World University of Bangladesh

Department of Business Administration

Business Statistics

Term Paper

Submitted by:
Kazi Naimur Rahman Nishad
ID: 0121714349
Batch: 71/A
Course: Business Statistics
Department: Business Administration
Date of Submission: 12/08/2021

Submitted to:
A. K. Ziauddin Ahmed
Assistant Professor, World School of Business
World University of Bangladesh
Email: ziauddin@business.wub.edu.bd
Cell: 01715 492 675
 Task 1

Answer to the question no. 1

First of all a table has to be made of 50 values where Data Y is included. Where Y = Z + Last
Two Digit of my Roll Number which is 49
So here, Y = Z + 49
Serial X Y Z Serial X Y Z
1 2 51 2 26 4 58 9
2 7 53 4 27 5 50 1
3 6 54 5 28 7 56 7
4 4 56 7 29 2 52 3
5 6 57 8 30 6 57 8
6 8 50 1 31 2 53 4
7 9 58 9 32 2 58 9
8 1 57 8 33 1 52 3
9 2 55 6 34 7 58 9
10 1 57 8 35 2 57 8
11 2 51 2 36 4 58 9
12 5 56 7 37 5 50 1
13 4 55 6 38 7 51 2
14 2 53 4 39 8 50 1
15 9 55 6 40 1 51 2
16 3 57 8 41 9 54 5
17 4 58 9 42 8 53 4
18 3 56 7 43 6 51 2
19 8 51 2 44 8 58 9
20 4 55 6 45 4 50 1
21 9 51 2 46 6 51 2
22 3 51 2 47 1 50 1
23 9 50 1 48 1 54 5
24 5 56 7 49 1 56 7
25 7 50 1 50 1 55 6

Now, constructing a frequency distribution table for Y taking suitable class intervals
following the exclusive method.
Class Class Mark Frequency
50 - 55 52.5 26
55 – 60 57.5 24
 Answer to the question no. 2

Finding the Mean and Standard Deviation of Y and commenting on the result.

Mean of Y:
Class Class Mark (X) Frequency (f) fX
50 - 55 52.5 26 1365

55 – 60 57.5 24 1380

N = 50 Total = 2745

∑𝐹 𝑋 2745
x̄ = = = 54.9
𝑁 50

Standard Deviation of Y:
Class Class Mark Frequency fX 𝑥 − 𝑥̅ (𝑥 − 𝑥̅ )2 𝑓(𝑥 − 𝑥̅ )2
(X) (f)
50 - 55 52.5 26 1365 -2.4 5.76 149.76

55 – 60 57.5 24 1380 2.6 6.76 162.24

N = 50 Total = 2745 Total = 312

Standard deviation is,

∑𝑓(𝑥−𝑥̅ )2 312
𝜎= √ =√ = √6.24 = 2.498
𝑁 50

The mean is the average or the most common value in a collection of numbers. Here the
Mean is 54.9 so it can be said that it is the average of data Y.
Standard deviation tells us how far the mean from each observation is in the given data set. In
other words, it shows the typical deviation from the mean. If the standard deviation is small
the data is not spread out but if it is large the data varies a lot from the mean. Here the
Standard Deviation is 2.498 which is very good.
 Answer to the question no. 3
Constructing the regression equation considering X as independent variable and Y as
dependent variable and commenting on this equation.
Serial X Y XY X2
1 2 51 102 4
2 7 53 371 49
3 6 54 324 36
4 4 56 224 16
5 6 57 342 36
6 8 50 400 64
7 9 58 522 81
8 1 57 57 1
9 2 55 110 4
10 1 57 57 1
11 2 51 102 4
12 5 56 280 25
13 4 55 220 16
14 2 53 106 4
15 9 55 495 81
16 3 57 171 9
17 4 58 232 16
18 3 56 168 9
19 8 51 408 64
20 4 55 220 16
21 9 51 459 81
22 3 51 153 9
23 9 50 450 81
24 5 56 280 25
25 7 50 350 49
26 4 58 232 16
27 5 50 250 25
28 7 56 392 49
29 2 52 104 4
30 6 57 342 36
31 2 53 106 4
32 2 58 116 4
33 1 52 52 1
34 7 58 406 49
35 2 57 114 4
36 4 58 232 16
37 5 50 250 25
38 7 51 357 49
39 8 50 400 64
40 1 51 51 1
41 9 54 486 81
42 8 53 424 64
43 6 51 306 36
44 8 58 464 64
45 4 50 200 16
46 6 51 306 36
47 1 50 50 1
48 1 54 54 1
49 1 56 56 1
50 1 55 55 1
Total 231 2696 12408 1429
Here,

𝑁∑𝑋𝑌 − ∑𝑋∑𝑌
𝑏=
𝑁∑𝑋 2 − (∑𝑋)2
50 × 12408 − 231 × 2696 620400 − 622776 −2376
= = = = - 0.131
50 ×1429 −(231)2 71450 − 53361 18089

