill, and the discount, this difference is called the current commercial
value (noted VA) of the bill of exchange.
If we use formulas (1) and (4), we can write:
If the duration of the discount is counted in days, this relation becomes:
Formula (9) is a relation between the 4 variables: VA (the current value), VN (the value nominal), n
(the discount period in days) and t (the discount rate); it makes it possible to the different problems:
calculate one of these variables knowing the 3 others. To do this we use the following relations:
Example 5: calculate the present value of a bill of exchange of nominal value 15,000FRS, due June 15
if it is discounted on April 13 of the same year rate discount of 9%.
Example 6: Calculate the nominal value of a commercial paper with a duration of The discount is 35
days, the discount rate 8% and the value on the date of the discount is 25,000 FRS.
Example 7: Calculate the maturity of a commercial paper whose face value is 12,500.00 FRS, the
current value is 12 000.00 FRS if the discount rate is 7.5%.
Example 8: Calculate the discount rate of a trade bill of nominal value 26,000.00 FRS, of present
value 25,650.00 FRS has a term of 45-day discount.
1.2.3.2. Rational discount

The bank, by immediately taking the discount, makes a loan withheld. The interest that should actually
be paid is the interest calculated on the amount actually loaned and not the interest calculated on the
face value of the note. The interest thus calculated is called the rational discount Er and the
corresponding present value is called the Rational Present Value Var. The rational discount Er
represents the real interest that the bank should, in principle, retain from the nominal value of the bill
to remunerate the current value of the bill. The rational discount Er is therefore the interest calculated
on the rational present value Var during a discount period of n days at a discount rate t. By applying
the fundamental formula of simple interests we have:
therefore
The nominal value VN represents an acquired value:
Which gives for the rational discount Er:
The rational present value Var is equal to
Which gives for the rational present value Var:
The rational discount is lower than the commercial discount, which means that the bank
withdraws more than necessary for a discount transaction. This causes the rational present value to be
greater than the commercial present value, which means that on the day of discounting, the bank gives
less than this that must be given
Example 11: Calculate the rational discount and the rational present value of a bill of exchange with
nominal value 23,250.00FRS, discount rate 6% and discount duration 45 days, between April 2,
discount day and May 17, date of maturity of the instrument. Compare the results with the commercial
discount and the current commercial value.
Example 12: Calculate the rational discount and the rational present value of a commercial paper of
Nominal value equal to 50 000.00FRS and due on December 31, discounted on July 20 of the same
year at rate of 12%. Compare the results to the business discount and the current business value.
1.2.3.3. Effective discount rate.
As we indicated, in the previous paragraph, the discount is taken by the bank on the date of the
discount, i.e. at the start of the period, which corresponds to what we have called a prepaid interest
loan. In the case of a discount transaction, the creditor does not pay a discount calculated at the
advertised discount rate ta but, in reality, pays a discount calculated at a higher rate called the effective
rate teff . This effective rate must be calculated on the basis of the capital actually advanced, by the
bank, namely, the present value VA:
Which gives for the effective rate:
This relation allows to calculate the displayed rate ta as a function of the effective rate teff:
Note that, in formula (17) (respectively (18)), the effective rate (respectively the announced rate) does
not depend on than the advertised rate (respectively the effective rate) and the discount period
Example 13: Calculate the effective discount rate of a trade bill whose discount period is 56 days and
the discount rate is of 12%.
Example 14: At what rate should a bank discount bills business that we present to her if she wishes
that its effective rate be 9% for a discount period of 90 days? From the formula giving the effective
rate, we can calculate the announced rate:
Example 15: Calculate the discount duration of an instrument whose displayed discount rates and
effective rate are 9.85% and 10.15% respectively?
1.2.3.4. The real discount rate.
Considering the set of what is retained by the bank (AGIOS TTC) as interest on the nominal value VN
of the bill of exchange, during the real discount period n, we obtain the real discount rate tr given by
the formula:
This rate is higher than the announced discount rate t.
Example 16: Consider a bill of exchange with a Nominal Value of 40,000.00 DH, due on November
30 and discounted on October 5 of the same year under the following conditions :
- Discount rate: 12%.
- Commission: 10 FRS.
- Take account of a bank day.
- VAT rate: 10 %.
1.2.3.5. The cost discount rate
If we look at the client side, the latter has disbursed the AGIOS TTC to benefit from an effective
capital which is the net value of the bill. The AGIOS TTC retained by the bank therefore corresponds
to an interest on the capital effectively loaned which is the net value and for a period which is the
actual duration of the discount. The corresponding rate is a rate of return of the company t re is the real
cost of this operation paid by the customer.
This rate is higher than the announced discount rate t.
Example 17: Take the data from example 16 and calculate the enterprise rate te:
Under these conditions, it is the AGIOS HT which corresponds to an interest on the capital actually
lent which is the net value and for a duration which is the real duration of the discount . The business
cost rate t re becomes:
Example 18: Let us take the data from example 16 and calculate the cost rate of a company subject to
VAT:
1.2.3.6. The placement rate
If we are on the side of the bank, the latter has made an investment of an effective amount
corresponding to the Net value of the note. The interest produced by this investment corresponds only
to the commercial discount E, the commissions are intended to cover charges and the VAT is paid
back to the state. The corresponding rate is an investment rate tp, it is the real return realized by the
bank during this operation.
Example 19: Take the data from Example 16 and calculate the placement rate.
Example 20: Take the data from Example 16 and check the order of the three rates relating to the
discount transaction.
1.2.4. PROPORTIONAL RATE AND EFFECTIVE RATE

1.2.4.1. Effective rate for withholding interest
The simple interest rate that has been defined so far assumes payment of interest at the end of the
loan period; in the opposite case where the borrower is required to pay the interest, at the
beginning of the loan period, that is to say at the time of payment by the lender of the loaned
capital, the loan is said, loan at withholding interest on the date of subscription.
In the case of a prepaid loan, the borrower does not pay interest calculated at the advertised
interest rate but, in effect, pays interest calculated at a higher rate called the effective rate. This is
particularly the case with public treasury bills which pays interest at the time of subscription.
Example 16: Kamal lends a sum of 10,000.00 DH to Said, under the following conditions:
Duration: 6 months; Simple interest rate: t = 10% per year; Interest is paid upon signing the
contract. We deduce the expression giving the effective rate teff according to the announced rate ta
If the duration is expressed in months, this formula becomes:
Note that the effective rate does not depend on the capital C , which is normal. It should only
depend on the posted rate and the duration of the loan.
Example 17: The effective rate corresponding to a withholding interest rate of 10% for an
investment period of 6 months is:
Example 18: Calculate the announced rate ta of a loan at withholding interest, granted for
150 days, the effective rate of which is 8%:
1.2.4.2. Real interest rate.
Generally, the bank invoices, when granting a loan, certain costs (fees for opening a file, etc.),
under these conditions, the borrower pays a real interest rate higher than the announced rate,
indeed, if the capital loaned, during n days is C, that the announced interest rate is ta and that the
fees invoiced, by the bank are f, the real rate tr, in the case where the interest is not deducted, is
calculated as follows:
Interest:
Capital granted as a loan: C '= C – f

