REVIEW EXERCISES

Descriptive statistics
1. The annual percentage returns on two stocks over a 7-year period were as follows:
Stock A: 4.01% 14.31% 19.01% -14.69% -26.49% 8.01% 5.81% 5.11%
Stock B: 6.51% 4.41% 3.81% 6.91% 8.01% 5.81% 5.11%
a. Compare the means of these two population distribution
b. Compare the means of these two population distribution
c. Compute an appropriate measure of dispersion for both stocks to measure the risk of these
investment opportunities. Which stock is more volatile? (hint: CV)
2. A small accounting office is trying to determine its staffing needs for the coming tax season.
The manager has collected the following data: 46, 27, 79, 57, 99, 75, 48, 89, and 85. These
values represent the number of returns the office completed each year over the past nine years it
has been doing tax returns:
a. For this data, what is the mean number of tax returns completed each year?
b. For this data, what is the median number of tax returns completed each year?
c. For this data, what is the variance of the number of tax returns completed each year?
d. For this data, what is the coefficient of variation for the number of tax returns completed each
year?

3. A sample of 150 students at a State University was taken after the final business statistics exam
to ask them whether they went partying the weekend before the final or spent the weekend
studying, and whether they did well or poorly on the final. The following table contains the result.

Did Well in Exam Did Poorly in Exam

a. Of those in the sample who went partying the weekend before the final exam, what percentage
of them did well in the exam?
b. Of those in the sample who did well on the final exam, what percentage of them went partying
the weekend before the exam?
c. What percentage of the students in the sample went partying the weekend before the final exam
and did well in the exam?
d. What percentage of the students in the sample spent the weekend studying and did well in the
final exam?
e. What percentage of the students in the sample went partying the weekend before the final exam
and did poorly on the exam?
f. If the sample is a good representation of the population, what percentage of the students in the
population should we expect to spend the weekend studying and do poorly on the final exam?

Probability
1. An insurance company estimated that 30% of all automobile accidents were partly caused by
weather conditions and that 20% of all automobile accidents involved bodily injury. Further, of
those accidents that involved bodily injury, 40% were partly caused by weather conditions.
a. What is the probability that a randomly chosen accident both was partly caused by weather
conditions and involved bodily injury?
b. Are the events “partly caused by weather conditions” and “involved bodily injury”
independent?
c. If a randomly chosen accident was partly caused by weather conditions, what is the probability
that it involved bodily injury?
d. What is the probability that a randomly chosen accident both was not partly caused by weather
conditions and did not involve bodily injury?
2. A large corporation organized a ballot for all its workers on a new bonus plan. It was found
that 65% of all night-shift workers favored the plan and that 40% of all female workers favored
the plan. Also, 50% of all employees are night-shift workers and 30% of all employees are
women. Finally, 20% of all night-shift workers are women.
a. What is the probability that a randomly chosen employee is a woman in favor of the plan?
b. What is the probability that a randomly chosen employee is either a woman or a night-shift
worker (or both)?
c. Is employee gender independent of whether the night shift is worked?
d. What is the probability that a female employee is a night-shift worker?
e. If 50% of all male employees favor the plan, what is the probability that a randomly chosen
employee both does not work the night shift and does not favor the plan?
3. A market research firm regularly assembles panel of consumers to test new television
commercials for effectiveness. The consumers are told that they are evaluating a pilot TV
program. After viewing the hour-long program, complete with commercials, they are asked many
questions about the program and some about the commercial – the actual object of research. A
tabulation of results from one panel counted the number of panelists who recalled the product
incorrectly, the number who recalled the product correctly and had a favorable opinion, and the
number who recalled the product correctly and had an unfavorable opinion.
 Incorrect Favorable Unfavorable Total
Men 42 38 20 100
Women 63 57 30 150
Total 105 95 50 250

a. Use the addition law to find the probability that a randomly chosen consumer recalled the
commercial.
b. What is the probability that a randomly chosen consumer is either a man or someone who
recalled the product favorably?
c. Calculate the conditional probabilities of incorrect, favorable, and unfavorable responses
among men. Do the same for women.

Probability distribution:
1. A factory manager is considering whether to replace a temperamental machine. A review of
past records indicates the following probability distribution for the number of breakdowns of this
machine in a week.

a. Find the mean and standard deviation of the number of weekly breakdowns.
b. It is estimated that each breakdown costs the company $1,500 in lost output. Find the mean
and standard deviation of the weekly cost to the company from breakdowns of this machine.
2. A car salesperson estimates the following probabilities for the number of cars that she will sell
in the next week:

a. Find the expected number and standard deviation of cars that will be sold in the week.
b. The salesperson receives a salary of $250 for the week, plus an additional $300 for each car
sold. Find the mean and standard deviation of her total salary for the week.
c. What is the probability that the salesperson’s salary for the week will be more than $1,000?
3. Binomial: It is estimated that 55% of the freshmen entering a particular college will graduate
from that college in four years.
a. For a random sample of 5 entering freshmen, what is the probability that exactly 3 will
graduate in four years?
b. For a random sample of 5 entering freshmen, what is the probability that a majority will
graduate in four years?
c. 80 entering freshmen are chosen at random. Find the mean and standard deviation of the
proportion of these 80 that will graduate in four years.
4. Your computer is in serious need of repair. You have estimated that the breakdowns occur on
average 3.5 times per week. If you are right and the breakdown variable is a Poisson distribution,
calculate the following.
a. The probability that for an entire week your computer runs with no problems.
b. The probability of getting only 1 shutdown.
c. The probability of getting 5 shutdowns.