MBA 1st Sem SFM/RMS notes

STATISTICS FOR MANAGEMENT (SFM)/

RESEARCH METHODOLOGY & STATISTICS
(RMS) NOTES
Statistics for Management Syllabus as per O.U
Unit 1 Introduction to statistics and probability
Nature and Scope of Statistics
General concept of probability
Theorems of Probability
1. Additional theorem
2. Multiplication theorem
3. Bayes theorem
Unit 2 Probability Distributions
Binomial Distribution
Poisson Distribution
Normal Distribution
Unit 3 Sampling Theory
Basics of sampling
Standard error
Testing of Hypothesis large sample test (Z test)
Unit 4 Small sample tests
Testing of Hypothesis small sample tests (t test)
Chi-square test
ANOVA
Unit 5 Correlation Analysis
Correlation Analysis
Regression analysis
Time series analysis

UNIT I
We live in a world in which we are unable to forecast the future with complete
certainty
Probability Definition:
The probability of a given event is an expression of likelihood or chance of occurrence of
an event. A probability is a number which ranges from 0 to 1 zero for an event which
can not occur and 1 for an event certain to occur.
Classical or a priori probability definition:
The classical approach to probability is the oldest and simplest. It originated in eighteenth
century in problems pertaining to games of chance, such as throwing of coins, dice or
deck of cards, etc. the basic assumption underlying the classical theory is that the
outcomes of a random experiment are equally likely.
The definition of probability given by French Mathematician Laplace is probability is
the ratio of the number of favorable cases (events) to the total number of equally likely
cases (events). If probability of occurrence of A is denoted by p (A), then by this
definition we have:
Number of favorable cases (events)
P (A) =--------------------------------------------------------Total number of equally likely cases (events)
For calculating probability we have to find out two things:
1. Number of favorable cases or events
2. Total number of equally likely cases or events
Calculation of probability
Before discussing the procedure for calculating probability it is necessary to define
certain terms as given below:
1. Experiment: The term experiment refers to describe an act which can be repeated
under some given conditions. Random experiments are those experiments whose
results depend on chance such as tossing of a coin, throwing of dice.
2. Event: An event is the outcome or result of the experiment. Events are generally
denoted by capital letters A, B, C. etc.
An event whose occurrence is inevitable when a certain random experiment is performed
is called a certain or sure event.
An event which can never occur when a certain random experiment is performed is called
an impossible event.
An event which may or may not occur while performing a certain random experiment is
known as a random event.

3. Mutually Exclusive Events: two events are said to be mutually exclusive or

incompatible when both cannot happen simultaneously in a single trial or, in other
words, the occurrence of any one of them precludes the occurrence of the other.
For example, if a single coin is tossed either head can be up or tail can be up, both
cannot be up at the same time.
4. Independent and Dependent Events: Two or more events are said to be
independent when the outcome of one does not affect, and is not affected by the
other. For example, if a coin is tossed twice, the results of the second throw.
Similarly, the results obtained by throwing a dice are independent of the results
obtained by drawing an ace from a pack of cards.
Dependent events are those in which the occurrence or non occurrence of one event in
any one trial affects the probability of other events in other trials. For example, if a card is
drawn from a pack of playing cards and is not replaced, this will alter the probability that
the second card drawn.
5. Equally likely events: Events are said to be equally likely when one does not
occur more often than the others. For example, if an unbiased coin or dice is
thrown, each face may be expected to be observed approximately the same
number of times in the long run.
6. Simple and Compound Events: In case of simple events we consider the
probability of the happening or not happening of single events. For example,
drawing a red ball from a bag containing 10 white and 6 red balls. On the other
hand, in case of compound events we consider the joint occurrence of two or
more events. For example, if a bag contains 10 white and 6 red balls and if two
successive draws of 3 balls are made, probability of getting 3 white balls in the
first draw and 3 black balls in the second draw.
7. Exhaustive Events: events are said to be exhaustive when their totality includes
all the possible outcomes of a random experiments. For example, while tossing a
dice, the possible while tossing a dice, the possible outcomes are 1, 2, 3, 4, 5 and
6 and hence the exhaustive number of cases is 6. If two dice are thrown once, the
exhaustive events are 36 (6).
Problems on general probability
1. What is the probability of getting a Head in a single toss of a fair coin.
2. What is the probability of obtaining (i) an even number (ii) a number less than 5
(iii) a 5 in a single throw of an unbiased dice.
3. What is the chance that a non leap year should have 53 Sundays?
4. What is the chance that a leap year selected at random will contain 53 Sundays?
5. In a throw of two unbiased dice find the probability of (i) total 7 points (ii) total 8
points.
6. Two dice are thrown simultaneously and the points are multiplied together. Find
the probability that the product is 4.
7. What is the probability of getting 3 white balls in a draw of 3 balls from a box
containing 5 white and 4 black balls.