Real interest rate:
Which gives after replacing C 'by (C - f) and I by
Note that the real interest rate tr is much higher than the announced rate ta and that it does not
depend on the duration of the loan.
Example 19: What is the real interest rate of a loan of 10,000.00FRS, granted for 75days, at the
advertised rate of 7% if the administrative fees retained by the bank amount to 150.00FRS
Example 20: What are the fees charged by the bank if when granting a loan of 25,000.00FRS, the
advertised rate and the real rate are respectively equal to 7% and 7.05 %?
1.2. AVERAGE RATE OF A SERIES OF INVESTMENTS MADE SIMULTANEOUSLY.
Let k capital C1, C2 ,… .., Ck be placed simultaneously at simple interest at the respective rates t1,
t2 , ……,tk and during the respective durations n1, n2 ,… ..nk , the total interest produced by the k
capitals is equal to the sum of the simple interest produced by each capital.
By definition, the average rate of several investments is the single rate which is applied to the
respective capital and for their respective durations, would give the same total interest. We therefore
have by definition:
Which gives for tavg:
The average rate of several placements is therefore the arithmetic mean of the different rates weighted
by the products n i Ci . This is quite obvious from the fact that the interest is, as it appears from the
fundamental formula (1), proportional to n and to C. If one had used the formula giving I with the time
counted in days or in months, we would have ended up with the same formula above which gives the
average interest rate, in fact, we will have successively
For periods counted in days:
Which gives, after simplification by 360, the same formula above for tavg.
For periods counted in months:
Which gives, after simplification by 12, the same formula above for tavg.
As for the fundamental formula of simple interest and that of acquired value, the formula of the
average interest rate of several capital invested, during different periods at different interest rates, is a
relation which binds several sets of parameters which are: tavg , the different C i , the different t i and
the different n i ; it therefore makes it possible to solve several different types of problems: Determine
a parameter knowing all the others. Since capital C i play symmetrical roles, we propose to study the
case 4 following possible:
Case one: Calculating the average interest rate tavg from the knowledge of all other parameters.
Example: Three capitals of respective amounts 10,000.00 FRS, 20,000.00FRS and 40,000.00FRS
were placed at simple interest at the respective rates: 8%, 6%, and 10% during the respective durations
of 8 months, 9 months and 6 months. Calculate the average investment rate of these three capitals.
2nd case: Calculation of the investment interest rate of one of the capital from knowledge of all other
parameters.
Example: three capitals of respective amounts 15,000.00FRS, 31,500.00 FRS and 5,000.00 FRS were
invested, at simple interest, during the respective periods of 30 days, 50 days and 45 days. The annual
interest rates at which the first two capitals have been invested are respectively 7% and 5%. What must
be the investment rate of the 3rd capital so that the average annual investment rate of the 3 capitals is
6%?
3rd case: Calculation of the amount of one of the capitals from the knowledge of all the others
parameters
Example: Three capitals of respective amounts 7,000.00 FRS, 20,000.00 FRS and C3 were invested at
the respective annual simple interest rates 9%, 5% and 10%, during the respective durations of 100
days, 55 days and 36 days. What is the amount of the 3rd capital so that the average annual investment
rate of the 3 capitals is 7%?
APPLICATION EXERCISES.
Exercise 1.
a) Calculate the interest produced by the investment of 50 000.00FRS, at the simple interest rate of
12% per year, from April 25 to September 12 of the same year.
b) Calculate the capital which, placed at 9% from March 10 to June 15, of the same year, acquired
a value of 10,242.50 FRS.
c) At what simple interest rate a capital of 25,000.00FRS, placed from April 16 to September 15 of
the same year, produces interest of 844.44 FRS?
d) A capital of 8000.00 FRS loaned at the rate of 15% was repaid, on June 10, by the payment of a
sum of 8200.00 FRS. On what date was this capital loaned?
Exercise2.
a) Calculate the capital which placed, for 5 months, produces a simple interest of 256.37RS,
knowing that the interest rate is 7.5%.
b) Calculate the duration, in months, of a capital of 12,341.50RS so that it reaches an amount of
13,000.00FRS if the simple interest rate is 8%.
c) Calculate the simple interest rate of a capital of 7,850.00RS which, placed for 7 months,
produces interest of 297.65RS.
d) Calculate the simple interest rate on a capital of 9,325.00RS which, placed for 3 months,
reaches the amount of 9,490.52RS.
Exercise 3.
We consider the following 4 capital invested as follows:
¤ 52,000.00 FRS placed from April 15 to July 23 of the same year, at 6%;
¤ 20,000.00 FRS placed from May 10 to August 25 of the same year, at 7%;
¤ 18,500.00 FRS placed from June 5 to September 10 of the same year, at 6.5%;
¤ 36,000.00 FRS placed from July 20 to August 12 of the same year, at 9%.
a) Calculate the overall interest.
b) Calculate the average investment rate of the 4 capitals.
Exercise 4.
We consider the following 3 capital invested as follows:
¤ 6,500.00 FRS placed from March 7 to June 30 of the same year at the rate of 7%;
¤ 3,800.00 FRS placed from April 15 to July 10 of the same year at the rate of 10%;
¤ 8,000.00 FRS placed from April 20 to October 15 of the same year at the rate of 12%.
a) Calculate the overall interest.
b) Calculate the average investment rate of the 3 capitals.
c) At what rate should we place a 4th capital of 7,500.00FRS so that this average rate becomes
equal to 10% if the investment period of this capital is 25 days?
Exercise 1.
a) Calculate the discount due for an effect with a nominal value of 15,000.00 FRS due on May 15 and
discounted on March 23 at the rate of 7.5%.
b) Calculate the discount rate at which a negotiated bill of nominal value 8,500.00FRS maturing on
June 28 has been negotiated if it is discounted on June 3 and has cost a discount from 35.42 FRS.
c) Determine the discount expiry date of a commercial bill of nominal value 5,250.00 FRS, discounted
on August 13 at the discount rate of 8% and having cost 87.50 FRS of discount.
d) Calculate the face value of a bill of exchange, discounted on April 5, at the rate of 5% and having
cost 93.75 FRS discount if its due date is July 4.
Exercise 2.
a) Calculate the present value of a bill of exchange of nominal value 3,650.00FRS, discounted on July
10 for an expiry date on August 9 and having caused a discount of 27.38 FRS.
b) Calculate the present value of a commercial paper which is discounted on May 8 for a maturity on
July 7 and traded at the rate of 8.5% has a face value of 12,250.00 FRS.
c) Calculate the discount rate of a bill of exchange with a nominal value equal to 11,250.00 FRS which
discounted on February 3 for a due date on March 20, acquires a current swallower of 11,133.98 FRS.
d) Determine the discount expiry date of a commercial bill of nominal value 10,500.00 FRS,
discounted on August 7 with a current value of 10,246.25 FRS if it was negotiated at the rate 7.25%
discount.
CHAPTER TWO:
GENERAL INTRODUCTION TO DESCRIPTIVE AND BIOSTATISSISTIC
WHAT IS BIOSTATISTICS?
Biostatistics is using of statistical data for the study of biological changes in humans, such as functions
and diseases, reproduction, growthand death. Biostatistics is the application of statistics to a variety of
topics inbiology.
What is Statistics?
Statistics is the study of how to collect, organize, analyze, and information Interpret from the data of
the digital. Statistics – a descriptive measure of calculated from sample data to serve as an estimate of
an unknown population parameter.
Characteristics of statistics
(i) Statistics are the aggregates of facts. It means a single figure is not statistics. For example, national
income of a country for a single year is not statistics but the same for two or more years is statistics.
(ii) Statistics are affected by a number of factors. For example, sale of a product depends on a number
of factors such as its price, quality, competition, the income of the consumers, and so on.
(iii) Statistics must be reasonably accurate. Wrong figures, if analyzed, will lead to erroneous
conclusions. Hence, it is necessary that conclusions must be based on accurate figures.
(iv) Statistics must be collected in a systematic manner. If data are collected in a haphazard manner,
they will not be reliable and will lead to misleading conclusions.
(v) Collected in a systematic manner for a pre-determined purpose
Types of Statistics (Descriptive & Inferential)
Statistics is one of the most important parts of research today considering how it organizes data into
measurable forms. However, some students get confused between descriptive and inferential statistics,
making it hard for them to select the best option to use in their research. If you look closely, the
difference between descriptive and inferential statistics is already pretty obvious in their given names.
“Descriptive” describes data, while “inferential” infers or allows the researcher to arrive at a
conclusion based on thecollected information.
Descriptive statistics
1. Descriptive statistics merely “describes” research and does not allow for conclusions or
predictions.
2. Descriptive statistics usually operates within a specific area that contains the entire target
population.
Summary
Descriptive – used to organize and describe a sample.
Descriptive statistics – any of numerous calculations which attempt to provide aconcise summary
of the information content of data (for example, measures of central tendency, measures of
dispersion, etc.).
Inferential statistics
1. Inferential statistics makes it possible for the researcher to arrive at a conclusion and predict
changes that may occur regarding the area of concern.
1. Inferential statistics usually takes a sample of a population, especially if the population
is too large to conduct research on.
Summary
Inferential – used to extrapolate from a sample to a larger population Inferential
statistics involves methods of using information from a sample to draw conclusions about
the population.
IMPORTANCE OF STATISTICS
There are three major functions in any business enterprise in which the statistical methods are useful.
These are as follows:
(i) The planning of operations: This may relate either to special projects or to the recurring activities
of a firm over a specified period.
(ii) The setting up of standards: This may relate to the size of employment, volume of sales, fixation
of quality norms for the manufactured product, norms for the daily output, and so forth.
(iii) The function of control: This involves comparison of actual production achieved against the norm
or target set earlier. In case the production has fallen short of the target, it gives remedial measures so
that such a deficiency does not occur again.
2.1.1 STATISTICAL TERMS
WHAT IS DATA
Data is information or Facts collected for statistical purposes. It can be obtained from an investigation
a survey or an experiment. Most of the statistician data are always obtained from a series of
observation indicating some variables characteristics taken into consideration in a group. This does not
mean that all data must be in a numerical form. They can be primary or secondary data depending on
the type of variables. Primary data is a data collected for a particular purpose meanwhile secondary
data is data earlier collected for some other purpose.
1. THE POPULATION
A population may be defined as a group of people, things or animals which possess common
characteristics which are particular in a given moment and that can make an object of study. In
statistics, population refers to all members of a group concerned. It can also be referred to as a well-
defined group of animals, people, plants or objects.
2. THE SAMPLE
According to the oxford Advanced Learner’s Dictionary of current English AS Hornby (1985: 753) a
sample may be defined as a specimen, one of a number, part of a whole taken to show what the rest is
like. In terms of statistics it may be referred to as a set of individual chosen scientifically from a study
in a way to better represent them in a possible and truthful manner.
3. SAMPLING TECHNIQUES
In statistics, samples are not obtained haphazardly. It has a specific technique of obtaining small
portions of the entire population some common techniques used are;
4. THE SIMPLE RANDOM SAMPLING
To select a sample, the simple random sampling method should be used. In this case, each member of
the entire population or accessible population has an equal chance to be selected. As such this method
is also known as probability sample. However the selection of one number does not influenced the
selection of others in anyway. This method are balloting and can use a computer to select random
number.
B. THE CLUSTER SAMPLING
With cluster sampling, the population is divided into small groups or cluster and simple random
selection of cluster is done. For example in order to choose the school prefect, we can select the best
three pupils at randomly from four different classes out of the six classes making the school
population. However the position of the four selected classes had nothing to do with the other two
unselected classes.
C. THE STRATIFIED SAMPLING
With the stratified sampling, the population is divided into strata depending on the degree of the
characteristics present and members of the sample are randomly selected the strata. Equal percentages
are to be selected from each stratum. However, sex, age, income group, occupation can be used as a
natural divisions in strata. A stratified sampling method can be used such as that 10% are females
meanwhile 10% are males. Another example may be that 10% represent the high income earners while
the other 10% represent low income earners.
D. THE SYSTEMATIC SAMPLING
This is a sampling method that systematically or regularly select items or subjects under
investigation. If the names of the students of level II are written in a register and the researcher decides
to select one student after every two names then the selection is to be systematic. That is to say there is
a constant skip. For example,
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20.
Here the third, the sixth, the ninth, the twelfth, the fifteenth, the eighteenth are selected. Take note of
the constant skip of numbers.
E. THE QUOTA SAMPLING
With quota sampling, specific number of member has to be drawn from each group the population that
makes up the sample are defined. These numbers are called quota. The researcher uses this discretion
to pick out member to constitute each quota. For example a researcher may decide to interview 20
level I students, 15 level II students, 15 level III students, 10 master I and 5 master II. The individual
selected for interview depends on the researcher’s discretion. Therefore it is an example of a non-
probabilistic sampling.
F. THE PANEL SAMPLING
With this method the sample is used to obtain data twice or more times. This has the advantage of
measuring change and long term trends. That is monitoring trends is very easy when this sampling
method is used. However the problem of replacement may cause inconsistency in the trends.
G. MULTI-STAGE SAMPLING
This type of sampling technique involves multiple random selections. This concerns a large population
case. For example if a researcher wants to study some variation in students in large town, at least 600
students he/she may start by selecting at random some 20 schools in the town. Then he/she can select
30 students from each school at random for data collection. As such only two stages are involved.
II. 4 THE METHODS OF DATA COLLECTION
In research or statistical analysis, data collection is a delicate exercise since one must rely on
information or results obtained. As such, faulty data results can mislead the conclusion. However, the
type of data required, the ability of the researcher, the methods of collection of the required data can
influence the results arrived at. Some methods used in collecting data are;-
A. INTERVIEW
In this case, the interviewer seeks information from the by talking with the subject. Personal
interviews are very easy and more information can be asked by the interviewer. The problem here is
that the interviewer may be bias and falsified the results.
B. THE OBSERVATION METHOD
According to Allen and Santrock 1993, observation is anything that we can do that is directly
observed. In this case, behavioral study and observation is very useful in statistics. For example to find
out if discipline exist in a school we can simply observed the behavior of the students of that particular
school. This observation may participant or non-participant.
C. THE QUESTIONNAIRE
A questionnaire is made up of a list of questions or items expecting the respondent to answer. The
choice of questions depends on the researcher’s need. Questionnaire are particularly good for survey
research designs. Questionnaire has a greater advantages in that, it can be used with a large samples.
The response can be stored and retrieved when need be.
The disadvantages are the low return rate, difficulty in constructing valid questionnaires and the
inability of the researcher to ask further questions where there is doubt.
D. THE EXPIREMENTING AND RECORDING
With this method the researcher carry out experiments and record the data for analysis from which
conclusions are drawn. In comparing two results the researcher can records scores by subject after
using the different method in order to compare the mean.
5. A PILOT SURVEY
A pilot survey is a trial and error investigation in which the work ability of the instrument is tried
out. This can also be called pilot study. The aims of the study include:
 To test the techniques of the method prior to their use.