Again,

1
𝑎= (∑𝑌 − 𝑏∑𝑋)
𝑁
1
= {2696 - (- 0.131) × 231} = 0.02 × 2726.261 = 54.526
50

Regression equation is Y= a + bX
Or, Y= 54.526 + (- 0.131) X = 54.526 – 0.131X

Hence, the regression equation = 54.526 – 0.131X [The value of X is not given]
 Task 2

Answer to the question no. 1

Maximin Decision Rule:

Choices Profit
Investment Big Rise Small Rise Small Fall Big Fall
Options ($)
Gold Market -100 100 300 0
Bond Market 250 200 -100 -150
Stock Market 500 250 -200 -600
Fixed Deposit 60 60 60 0

Here we will consider the worst consequences of each possible course of action and choose
the one that is the best among the worst. If we continue with Mr. X’s decision case and go
back to his pay off table, we can see that the worse consequences can occur if the markets
turns out to be Big Fall. This consequences are highlighted here in yellow colour. There are
all losses and among all these losses, the minimum loss occurs on investment Gold and Fixed
Deposit.
Therefore by maximin decision rule Mr. X will consider investing in Gold Market or Fixed
Deposit.
 Answer to the question no. 2

Minimax Regret Decision Rule:

Choices Regret
Investment Big Rise Small Rise Small Fall Big Fall
Options ($)
Gold -100 100 300 0
Market
Regret: 500 - (-100) = 600 Regret: 250 - 100 = 150 Regret: 300 - 300 = 0 Regret: 0 - 0 = 0
Bond 250 200 -100 -150
Market
Regret: 500 - 250 = 250 Regret: 250 - 200 = 50 Regret: 300 - (-100) = 400 Regret: 0 - (-150) = 150
Stock 500 250 -200 -600
Market
Regret: 500 -500 = 0 Regret: 250 - 250 = 0 Regret: 300 - (-200) = 500 Regret: 0 - (-600) = 600
Fixed 60 60 60 0
Deposit
Regret: 500 - 60 = 440 Regret: 250 - 60 = 190 Regret: 300 - 60 = 240 Regret: 0 - 0 = 0

Again,
Choices Regret
Investment Options ($) Big Rise Small Rise Small Fall Big Fall

Gold Market 600 150 0 0

Bond Market 250 50 400 150
Stock Market 0 0 500 600
Fixed Deposit 440 190 240 0

In applying the minimax regret decision rule we find the maximum amount of regret for each
possible course of action. In this table, the maximum regret for each course of action is
colored in yellow. Here, the maximum regret for Gold, Bond Market, Stock Market and
Fixed Deposit are 600, 400, 600 and 440 respectively.

So, applying minimax regret decision rule Mr. X should invest in Bond Market because that
is the minimum of all the maximum regrets.
 Answer to the question no. 3

Maximize Expected Value of Returns:

Investment Profit Expected Monitory Value
Options ($)
Big Rise Small Small Big Fall
Rise Fall

(p = 0.3) (p = 0.4) (p = 0.2) (p = 0.1)

Gold Market -100 100 300 0 (-100×0.3) + (100×0.4) + (300×0.2) +
(0 × 0.1) = 70
Bond Market 250 200 -100 -150 (250 × 0.3) + (200 × 0.4) + (-100 ×
0.2) + (-150 × 0.1) = 120
Stock Market 500 250 -200 -600 (500 × 0.3) + (250 × 0.4) + (-200 ×
0.2) + (-600 × 0.1) = 150
Fixed Deposit 60 60 60 0 (60 × 0.3) + (60 × 0.4) + (60 × 0.2) +
(0 × 0.1) = 54

The expected values are calculated by multiplying each possible pay off associated with a
course of action by the probabilities of their occurrence and then summing up all those
values. So here we got expected values for investment choices of Gold, Bond Market, Stock
Market and Fixed Deposit as 70, 120, 150 and 54 respectively. The highest expected value is
150.

Therefore to maximize the expected value Mr. X should invest in Stock Market.
 Answer to the question no. 4

Regret Matrix:
Investment Regret Expected Opportunity Loss
Options ($)
Big Rise Small Small Big Fall
Rise Fall

(p = 0.3) (p = 0.4) (p = 0.2) (p = 0.1)

Gold 600 150 0 0 (600 × 0.3) + (150 × 0.4) + (0 × 0.2)
+ (0 × 0.1) = 240
Bond Market 250 50 400 150 (250 × 0.3) + (50 × 0.4) + (400 × 0.2)
+ (150 × 0.1) = 190
Stock Market 0 0 500 600 (0 × 0.3) + (0 × 0.4) + (500 × 0.2) +
(600 × 0.1) = 160
Fixed Deposit 440 190 240 0 (440 × 0.3) + (190 × 0.4) + (240 ×
0.2) + (0 × 0.1) = 256

Here we will calculate regret or opportunity loss values for every market condition as before
and then calculate the expected values of opportunity loss for each investment choice. These
values for investment choices of Gold, Bond Market, Stock Market and Fixed Deposit came
up as 240, 190, 160 and 256 respectively.

So the lowest expected value is 160 and therefore to minimize expected opportunity loss Mr.
X should invest in Stock Market.