8. A bag contains 6 white, 4 red and 10 black balls. Two balls are drawn at random.
Find the probability that they both will be black.
9. A bag contains 5 white and 8 red balls. Two drawings of 3 balls are made such
that (a) the balls are replaced before the second trial, and (b) the balls are not
replaced before the second trial. Find the probability that the first drawing will
give 3 white and the second 3 red balls in each case.
10. One bag contains 4 white and 2 black balls. Another contains 3 white and 5 black
balls. If one ball is drawn from each bag, find the probability that (a) both are
white, (b) both are black, and (c) one is white and one is black.

Theorems of Probability
There are two important theorems of probability, namely:
1. The Addition Theorem; and
2. The Multiplication Theorem.
Addition Theorem
The addition theorem states that if two events A and B are mutually exclusive the
probability of the occurrence of either A or B is the sum of the individual probability of A
and B. symbolically,
P (A or B) = P (A) + P (B) or P (AUB) = P (A) + (B)
In case of three mutually exclusive events,
P (A or B or C) = P (A) + P (B) + P (C) or P (AUBUC) = P (A) + P (B) + P(C)
When events are not mutually exclusive: when events are not mutually exclusive or, in
other words, it is possible for both events to occur, the addition rule must be modified.
The modified form of the addition theorem is as follows.
P (AUB) = P (A) + P (B)-P (AB)
In the case of three events,
P (AUBUC)=P (A) +P (B) + P (C) P (AB) P (BC) P (AC) + P (ABC)
Problems on Additional Theorem
1. One card is drawn from a standard pack of 52. What is the probability that it is
either a king or a queen?
2. Calculate the probability of picking a card that was a heart or a spade?
3. What is the probability of picking a card that wad red or black?
4. A card is drawn from a standard pack of 52 cards. what is the probability that it is
an Ace or King or a Queen?
5. What is the probability of getting a Jack or a Spade from a pack of 52 cards?
6. A person can hit a target in 5 out of 7 shots, whereas another person can hit the
target in 10 out of 11 shots. What is the probability of the target being hit when
they make an attempt to hit?

7.
Multiplication Theorem
This theorem states that if two events A and B are independent, the probability that they
both will occur is equal to the product of their individual probability. Symbolically, if A
and B are independent, then
P (A and B) = P (A) X P (B) or P (AB) = P (A) X P (B)
In case of three independent events
P (A, B and C) = P (A) X P (B) X P(C) or P (ABC) = P (A) X P (B) X P (C)
In case of Dependent Events (Conditional Probability)
The multiplication theorem explained above is not applicable in case of dependent
events. Two events A and B are said to be dependent when B can occur only when A is
known to have occurred or vice versa. The probability attached to such an event is called
the conditional probability and is denoted by P (A/B) or, in other words, probability of A
given that B has occurred.
P (AB) = P (A) X P (B/A)
P (AB) = P (B) X P (A/B)
For three events A, B and C, we have
P (ABC) = P (A) X P (B/A) X P (C/AB) i.e., the probability of occurrence of A, B
and C is equal to the probability of A, times the probability of B given that A has
occurred, times the probability of C given that both A and B has occurred.
BAYES THEOREM OR POSTERIOR PROBABILITY
The concept of conditional probability takes in to account information about the
occurrence of one event to predict the probability of another event. This concept can be
extended to revise probabilities based on new information and to determine the
probability that a particular effect was due to a specific cause. The procedure of revising
these probabilities is known as Bayes theorem,
The Bayes theorem named ater the british mathematician rev. Thomas Bayes (1702-61)
and published in 1763 in a short paper has become one of the most famous memories in
the history of science and one of the most controversial. His contribution consists
primarily of a unique method for calculating conditional probabilities.
An event E can occur only if any one of the set of exhaustive and mutually exclusive
events A1, A2, A3..An occurs. The probabilities P(A1), P(A2), P(A3)P(An) and
the conditional probabilities P(E/Ai) where (i = 1,2,3,.n) for E to occur are known.
Then the conditional probability P (Ai/E) when E has actually occurred is given by
P (Ai) x P (E/Ai)
P (Ai/E) = ------------------------------------ where i = 1, 2, 3..n
P (Ai) x P (E/Ai)