 To find out if the instruments for data collection is valid.
 To find out if interviewer and respondents can understand and answer questions.
2.1.2. GRAPHICAL REPRESENTATION OF DATA
INTRODUCTION
The information data contained may not be easily understood if it is not well presented. This chapter
deals with the four ways of data presentation:
1. A report in words;
2. Frequency tables of distribution;
3. Charts and diagrams;
4. Graphs and statistics.
1. REPORTS
Report is one of the most widely used methods of presenting data as found in many companies and
newspapers etc. A report gives room for explanations, emphases and interpretations to be made.
However it is also possible for the data to be distorted or for data which do not fit the author’s
preconceived ideas to be omitted or to be dealt with sufficiently.
When drawing up a report, the statistical investigation involving the collection, the classification, the
analysis and the interpretation of the data should follow and the amount of detail of each of these to be
included will be decided by the author. Many reports take these format:
1. Terms of references
2. Methods of data collection and analysis
3. Findings
4. Conclusions
5. Recommendations.
2. TABLES
Statistical data are often presented in the form of tables. A table displays detailed numerical
information concisely and does not give room for any interpretations or emphases except by the use of
a footnote. A table arranges data in a horizontal rows and vertical columns. Generally a table is better
if it is designed such that it has more rows than columns. This is illustrated by comparing the tables
below which shows the water sources of some city dwellers.
Table 5.1: Sources of water; correct layout:
Sources of water
Age group Own taps Public taps totals
Under 18 4 14 18
18 - 23 10 15 25
24 - 29 25 18 43
30 - 35 32 13 45
Over 35 12 6 18
Totals 83 66 149
Suppose we rather decide to draw a table which will contain more columns than rows as in table 5.2,
the information will be less easy to understand.
Table 5.2: sources of water incorrect layout.
Age groups
Sources of water Under 18 18 - 23 24 - 29 30 - 35 Over 35 Total
Own taps 4 10 25 32 12 83
Public taps 14 15 18 13 6 66
Totals 18 25 43 45 18 149
3. FREQUENCY DISTRIBUTION TABLES
A frequency distribution table is an efficient ways of summarizing and organizing large data such that in shows
events and the number of times the events occur.
For example a die is rolled 24 times and the following results are recorded.
6 3 1 4 1 6
5 2 4 3 5 5
4 1 5 2 2 6
5 3 3 4 5 5
When a die is rolled, it constitutes a variable Z which is limited to the values 1, 2, 3 , 4 , 5 , and 6. The above data
can be arranged in a frequency distribution as follows.
x f
1 3
2 3
3 4
4 4
5 7
6 3
Total 24
f = Frequency the number of times each number occurs when the die is rolled.
Example 2: The following are the marks scored by 30 pupils in Math’s Test.
15 17 8 10 14 11
9 10 9 8 12 13
14 16 15 12 10 14
12 14 12 16 13 10
8 14 15 15 11 17
The frequency distribution table is as follows:
Score (x) Frequency (f)
8 3
9 2
10 4
11 2
12 4
13 2
14 5
15 4
16 2
17 2
Total 30
f = n = ∑f = 30
Scores = variable = x
The table above is a frequency distribution table. A frequency distribution is a tabulation of data that
indicates the number of times a score or group of scores occurs. When the scores are not grouped as
above the frequency distribution is known as an ungrouped frequency distribution.
At times the data may be too large so that if many of the scores are not grouped together the frequency
distribution table that will result will be too cumbersome. For example suppose a teacher gave a test in
Maths for 60 pupils or students and obtained these results from the candidates:
68 55 65 42 64 45 56 59 56 42
38 50 37 42 53 52 54 57 49 63
54 38 46 49 33 43 40 29 43 60
69 54 64 41 63 44 55 58 55 41
37 49 36 41 52 51 53 49 58 64
55 37 47 50 34 44 39 30 42 61
Data such as these scores which have not been organized are numerically known as raw data. A first
step in organizing these scores could be to reorder or rank them from the highest to the lowest scores
(or from the lowest to the highest). Such an arrangement is known as an array or a rank distribution.
The students should produce the array for the above data i e 29, 30, 33, 34, 36, 37, 37, 37, etc. Or 69,
68, 65, 64, 64, 64, 63, 63, etc.;
When scores are arranged to form an array, all identical scores are grouped together so that their
frequencies can be readily determined and furthermore the highest lowest scores are easily detected.
The second step in organizing and summarizing these scores could be by developing a frequency
distribution which will indicate each score and its frequency ( i.e the number of times it occurs) in the
data .
Table 5.3: Frequency distribution table for students’ score in statistics examination
Score(x) Tally Frequency ( f)

