BUSINESS STATISTICS

Assignment # 10

Q1 A hospital found that the probability of a power failure in a certain time period is .00001. To
guarantee the functioning of the hospital, the hospital installed a backup system that has a
probability of .005 of breaking down. The two power systems operate independently. What is
the probability that the hospital will completely stop functioning?

Q2 The state highway bureau found that during the rush hour, in the treacherous section of a
highway, an average of three accidents occur. The probability of there being an accident follows
a Poisson distribution. What is the probability that there is no accident in a given day? what is
the probability that there are no traffic accidents in all five workdays of a week?

Q3 Gather Daily stock prices for KSE 100 index and BAHL for past five years. Illustrate the data using
a line plot.
(a)Calculate average daily return, standard deviation for KSE Index and company stock prices
(b) Calculate Covariance and correlation between the two. Comment
(c) Calculate annualized return and annualized standard deviation
(d) Calculate covariance and correlation based on (C). Comment
(e) Based on your data, comment whether covariance based on annualized returns gives better
results than covariance based on daily returns or not. Explain

Q4 Explain Slice Sampling? Under what circumstances, can it be used? Elaborate on the application
and limitations related to this sampling?

Q5 A cigarette manufacturer came up with a new brand of cigarettes called Long Life. The nicotine
content of the cigarettes follows a normal distribution with a mean of 20 and a standard
deviation of 5. A consumer bought a pack of Long Life that contains 25 cigarettes. Consider
these 25 cigarettes as a random sample.
(a) What is the probability that a cigarette contains over 23 units of nicotine?
(b) What is the probability that the average nicotine content for the whole pack of cigarettes is
higher than 23?

Q6 Briefly discuss the relationship between the Poisson distribution and the exponential
distribution.