CORRELATION ANALYSIS

1. Calculate karl pearsons correlation coefficient from the following data and
interpret its value.
Roll No. of
Students
Marks in
Accounts
Marks in
Statistics

48

35

17

23

47

45

20

40

25

45

2. Making the use of data summarized below calculate coefficient of correlati

on. Also calculate probable error.
Case
X
Y

A
10
9

B
6
4

C
9
6

D
10
9

E
12
11

F
13
13

G
11
8

H
9
4

3. Calculate karl pearsons coefficient of correlation from the following data taking
100 and 50 as the assumed averages of X and Y respectively.
X
Y

104 111 104 114 118 117 105 108 106 100 104 105
57 55 47 45 45 50 64 63 66 62 69 61

4. The following data gives the sales and advertisement values. Calculate the
coefficient of correlation from the data by taking 44 and 26 as assumed means and
interpret its values.
Sales
Advert.

57 42 40 38 42 45 42 45 42 44 40 46
10 26 30 41 29 27 27 19 18 19 31 29

5. The following table shows the amount of advertising expenses(X) and the sales
(Y) of 10 firms in Rs. 000s. Find the karl pearsons coeeficient of correlation and
comment.
X
Y

1.1 1.3 1.4 1.6 1.6 1.5 1.5 1.4 1.3 1.6
60 80 70 50 70 65 58 60 75 80

6. Calculate coefficient of correlation from the following data.

X
Y

500 1000 1500 2000 2500 3000 3500

100 200 300 400 500 600 700

7. From the following data compute the coefficient of correlation between X and Y.
X Series
Y Series
No. of items
15
15
Arithmetic mean
25
18
Squares of deviations from mean
136
138
Summation of product of deviations of X and Y series from their respective
Arithmetic mean is 122.
8. A computer while calculating correlation coefficient between two variables X and
Y from 25 pairs of observations obtained the following results.
N = 25, x = 125,
y = 100, xy = 508, x = 650, y = 460.
It was however discovered at the time of checking that two pairs of observations were not
correctly copied. They were taken as (6,4) and (8,6) while the correct values are (8,12)
and (6,8). Prove that the correct value of the correlation coefficient should be 2/3.
9. Calculate karl pearsons coefficient of correlation and find out probable error.
X:
Y:

13-14, 14-15, 15-16, 16-17, 17-18, 18-19, 19-20, 20-21, 21-22

39
40
43
43
36
39
48
44
56

10. The ranks of 10 students in two subjects of accountancy and auditing are as
follows.
Accountancy: 3
5
8
4
7
Auditing:
6
4
9
8
1
What is the coefficient of rank correlation?

10
2

2
3

1
10

6
5

9
7

11. 10 competitors in a beauty contest are ranked by 3 judges in the following order.
1st Judge:
1
6
5
10
3
2nd Judge:
3
5
8
4
7
3rd Judge:
6
4
9
8
1
Use the rank correlation coefficient to determine
approach to common taste in beauty.