29 I 1
30 I 1
33 I 1
34 I 1
36 I 1
37 III 3
38 II 2
39 I 1
40 I 1
41 III 3
42 IIII 4
43 II 2
44 II 2
45 I 1
46 I 1
47 I 1
48 I 1
49 IIII 4
50 II 2
51 I 1
52 II 2
53 II 2
54 III 3
55 IIII 4
56 II 2
57 I 1
58 I 1
59 I 1
60 I 1
61 I 1
63 II 2
64 III 3
65 I 1
68 I 1
69 I 1
TOTAL 60
The above data could be made more manageable by grouping some of the scores together to form what
is known as class intervals e.g. All the scores between 29 and 33 (inclusive) can be grouped to form a
class interval. The numbers of scores which occurs within a class interval is known as the class size or
width. The class interval 29 -33 has a width of 5. Using this width of 5, we can develop a grouped
frequency distribution for the data above which will be as below.
Table 5.4 Frequency distribution for student’s scores in MATH’S TESTS
Class interval Tally Frequency

29 – 33 III 3
34 – 38 IIIII II 7
39 – 43 IIIII IIIII I 11
44 – 48 IIIII I 6
59 – 63 IIIII 5
64 – 68 IIIII 5
69 – 73 I 1
TOTAL 60
It should be noted that the choice of the class intervals depends on the statisticians and an alternative
grouping of the data above could just be as valid.
The grouping of data enable us to detect any pattern that exists in it. For instance in the example
above, the scores clusters around the class intervals 39 – 43, 49 – 53, and 54 – 58. Even though it may
reveal any pattern, grouping also results in the lost specific information eg the grouped frequency
distribution table no longer specifies the number of students who scored 29, 30, 33, and so no.
HOW TO DETERMINE THE CLASS SIZE:
1) First decide on the number of classes you will like to have. Most statisticians are of the opinion that
these should be between 10 and 20 to suit a balance between compressing the data too much and
giving too much details of it.
2) Determine the range of the score (range = highest score to lowest score). In our example range = 69
– 29 = 40
3) Divide the range by the number of class intervals (you will like to have) and approximate to the
nearest whole number. This gives the class size by supposing we had wished to group the data in our
example above into 10 class intervals, the class size will be I = 40/10 = 4. This means in each class
interval we shall have only four scores and our intervals would have been 29 – 32, 33 – 36, 37 – 40
etc.
ADDITIONAL INFORMATION THAT MAY BE CONTAINED IN FREQUENCY

DISTRIBUTION TABLE (OF GROUPED DATA):
1) CLASS LIMITES.
These are the extreme scores that are found in class interval. The class limit as given in frequency
distribution are known as the stated limit and the lower score is known as the lower class limit, while
the higher is known as the upper class limit. For example in a class interval 5 – 9 and 10 – 14 , 5 and
10 are the lower class limit while 9 and 14 are the upper class limit .
NB To determine the class size of a frequency distribution subtract two successive stated lower limit or
two successive stated upper limit eg 10 – 5 and 14 – 9 = 5 in the above example.
2) CLASS BOUNDARIES OR EXAT LIMIT OF CLASS INTERVALS:
The exact or true lower limit of any interval is usually have a limit (i.e. 0.5) lower than the smallest or
lowest score in that interval, while the true upper limit is usually have a unit (i.e. 0.5) greater than the
highest or largest score in that interval. For example the true lower limit for the interval 0 – 9 is 4.5 (5
– 0.5) while the true upper limit is 9.5 ( I e 9 + 0.5 ). This gives the following class boundary 4.5 ≤ x ≤
9.5 or simply 4.5 – 9.5 .Also the true limit of the interval 10 – 14 is 9.3 while the true upper limit is
14.5 given the class boundary 9.5 ≤ x ≤ 14.5 or simply 9.5 – 14.5
3) THE MIDPOINT OR THE CLASS MARKS OR CLASS INTERVAL.
The midpoint or class mark is the score which at the middle of the interval. This score is usually taken
to be representative of the interval. The midpoint is obtained by adding the upper limit of an interval to
the lower one add divided by two.
𝑙𝑜𝑤𝑒𝑟 𝑙𝑖𝑚𝑖𝑡+𝑢𝑝𝑝𝑒𝑟 𝑙𝑖𝑚𝑖𝑡

Midpoint 2
Example: what are the midpoints of the class interval 3 – 7; 8 – 12
7 10
Midpoint of interval 3 – 7 is 3 + 2 = 2 = 5
12 20
Midpoint of interval 8 – 12 is 8 + = 2 = 10
2
4) FREQUENCY PERCENTAGE (F %)
The frequency percentage of a class interval is defined as the frequency of that interval divided by the
sum of frequencies × 100.
𝑓𝑖
𝑓% = 𝑓𝑖 × 100 where
𝑓𝑖 =Frequency of class interval
𝑓𝑖 = ∑𝑓 = Sum of frequencies
𝑓% = Frequency percentage
Consider the frequency distribution for students’ scores in a Maths test as given in table 5.4. What are
the frequency percentages for the intervals 34 – 38; 49 – 53 and 64 – 68?
For interval 34 – 38; 𝑓𝑖 = 7 ; 𝑓𝑖 = 60
7
𝑓% = 60 × 100 = 11.67%
For interval 49 – 53; 𝑓𝑖 = 11 ; 𝑓𝑖 = 60
11
𝑓% 60 × 100 = 18.33%
For interval 64 = 68. 𝑓𝑖 = 5; 𝑓𝑖 = 60
5
𝑓% 60 × 100 = 8.33%
5) CUMULATIVE FREQUENCY(𝒄𝒇)
The cumulative frequency for class interval consists of the frequency for that interval plus the
frequencies of the all the preceding class intervals. This gives rise to cumulative frequency distribution
for all the class intervals. In constructing the cumulative frequency table, we start adding frequencies
from the class interval with the lowest scores towards that with the highest scores.
Example: Given the frequency distribution table below add to a column of cumulative frequencies.
Table 5.5 Frequency of distribution table of an arbitrary data.
Class interval Frequency
13 – 15 3
10 – 12 4
7–9 1
4–6 3
1–3 2
The addition of the 𝑐𝑓column gives the following distribution table.
Table 5.6: Frequency distribution table including the cumulative frequency column for data table 5.5
Class interval Frequency Cumulative frequency(𝑐𝑓)

13 – 15 3 13
10 – 12 4 10
7–9 1 6
4–6 3 5
1–3 2 2
NB The 𝑐𝑓 value for the interval that contains the highest scores is always the same as the sum of all
the frequencies in the given frequency distribution.
6) CUMULATIVE FREQUENCY PERCENTAGES (cf %)
The cumulative frequency of a class interval corresponds to the cumulative frequency of that class
interval divided by the total sum of frequencies (corresponds to the highest cumulative frequency
𝑐𝑓𝑖
value) × 100. Thus 𝑐𝑓% = 𝑐𝑓𝑡 × 100 where
𝑐𝑓𝑖 = Cumulative frequency of the class interval

𝑐𝑓𝑡 = Highest value of cumulative frequency.
Alternatively the cumulative frequency percentage ( or simply the cumulative percentage ) of class
interval is obtained by adding the frequency percentage of that class interval to the frequency
percentages of all class intervals precede it. If we use data in table 5.6 as an example, we can add the
frequency percentages and the cumulative frequency percentages to obtain the table below.
Table 5.7: Frequency distribution table showing 𝑐𝑓, 𝑓%, 𝑐𝑓%
Class interval 𝑓 𝑐𝑓 𝑓% 𝑐𝑓%

13 – 15 3 13 23.07 100
10 – 12 4 10 30.77 76.91
7–9 1 6 7.69 46.14
4–6 3 5 23.07 38.45
1–3 2 2 15.38 15.38
The cumulative frequency percentage of the class interval with the highest scores is always a value
which is either 100 or which is rounded to 100. This is so because the sum of all the percentage
frequencies should be 100.
Dot Plots
The dot plot is one of the simplest ways of graphical representation of the statistical data. As the name
itself suggests, a dot plot uses the dots. It is a graphicdisplay which usually compares frequency within
different categories.
The dot plot is composed of dots that are to be plotted on a graph paper.
A dot plot may look like:
Example 1: Draw a dot plot for the following data.
Favorite Colors Red Blue Green Yellow Orange Indigo Violet

Number of 9 7 5 3 2 1 3
Students
Bar Graph
A bar graph is a very frequently used graph in statistics as well as in media. A bar graph is a type of
graph which contains rectangles or rectangular bars. The lengths of these bars should be proportional
to the numerical values represented by them. In bar graph, the bars may be plotted either horizontally
or vertically. But a vertical bar graph (also known as column bar graph) is used more than a horizontal
one. A vertical bar graph is shown below:
Number of students went to different states for study:
The rectangular bars are separated by some distance in order to distinguish them from one another. The
bar graph shows comparison among the given categories. Mostly, horizontal axis of the graph
represents specific categories and vertical axisshows the discrete numerical values.
Example 2: Plot a bar graph from the data given below.
Students A B C D
Marks 8 14 9 5
Line Graph
A line graph is a kind of graph which represents data in a way that a series of points are to be
connected by segments of straight lines. In a line graph, the data points are plotted on a graph and they
are joined together with straight line. A sample line graph is illustrated in the following diagram:
The line graphs are used in the science, statistics and media. Line graphs are very easy to create. These
are quite popular in comparison with other graphs since they visualize characteristics revealing data
trends very clearly. A line graph gives a clear visual comparison between two variables which are
represented on X-axisand Y-axis.
Histogram and Frequency Polygon
The histograms and frequency polygons are very common graphs in statistics. A histogram is defined
as a graphical representation of the mutually exclusive events. A histogram is quite similar to the bar
graph. Both are made up of rectangular bars. The difference is that there is no gap between any two
bars inthe histogram. The histogram is used to represent the continuous data.
A histogram may look like the following graph:
The frequency polygon is a type of graphical representation which gives us better understanding of the
shape of given distribution. Frequency polygons serve almost the similar purpose as histograms do.
WE have a look at a sample of frequency polygon:
Example 3: Draw a histogram from the given data.
Test Score 24-30 30-36 36-42 42-48 48-54 54-60

Frequency 5 6 8 5 10 4
2.1.3. MEASURES OF CENTRAL TENDENCY AND MEASURES OF DISPERSION

The measures of central tendency enable us to compare two or more distributions pertaining to the
same time period or within the same distribution over time. For example, the average consumption of
tea in two different territories for the same period or in a territory for two years, say, 2003 and 2004,
can be attempted by means of an average.
2.1.3.1. The mean
Adding all the observations and dividing the sum by the number of observations results the arithmetic
mean. Suppose we have the following observations: 10, 15,30, 7, 42, 79 and 83
These are seven observations. Symbolically, the arithmetic mean, also called simply mean is
It may be noted that the Greek letter μ is used to denote the mean of the population and n to denote the
total number of observations in a population. Thus the population mean μ = ∑x/n. The formula given
above is the basic formula that forms the definition of arithmetic mean and is used in case of
ungrouped data where weights are not involved.
UNGROUPED DATA-WEIGHTED AVERAGE
In case of ungrouped data where weights are involved, our approach for calculating arithmetic mean
will be different from the one used earlier.
Example: Suppose a student has secured the following marks in three tests:
Mid-term test 30
Laboratory 25
Final 20
The simple arithmetic mean will be=30+25 + 20/3 =25
However, this will be wrong if the three tests carry different weights on the basis of their relative
importance. Assuming that the weights assigned to the three tests are:
Mid-term test 2 points
Laboratory 3 points
Final 5 points
Calculation of a Weighted Mean
Example: An investor is fond of investing in equity shares. During a period of falling prices in the
stock exchange, a stock is sold at 120FRS per share on one day, 105 FRS on the next and 90 FRS on
the third day. The investor has purchased 50 shares on the first day, 80 shares on the second day and
100 shares on the third' day. What average price per share did the investor pay?
GROUPED DATA-ARITHMETIC MEAN
For grouped data, arithmetic mean may be calculated by applying any of the following methods:
(i) Direct method, (ii) Step-deviation method
In the case of direct method, the formula x = ∑fm/n is used. Here m is mid-point of various classes, f
is the frequency of each class and n is the total number of frequencies. The calculation of arithmetic
mean by the direct method is shown below.
Marks No. of
Students
0-10 4
10-20 8
20-30 11
30-40 15
40-50 12
50-60 6
60-70 2
Total 58
In the case of short-cut method, the concept of arbitrary mean is followed. The formula for calculation
of the arithmetic mean by the short-cut method is given below:
2.1.3.2. The mode

The mode is another measure of central tendency. It is the value at the point around which the items
are most heavily concentrated. As an example, consider the following series: 8,9, 11, 15, 16, 12, 15,3,
7, 15
There are ten observations in the series wherein the figure 15 occurs maximum number of times three.
The mode is therefore 15. The series given above is a discrete series; as such, the variable cannot be in
fraction. If the series were continuous, we could say that the mode is approximately 15, without further
computation. In the case of grouped data, mode is determined by the following formula:
Where, l1 = the lower value of the class in which the mode lies
fl = the frequency of the class in which the mode lies
fo = the frequency of the class preceding the modal class
f2 = the frequency of the class succeeding the modal class
i = the class-interval of the modal class
While applying the above formula, we should ensure that the class-intervals are uniform throughout.
If the class-intervals are not uniform, then they should be made uniform on the assumption that the
frequencies are evenly distributed throughout the class. In the case of inequal class-intervals, the
application of the above formula will give misleading results.
Example 3.11: Let us take the following frequency distribution:
Class intervals (1) Frequency (2) Class intervals (1) Frequency (2)
30-40 4
40-50 6
50-60 8
60-70 12
70-80 9
80-90 7
90-100 4
We have to calculate the mode in respect of this series.
2.1.3.3. The median