2
10
2
which

4
2
3
pair of

9
1
10
judges

7
8
6
9
5
7
has the nearest

12. Calculate the correlation coefficient from the following data by the spearmans
rank correlation method.
Price of tea:
Price of coffee:

75
120

88
134

95
150

70
115

60
110

80
140

81
142

50
100

13. Quotations of index no. of security prices of a certain joint stock company are
given below.

Year:
1
2
3
4
5
6
7
Debenture Price:
97.8 99.2 98.8 98.3 98.4 96.7 97.1
Share price:
73.2 85.8 78.9 75.8 77.2 87.2 83.8
Using rank correlation method determine the relationship between debenture price and
share price.
14. Calculate the spearmans rank correlation coefficient in maths and statistics.
Maths:
Statistics:

78
51

25
84

36
91

78
60

62
62

65
68

62
60

79
47

98 63
53 51

15. Calculate rank correlation coefficient of the following data?

Series A:
115
109
112
87
98
120
98
100
Series B:
75
73
85
70
76
82
65
73
16. Following are the scores of 10 students in a class and their IQ.

98 118
68 80

Students:
Scores :
IQ
:

9
10
45 50
140110

1
35
100

2
40
100

3
25
110

4
55
140

5
85
150

6
90
130

7
65
100

8
55
120

17. Coefficient of rank correlation between marks in statistics and maths obtained by
a group of students is 2/3 and the sum of squares of differences in ranks is 55.
Calculate the number of observations or value of n?
18. In a bivariate samples the sum of squares of difference between the ranks of
observed values of two variables is 33. The coefficient of correlation between
them is 0.8. calculate no of observations.
REGRESSION ANALYSIS
1. You are given data relating to purchase and sales. obtain the two regression
equations and estimate likely sales when purchase is equal to 100.
Purchase:
Sales
:

62
112

72
124

98
131

76
117

81
132

56
96

76
120

92
136

88 49
97 85

2. The following table shows the ages (X) and BP (Y) of 8 persons obtain two
regression equations and find the expected BP of a person who is 49 years old.
X:
Y:

52
62

66
55

45
51

36
25

72
79

65
43

47
60

25
33

3. In a correlation study the following values are obtained.

Particulars
X
Y
Mean
65
67
S.D
2.5
3.5
Coefficient of
Correlation (r)
0.8
Find the two regression equations that are associated with the above values.
4. We are given the following data.
Particulars
X
Y
Arithmetic mean
36
85
S.D
11
8
Coefficient of
Correlation (r)
0.66
Find the two regression equations and estimate the value of X when Y is 75.
5. In a partially established laboratory record of an analysis of correlation data, the
following results are only available.
Variance of X = 9
8X 10Y + 66 = 0
40X 18Y = 214
Find on the basis of above information
(a) The mean values of X and Y.
(b) Coefficient of correlation between X and Y.
(c) Standard deviation of Y
6. For certain X and Y series which are correlated the two lines of regression are 5X
6Y + 90 = 0, 15X 8Y 130 = 0. Find the means of two series and the
correlation coefficient.
7. Two random variables have the regression equations 3X + 2Y 26 = 0, 6X + Y
31 =0. Find the mean values and correlation coefficient between X and Y. if the
variance of X = 25, Find the standard deviation of Y from the date given above.

TIME SERIES ANALYSIS

1. Calculate 3 yearly moving averages of the production figures given below. Also
calculate short term fluctuations.
Year:
Production:

1985 86 87 88 89 90 91 92 93 94 95 96 97 98 99
15 21 30 36 42 46 50 56 63 70 74 82 90 95 102

2. Using 3 yearly moving averages determine the trend and short term fluctuations.

Year:
Production
In tons :

1987

88

89

90

91

92

939

94

95

96

21

22

23

25

24

22

25

26

27

26

3. Find the trend for the following series using 4 yearly moving average.
Year:
Production:

1994 95 96 97 98 99
614 615 652 678 681 655

00 01
02
717 719 708

03
779

04
757

4. Find the five years weighted moving average with weights 1,2,2,2,1 respectively
for measuring the trend of the following time series.
Year: 1974
Sales: 2