Median is defined as the value of the middle item (or the mean of the values of the two middle items)
when the data are arranged in an ascending or descending order of magnitude. Thus, in an ungrouped
frequency distribution if the n values are arranged in ascending or descending order of magnitude, the
median is the middle value if n is odd. When n is even, the median is the mean of the two middle
values.
Suppose we have the following series:
15, 19,21,7, 10,33,25,18 and 5
We have to first arrange it in either ascending or descending order. These figures are arranged in an
ascending order as follows:
5,7,10,15,18,19,21,25,33
Now as the series consists of odd number of items, to find out the value of the middle item, we use the
formula
Where n+1/2
In the case of a grouped series, the median is calculated by linear interpolation with the help of the
following formula:
Where
l = Lower limit of the median class
N = Total Numbers of frequencies
f = Frequency of the median class
m = Cumulative frequency of the class preceding the median class
c = the class interval of the median class.
From the formula, it is clear that one has to find the median class first. Median class is, that class which
correspond to the cumulative frequency just greater than N/2.
Monthly Wages (FRS) No. of Workers Monthly Wages (FRS) No. of Workers
800-1,000 18
1,000-1,200 25
1,200-1,400 30
1,400-1,600 34
1,600-1,800 26
1,800-2,000 10
Total 143
Example 3.9: The following data give the savings bank accounts balances of nine sample households
selected in a survey. The figures are in rupees. 745 , 2,000 , 1,500 68,000 , 461 , 549 , 3750 , 1800,
4795
(a) Find the mean and the median for these data;
(b) Do these data contain an outlier? If so, exclude this value and recalculate the mean and median.
Which of these summary measures has a greater change when an outlier is dropped?
(c) Which of these two summary measures is more appropriate for this series?
Example 3.10: Suppose we are given the following series:
Class interval 0-10 10-20 20-30 30-40 40-50 50-60 60-70
Frequency 6 12 22 37 17 8 5
We are asked to draw both types of olive from these data and to determine the median.
2.1.3.4. The standard deviation

To calculate the standard deviation we have to start by calculating the variance as given below
a) Variance for ungrouped data
Where:
V = Variance
xi = Value of each data point
x̄ = Mean
N = Number of data points
Variance can be negative. A zero value means that all of the values within a data set are identical. If
the variance is low that’s mean the data collect near average, while If the variance is high the data will
spread from the average
example:
The height (in cm) of students of a class is given to be 163, 158, 167, 174, 148. Find the variance.
b) Variance for grouped data

Find the variance of the following data:
Example:
Find the variance of the following data:
E) STANDARD DEVIATION
Standard deviation is a measure of dispersement in statistics. “Dispersement” tell you how much your
data is spread out. Specifically, it shows you how much your data is spread out around the mean or
average.
It is the most robust and widely used measure of dispersion since, unlike the range and inter-quartile
range; it takes into account every variable in the dataset. For example, are all your scores close to the
average? Or are lots of scores way above (or way below) the average score? When the values in a
dataset are pretty tightly bunched together the standard deviation is small. When the values are spread
apart the standard deviation will be relatively large. The standard deviation is usually presented in
conjunction with the mean and is measured in the same units.
a) Standard deviation for ungrouped data
Where:
• Xi = Value of each data point
• x̄ = Mean
• N = Number of data points
Example
Suppose we have five climatic stations and have recorded rainfall in mm as follows (60, 47, 17, 43,
and 30). Calculate the standard deviation for them.
2.1.3.5. Quartiles
The interquartile range or the quartile deviation is a better measure of variation in a distribution than
the range. Here, avoiding the 25 percent of the distribution at both the ends uses the middle 50 percent
of the distribution. In other words, the interquartile range denotes the difference between the third
quartile and the first quartile.
Symbolically, interquartile range = Q3- Ql
Many times the interquartile range is reduced in the form of semi-interquartile range or quartile
deviation as shown below: Semi interquartile range or Quartile deviation = (Q3 – Ql)/2
When quartile deviation is small, it means that there is a small deviation in the central 50 percent
items. In contrast, if the quartile deviation is high, it shows that the central 50 percent items have a
large variation. It may be noted that in a symmetrical distribution, the two quartiles, that is, Q3 and QI
are equidistant from the median. Symbolically, M-QI = Q3-M
However, this is seldom the case as most of the business and economic data are asymmetrical. But one
can assume that approximately 50 percent of the observations are contained in the interquartile range.
It may be noted that interquartile range or the quartile deviation is an absolute measure of dispersion. It
can be changed into a relative measure of dispersion as follows:
The computation of a quartile deviation is very simple, involving the computation of upper and lower
quartiles. As the computation of the two quartiles has already been explained in the preceding chapter,
it is not attempted here.
Formally, the Quartile Deviation is equal to the half of the Inter-Quartile Range and therefore we also
𝑛
call it the Semi Inter-Quartile Range. For the raw data Q1 is that observation which comes in the 4
3𝑛
position and Q3 is that observation which comes in the position when the data are arranged in
4
ascending or increasing order of magnitude. For the discrete data Q1 is that observation which comes
𝑛 3𝑛
in the 4 position and Q3 is that observation which comes in the 4 position judged from the less than
cumulative frequency table. In the case of grouped frequency table the following formulas are used to
calculate Q1 and Q3
Where l1 and l3 are the lower bounds, f1 and f3 are the frequencies and c1 and c3 are the class limit of
the first and third quartile class and m1 and m3 are the less than cumulative frequencies up to those
𝑛 3𝑛
classes. First and third quartile class are those classes in which the the observations falls. OR
4 4
the bellow formula can be applied.
Where:
L is the lower limit of the first quartile class,
N is the total number of frequencies,
C is the cumulative frequency of the class just above the quartile class,
f is the frequency of the quartile class,
h is the class interval.
Example: Find the quartile deviation for the following data
2.1.3.6. Coefficient of variation
Example: In a small business firm, two typists are employed-typist A and typist B. Typist A types out,
on an average, 30 pages per day with a standard deviation of 6. Typist B, on an average, types out 45
pages with a standard deviation of 10. Which typist shows greater consistency in his output?
2.2. STATISTICAL SERIES WITH TWO VARIABLES
2.2.2. Scatter plot
This method is also known as Dot diagram. Scatter diagram is one of the simplest methods of
diagrammatic representation of a bivariate distribution. Under this method, both the variables are
plotted on the graph paper by putting dots. The diagram so obtained is called "Scatter Diagram". By
studying diagram, we can have rough idea about the nature and degree of relationship between two
variables. The term scatter refers to the spreading of dots on the graph. We should keep the following
points in mind while interpreting correlation:
 If the plotted points are very close to each other, it indicates high degree of correlation. If the
plotted points are away from each other, it indicates low degree of correlation.
Figure 4-1 Scatter Diagrams
 if the points on the diagram reveal any trend (either upward or downward), the variables are said
to be correlated and if no trend is revealed, the variables are uncorrelated.
 if there is an upward trend rising from lower left hand corner and going upward to the upper right
hand corner, the correlation is positive since this reveals that the values of the two variables move
in the same direction. If, on the other hand, the points depict a downward trend from the upper left
hand corner to the lower right hand corner, the correlation is negative since in this case the values
of the two variables move in the opposite directions.
 In particular, if all the points lie on a straight line starting from the left bottom and going up
towards the right top, the correlation is perfect and positive, and if all the points like on a straight
line starting from left top and coming down to right bottom, the correlation is perfect and negative.
The various diagrams of the scattered data in Figure 4-1 depict different forms of correlation.
Example: Given the following data on sales (in thousand units) and expenses (in thousand rupees) of a
firm for 10 month:
Month : J F M A M J J A S O
Sales: 50 50 55 60 62 65 68 60 60 50
Expenses: 11 13 14 16 16 15 15 14 13 13
a) Make a Scatter Diagram
b) Do you think that there is a correlation between sales and expenses of the firm? Is it positive or
negative? Is it high or low?
2.2.3. Correlation coefficient and linear regression
A mathematical method for measuring the intensity or the magnitude of linear relationship between
two variables was suggested by Karl Pearson (1867-1936), a great British Biometrician and Statistician
and, it is by far the most widely used method in practice. Karl Pearson’s measure, known as
Pearsonian correlation coefficient between two variables X and Y, usually denoted by r(X,Y) or rxy or
simply r is a numerical measure of linear relationship between them and is defined as the ratio of the
covariance between X and Y, to the product of the standard deviations of X and Y.
Symbolically
Thus by substituting Eqs. (4.2) in Eq. (4.1), we can write the Pearsonian correlation coefficient as
Example: Find the Pearsonian correlation coefficient between sales (in thousand units) and expenses
(in thousand rupees) of the following 10 firms:
Firm: 1 2 3 4 5 6 7 8 9 10
Sales: 50 50 55 60 65 65 65 60 60 50
Expenses: 11 13 14 16 16 15 15 14 13 13
Example : The data on price and quantity purchased relating to a commodity for 5 months is given
below:
Month : January February March April May
Prices(frs): 10 10 11 12 12
Quantity(Kg): 5 6 4 3 3
Find the Pearsonian correlation coefficient between prices and quantity and comment on its sign and
magnitude.
2.3 SPEARMAN’S RANK CORRELATION
Sometimes we come across statistical series in which the variables under consideration are not capable
of quantitative measurement but can be arranged in serial order. This happens when we are dealing
with qualitative characteristics (attributes) such as honesty, beauty, character, morality, etc., which
cannot be measured quantitatively but can be arranged serially. In such situations, Karl Pearson’s
coefficient of correlation cannot be used as such. Charles Edward Spearman, a British Psychologist,
developed a formula in 1904, which consists in obtaining the correlation coefficient between the ranks
of N individuals in the two attributes under study.
Suppose we want to find if two characteristics A, say, intelligence and B, say, beauty are related or
not. Both the characteristics are incapable of quantitative measurements but we can arrange a group of
N individuals in order of merit (ranks) w.r.t. proficiency in the two characteristics. Let the random
variables X and Y denote the ranks of the individuals in the characteristics A and B respectively. If we
assume that there is no tie, i.e., if no two individuals get the same rank in a characteristic then,
obviously, X and Y assume numerical values ranging from 1 to N.
Where d is the difference between the pair of ranks of the same individual in the two characteristics
and N is the number of pairs.
Example 4-6
Ten entries are submitted for a competition. Three judges study each entry and list the ten in rank
order. Their rankings are as follows:
Entry: A B C D E F G H I J
Judge J1: 9 3 7 5 1 6 2 4 10 8
Judge J2: 9 1 10 4 3 8 5 2 7 6
Judge J3: 6 3 8 7 2 4 1 5 9 10
Calculate the appropriate rank correlation to help you answer the following questions:
(i) Which pair of judges agrees the most?
(ii) Which pair of judges disagrees the most?
2.4 COVARIANCE
It is the computation of the relationship between any two random variables from their mean. It
measures the total variation of any two random variables obtained from their expected values. Types of
covariance: There are two types of covariance depending upon the movement of the two variables.
2.4.1 The two types of covariance are:
Positive Covariance: The covariance is said to be positive when both the variables move in the same
direction. When both the variables increase or when both the variables decrease, it is called positive
covariance.
Negative Covariance: The covariance is said to be negative when both the variables move in opposite
directions i.e. when both the variables are inversely related. In negative covariance, if X variable
increases, Y variable decreases, and vice versa.
2.3.2 What are the Applications of Covariance