75
6

76
1

77
5

78
3

79
7

80
2

81
6

82
4

5. For the below data calculate 4 yearly weighted moving average with weights
1,2,2,1.
Year: 1974
Slaes: 2

75
6

76
1

77
5

78
3

79
7

80
2

81
6

82
4

6. Calculate the equation of a straight line trend for the following data.
Year: 1974
Sales: 35

75
56

76
79

77
80

78
40

7. Fit a straight line by the method of least squares and estimate the values for 1984
and 1986.
Year (X):
Y
:

1978 79
80
85

80
87

81
93

82
100

8. Fit a straight line trend by the method of least squares and estimate the production
in 1981.
Year:
Production:

1985
15

86
18

87
16

88
18

89
20

90
19

PROBABILITY
1. What is the probability of getting a head in a single toss of a fair coin.

2. What is the probability of obtaining (i) an even number (ii) a number less than 5 (iii) a
number 5 in a single throw of a unbiased die.
3. Find the probability that a throw of an unbiased die results in (i) an ace (number 1) (ii) an
even number (iii) a multiple of 7.
4. A bag contains 3 white, 4 red and 2 green balls. One ball is selected at random from the
bag. Find the probability that the selected ball is (i) white (ii) non white (iii) white or
green.
5. What is the chance that a non leap year should have 53 Sundays.
6. What is the chance that a leap year selected at random will contain 53 Sundays.
7. In a throw of an unbiased dice find the probability of (i) total 7 points (ii) total 8 points
8. Two unbiased dice are thrown. Find the probability that the sum of the faces is not less
than 10.
9. Two dice are thrown are simultaneously and the points are multiplied together, find the
probability that the product is 4.
10. What is the probability of getting 3 white balls in a draw of 3 balls from a box containing
5 white balls from a box containing 5 white and 4 black balls.
Additional Theorem
1. One card is drawn from a standard pack of 52 cards. What is the probability that either
king or queen.
2. In drawing a card from well shuffled pack find the probability that the card drawn will be
either spade or Arc.
3. In a college, there are five lecturers. Among them, three are doctorates. If a committee
consisting three lecturers is formed, what is the probability that at least two of them are
doctorates?
4. A bag contains 30 balls numbered from 1 to 30. One ball is drawn at random. Find the
probability that the no of the ball drawn will be a multiple of a) 5 or 7 b) 3 or 7
Multiplication Theorem
1.

A man wants to marry a girl having qualities, white complexion the probability of
getting such a girl is 1 in 20. Hand some dowry the probability of getting this is 1 in 50.
Westernized manner the probability here is 1 in 100. Find out the probability of his
getting married to such a girl where the possession of these three attributes are
independent.
2. The personnel department of a company has records show the following of 200
engineers.
Age

Bachelors
Masters
Total
Degree
degree
Under 30
90
10
100
30 40
20
30
50
Above 40
40
10
50
If an engineer is selected at random from the company, find the probability that
a) He has only a bachelors degree

b) He has a masters degree given that he is over 40

c) He is under 30 given that he has only a bachelors degree.
3. The data for the promotion status and academic qualification regarding 100
Employees of a company is as follows.
Promotional status

A)
B)
C)
D)
3.

5.

6.

7.

non - MBA

Total

Promoted
12
48
60
Not promoted
18
22
40
Total
30
70
100
At random one employee is picked up. What is the probability that
He is an MBA
He is promoted
He is promoted given that he is an MBA
He is an MBA promoted given that he is promoted.
The records of 400 examinees are given below.
Score

a)
b)
c)
4.