Covariance has wide applications in statistics. Covariance applies to many biological, genomic,
financial, and meteorological concepts. It finds its use in micrometeorology and feature extraction.
In genetic and microbiological studies, covariance and correlation equations are the foundation for the
measurement of the Genetic relationship matrix.
The covariance equation also provides the basis to understand the key concepts of evolution, gene
transmission, and natural selection.
Covariance in finance is considered significant as it helps in determining risks and opportunities.
It allows the investors to identify whether the instruments are moving in positive covariance or
negative covariance. It helps them in preventing losses.
The equation is used for data embedding or dimensionality reduction studies. Its properties are utilized
to perform various operations and functions.
The other common application of the formula is canonical correlation analysis (CCA). With this, one
understands how and where the sets of variables are moving. The properties are used in enabling
multi-viewing learning. There are many more applications of covariance and are considered as the
basis for many statistical studies.
𝝈𝟐 ∑ 𝑿𝟏𝑿𝟐 ∑ 𝑿𝟏𝑿𝟑
COVARIANCE (X1, X2, X3) = ∑ 𝑿𝟐𝑿𝟏 𝝈𝟐 ∑ 𝑿𝟐𝑿𝟑
∑ 𝑿𝟑𝑿𝟏 ∑ 𝑿𝟑𝑿𝟐 𝝈𝟐
2.4 REGRESSION ANALYSIS

INTRODUCTION
In business, several times it becomes necessary to have some forecast so that the management can take
a decision regarding a product or a particular course of action. In order to make a forecast, one has to
ascertain some relationship between two or more variables relevant to a particular situation. For
example, a company is interested to know how far the demand for television sets will increase in the
next five years, keeping in mind the growth of population in a certain town. Here, it clearly assumes
that the increase in population will lead to an increased demand for television sets.
Thus, to determine the nature and extent of relationship between these two variables becomes
important for the company. In the preceding lesson, we studied in some depth linear correlation
between two variables. Here we have a similar concern, the association between variables, except that
we develop it further in two respects. First, we learn how to build statistical models of relationships
between the variables to have a better understanding of their features. Second, we extend the models to
consider their use in forecasting.
For this purpose, we have to use the technique - regression analysis - which forms the subject-matter
of this lesson.
2.5 WHAT IS REGRESSION?
In 1889, Sir Francis Galton, a cousin of Charles Darwin published a paper on heredity, “Natural
Inheritance”. He reported his discovery that sizes of seeds of sweet pea plants appeared to “revert” or
“regress”, to the mean size in successive generations. He also reported results of a study of the
relationship between heights of fathers and heights of their sons. A straight line was fit to the data
pairs: height of father versus height of son. Here, too, he found a “regression to mediocrity” The
heights of the sons represented a movement away from their fathers, towards the average height. We
credit Sir Galton with the idea of statistical regression.
While most applications of regression analysis may have little to do with the “regression to the mean”
discovered by Galton, the term “regression” remains. It now refers to the statistical technique of
modeling the relationship between two or more variables. In general sense, regression analysis means
the estimation or prediction of the unknown value of one variable from the known value(s) of the other
variable(s). It is one of the most important and widely used statistical techniques in almost all sciences
- natural, social or physical.
In this lesson, we will focus only on simple regression –linear regression involving only two variables:
a dependent variable and an independent variable. Regression analysis for studying more than two
variables at a time is known as multiple regressions.
2.6 INDEPENDENT AND DEPENDENT VARIABLES
Simple regression involves only two variables; one variable is predicted by another variable. The
variable to be predicted is called the dependent variable. The predictor is called the independent
variable, or explanatory variable. For example, when we are trying to predict the demand for television
sets on the basis of population growth, we are using the demand for television sets as the dependent
variable and the population growth as the independent or predictor variable.
The decision, as to which variable is which sometimes, causes problems. Often the choice is obvious,
as in case of demand for television sets and population growth because it would make no sense to
suggest that population growth could be dependent on TV demand! The population growth has to be
the independent variable and the TV demands the dependent variable.
If we are unsure, here are some points that might be of use:
 if we have control over one of the variables then that is the independent. For example, a
manufacturer can decide how much to spend on advertising and expect his sales to be dependent
upon how much he spends
 it there is any lapse of time between the two variables being measured, then the latter must depend
upon the former, it cannot be the other way round
 if we want to predict the values of one variable from your knowledge of the other variable, the
variable to be predicted must be dependent on the known one
2.7 LINEAR REGRESSION
The task of bringing out linear relationship consists of developing methods of fitting a straight line, or
a regression line as is often called, to the data on two variables. The line of Regression is the graphical
or relationship representation of the best estimate of one variable for any given value of the other
variable. The nomenclature of the line depends on the independent and dependent variables. If X and
Y are two variables of which relationship is to be indicated, a line that gives best estimate of Y for any
value of X, it is called Regression line of Y on X. If the dependent variable changes to X, then best
estimate of X by any value of Y is called Regression line of X on Y.
2.7 LEAST SQUARE METHOD:
The least square method of fitting a line of best fit requires minimizing the sum of the squares of
vertical deviations of each observed Y value from the fitted line. These deviations, such as d1 and d3,
are shown in Figure 5-1 and are given by Y-Yc, where Y is the observed value and Yc the
corresponding computed value given by the fitted line
For the ith value of X.