MBA

BA

B.SC

B.COM

Total

Below 50
90
30
60
180
50 60
20
70
70
160
Above 60
10
30
20
60
Total
120
130
150
400
If an examinee is selected at the random from this group of examinees, find the
probability that
He is a commerce graduate
He is a science graduate given that his score is above 60.
His score is below 50 given that he is a BA
In a bolt factory 3 machines M1,M2,M3 manufactures respectively 25%, 35% and 40%
of the total of the output. 5%, 4%, 2% respectively are defective bolts. One bolt is drawn
at random from the products and is found to be defective. What is the probability that it is
manufactured in Machine 2?
Three A, B, C produce 50%, 30% and 20% respectively of the total no of items in a
factory. The percentage of defective output of these machines are 3%, 4%, 5%. An item
from production of the factory is selected at random and is found to be defective. What is
the probability it was produced by machine A?
Suppose that there is a chance for a newly constructed building to collapse whether the
design is faulty or not. The chance that the design is faulty is 10%. The chance that the
building collapse is 95%, if the design is faulty and otherwise it is 45%. It is seen that the
building collapsed. What is the probability that it is due to faulty design?
There are two identical boxes containing respectively 4 white, 3 red and 3 white, 7 red
balls. A box is choosen at random and a ball is drawn from it. If the ball is white, what is
the probability it is from 1st box?

Binomial Distribution
1. 6 coins are tossed in succession. Find the probability of getting more than 4 heads.
2. The probability that an evening college student will graduate is 0.4. determine the
probability that out of five students, one student, two students and at least one student
will be graduate.
3. A bag containing 50 items has five defectives. Indicate the probability of the following if
4 items are drawn with replacement
(a) Exactly two defective items
(b) At least two defective items
(c) At the most two defective items
4. A random variable x is binomially distributed with mean & standard deviation 2.4.
find the probability that more than half of the trials are success.
5. 8 coins are tossed at a time 256 times. No of heads observed at each throw is recorded
and the results are given below. Find the expected frequency. What is the theoretical
value of mean and standard deviation.
6. The screws produced by a certain machine were checked by examining centers of 7. The
following shows the distribution of 128 samples according to the no of defective items
they contained.
No. of Defectives:
0
1
2
3
4
5
6
7
No. of Samples: 7
6
19
35
30
23
7
1
Fit a binomial distribution and find the expected frequencies if the chance of machine
being defective is . Find the mean and variance.
Poisson distribution
1. Assuming that on an average 2% of the output in a factory manufacturing certain bolts is
defective and that 200 units are in package. What is the probability that
(i)
None is defective
(ii)
At most 3 defectives bolts may be found in that package.
2. A book contains 125 misprints distributed at random throughout its 125 pages. What is
the probability that a page observed at random contains at least 2 misprints.
3. A random x follows a poisson distribution with parameter 3. Find the probability that
x assumes the values
(i)
0, 1, 2
(ii)
Less than 3
(iii)
At least 3
4. In an office between 4&5 PM the average no of incoming phone calls per minute in the
switch board is 1.8. find the probability that during one particular minute there will be
(i)
No phone call at all
(ii)
Exactly 2 phone calls

5. Suppose that a manufactured product has two defectives per unit of product inspected.
Using Poisson distribution calculate the probabilities of finding a product without any
defect, 3 defects and 4 defects.
6. Fit a poisson distribution to the following data and calculate the theoretical frequencies.
No of deaths:
0
1
2
3
4
Frequencies:
122
60
15
2
1
7. The distribution of typing mistakes committed by a typist is as follows. Assuming a
poisson model, find out the expected frequencies.
Mistakes/page:
0
1
2
3
4
5
No of pages:
142
156
69
27
5
1
1.
(a)
(b)
(c)
2.
(a)
(b)
(c)
3.
(a)
(b)
(c)
(d)
(e)

Normal Distribution
A sample of 100 dry battery cells are tested to find out the length of life produced the
following results. =12 hrs. S.D. = 3 hrs. assuming that the data are normally distributed
what percentage of battery cells are expected to have
More than 15 hrs
Less than 6 hrs
Between 10 and 14 hrs.
The mean and standard deviation of the wages of 6000 workers engaged in a factory are
Rs. 1200 and 400 respectively. Assuming the distribution to be normal estimate
Percentage of workers getting wages above Rs.1600
No of workers getting wages between Rs.600 and Rs.900.
No of workers getting wages between Rs.1100 and Rs.1500.
The daily wages of 1000 workmen are normally distributed around a mean of Rs.70 and
with a standard deviation of Rs.5. estimate the no of workers where daily wages will be
More than 75
More than 80
Less than 63
Between 70&72
Between 69&72