The straight line relationship in Eq.(5.1), is stated in terms of two constants a and b The constant a is
the Y-intercept; it indicates the height on the vertical axis from where the straight line originates,
representing the value of Y when X is zero. Constant b is a measure of the slope of the straight line; it
shows the absolute change in Y for a unit change in X. As the slope may be positive or negative, it
indicates the nature of relationship between Y and X. Accordingly, b is also known as the regression
coefficient of Y on X.
Since a straight line is completely defined by its intercept a and slope b, the task of fitting the same
reduces only to the computation of the values of these two constants. Once these two values are
known, the computed Yc values against each value of X can be easily obtained by substituting X
values in the linear equation.
In the method of least squares the values of a and b are obtained by solving simultaneously the
following pair of normal equations
By operating by derivation with respect to a and a (optimization conditions to take order) in order to
find the minimum of this function we gets the following results)
∑𝒏 ̅̅̅̅
𝒕=𝟏 𝒙𝒊 𝒚𝒕 −𝒏𝒙𝒚
̂𝟏 =
𝜶 ∑𝒏 𝒙𝟐 −𝒏𝒙 ̅̅̅𝟐̅ …………………………….. (1)
𝒕=𝟏 𝟏
̂𝟎 = 𝒚
𝜶 ̅−𝜶𝟏 ̅ ………………………………… (2)
̂𝒙
Note carefully
The writing of the model is not neutral. The specification 𝑦𝑡 = 𝛼0 + 𝛼1 𝑥𝑡 + 𝜀𝑡 and not equivalent to
𝑥𝑡 = 𝛼0 + 𝛼1 𝑌 + 𝜀𝑡 . In the first model, 𝑥𝑡 is the cause of 𝑦𝑡 , while in the second, y is the cause of
̂0′ and
x. In the second specification, we can write 𝑥𝑡 = 𝛼0′ + 𝛼1′ 𝑦𝑡 + 𝜀𝑡 and these estimators are 𝛼
𝛼̂1′ . Note that 𝛼
̂0′ x 𝛼̂1′ 𝑝2 (p=correlation coefficient between x and y)
• If the model is labeled 𝑦𝑡 = 𝛼1 𝑥𝑡 + 𝜀𝑡 (without constant term)
∑𝒏
𝒕=𝟏 𝒙𝒊 𝒚𝒊
̅̅
𝜶̅̅𝟏 = ∑𝒏 𝟐 ……………………………… (3)
𝒕=𝟏 𝒙𝒕
Quite naturally the estimator of the constant term as 𝛼

̂0 is null. We note that this is the application of
formula (1) in which x and y are 0. In the case of centered variables, it is therefore this formula (3) that
should be use because the constant term is zero.
Application exercise 2: estimator of the parameters
For the purpose of predicting the overall consumption of cassava at restaurant B of the University of
Dschang, a team of teachers-researchers from FASA, working on behalf of a supplier the following
sums have been used, obtained from a table retracing the evolution of cassava consumption and that of
the price of cassava over the entire period of existence of this institution.
∑ 𝑥𝑡 = 11.12 , ∑ 𝑦𝑡 = 24.12, ∑ 𝑥𝑡 𝑦𝑡 = 23.92 , ∑ 𝑥 2 = 12.52 , ∑ 𝑦 2 = 53.97 , n=20
Y present consumption of cassava and X the price of cassava. Supposes that all the other variables
influencing the demand for cassava are constant. If 𝑦𝑡 = 𝛽0 + 𝛽1 𝑥𝑡 + 𝜀𝑡 , determine the estimated
version of the model knowing that the termic of error verifies all the basic hypotheses.
We now assume the cancellation of the constant term
1. Specify the model thus obtained
2 Determine the estimator of the parameter of this model

QUANTATITIVE 1

Uploaded by

Copyright:

Available Formats

QUANTATITIVE 1

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

QUANTATITIVE 1

Uploaded by

Copyright:

Available Formats

BY MR.

TANDUN PROMIS WHATSAPP-672474630 QUANTITATIVE TECHNIQUES I

COURSE CODE: ACC112 QUANTITATIVE TECHNIQUES

1.2. BASIC NOTIONS

I: Interest produced by C during n periods;

B. Periods counted in fortnights:

C. Periods counted in days:

B. Periods counted in days:

B.1. Periods counted in days:

B. Periods counted in months:

B. Periods counted in months:

With - E: Commercial discount produced by the commercial paper;

1.2.3.1. CURRENT COMMERCIAL VALUE (Present value)

If we use formulas (1) and (4), we can write:

If the duration of the discount is counted in days, this relation becomes:

1.2.3.2. Rational discount

The rational present value Var is equal to

Which gives for the rational present value Var:

Which gives for the effective rate:

1.2.3.4. The real discount rate.

This rate is higher than the announced discount rate t.

1.2.3.6. The placement rate

1.2.4. PROPORTIONAL RATE AND EFFECTIVE RATE

If the duration is expressed in months, this formula becomes:

Capital granted as a loan: C '= C – f

Which gives after replacing C 'by (C - f) and I by

Which gives for tavg:

For periods counted in days:

For periods counted in months:

(v) Collected in a systematic manner for a pre-determined purpose

Types of Statistics (Descriptive & Inferential)

II. 4 THE METHODS OF DATA COLLECTION

B. THE OBSERVATION METHOD

D. THE EXPIREMENTING AND RECORDING

 To test the techniques of the method prior to their use.

Table 5.2: sources of water incorrect layout.

The frequency distribution table is as follows:

Score(x) Tally Frequency ( f)

Table 5.4 Frequency distribution for student’s scores in MATH’S TESTS

Class interval Tally Frequency

ADDITIONAL INFORMATION THAT MAY BE CONTAINED IN FREQUENCY

2) CLASS BOUNDARIES OR EXAT LIMIT OF CLASS INTERVALS:

3) THE MIDPOINT OR THE CLASS MARKS OR CLASS INTERVAL.

𝑙𝑜𝑤𝑒𝑟 𝑙𝑖𝑚𝑖𝑡+𝑢𝑝𝑝𝑒𝑟 𝑙𝑖𝑚𝑖𝑡

Example: what are the midpoints of the class interval 3 – 7; 8 – 12

𝑓𝑖 =Frequency of class interval

For interval 34 – 38; 𝑓𝑖 = 7 ; 𝑓𝑖 = 60

For interval 64 = 68. 𝑓𝑖 = 5; 𝑓𝑖 = 60

The addition of the 𝑐𝑓column gives the following distribution table.

Class interval Frequency Cumulative frequency(𝑐𝑓)

𝑐𝑓𝑖 = Cumulative frequency of the class interval

Class interval 𝑓 𝑐𝑓 𝑓% 𝑐𝑓%

A dot plot may look like:

Example 1: Draw a dot plot for the following data.

Favorite Colors Red Blue Green Yellow Orange Indigo Violet

WE have a look at a sample of frequency polygon:

Example 3: Draw a histogram from the given data.

Test Score 24-30 30-36 36-42 42-48 48-54 54-60

2.1.3. MEASURES OF CENTRAL TENDENCY AND MEASURES OF DISPERSION

GROUPED DATA-ARITHMETIC MEAN