Class Test –STAT 1011Y (28 November 2017)

Instructions:
Answer ALL questions
Time allocated: 55 mins
Silent non-programmable calculators are allowed
You are expected to show clearly the steps employed to obtain the solution.

Question 1

(a) The mean and the sample standard deviation of 10 recorded observations are 62.5 and
27.5 respectively. However, an observation was later found to be wrongly recorded. The
observation concerned was supposed to be 10 instead of 100.
(i) What is the correct mean? [2]

∑X
=62.5=¿ ∑ X=625
10

New Sum =625-100+10=535.

Therefore, new mean = 53.5
(ii) What is the correct sample standard deviation? [4]
1
S2 = (∑ X 2−n x́ 2)
n−1
1
( ∑ X 2−10 ×62.52 ) =27.52
9
∑ X 2=( 9 ×27.52 ) + ( 10× 62.52 )=45868.75
New ∑ X 2=45868.75−1002 +102=35968.75
1
New S 2= ( 35968.75−10 ×53.52 )=816.25∴ New S=√ 816.25=28.57
9
(b) Consider the following table which relates to the percentage return on an ordinary share
for 15 consecutive months.
Returns (%) Frequency
-3 but under -2 1
-2 but under -1 2
-1 but under 0 3
0 but under 1 5
1 but under 2 3
2 but under 3 1

(i) What is the point of balance for the distribution of returns? [2]
 Class Test –STAT 1011Y (28 November 2017)

Returns (%) Frequency (f) Midpoint (x) fx cf

-3 but under -2 1 -2.5 -2.5 1
-2 but under -1 2 -1.5 -3 3
-1 but under 0 3 -0.5 -1.5 6
0 but under 1 5 0.5 2.5 11
1 but under 2 3 1.5 4.5 14
2 but under 3 1 2.5 2.5 15
15 2.5

Mean Returns =2.5/15=0.167%

(ii) The return has been above what value for 25% of the months? [4]
We are trying to find the upper quartile returns.
The upper quartile class can be located by the cumulative frequency relating to
the upper quartile. The cumulative frequency relating to the upper quartile is
0.75*(15+1)=12
Therefore upper quartile class is 1 but under 2
3
Upper quartile=1+
(
1 × ( 15+1 )−11
4 ) =1.333 %
3

Question 2

(a) Matthew, Mark, Luke, and John have formed a band consisting of 4 instruments. If
Matthew and Mark can play all 4 instruments, but Luke and John can each play only
guitar and flute, how many different arrangements are possible? [2]
2! For Luke and John to be assigned piano and drums. 2! Left for Matthew and Mark.
Total arrangements= 2!*2!=4
n n= n
()
(b) Using the factorial definition of
r () ( )
, prove the identity
r n−r
. [2]

n= n! n! n!
= n
() = = ( )
r ( n−r ) ! r ! ( n−r ) ! ( n−n+r ) ! ( n−( n−r ) ! ) ( n−r ) ! n−r
(c) A person has n keys, of which one will open his door. If he tries the keys at random, by
not discarding those that does not work, what is the probability that he will open the door
on the rth try? [3]
n−1 1
Probability of a failure is . Probability of getting the right key is .
n n
r−1
n−1 1
Therefore required probability is ( ) ()
n n
 Class Test –STAT 1011Y (28 November 2017)

(d) Express the following events in terms of the events E, F, and G as well as the operations
of complementation, union and intersection. Represent the expression through a Venn
diagram as well by shading the events.
(i) Both E and G but not F occur. [2]
'
E ∩ F ∩G

(ii) At most two of them occur. [2]

( E ∩ F ∩G ) ∪ ( E ∩ F ∩ G ) ∪ ( E ∩ F ∩G ) ∪ ( E ∩ F ∩G ) ∪ ( E ∩ F ∩G ) ∪ ( E∩ F ' ∩ G ) ∪ (E ' ∩ F ∩
' ' ' ' ' ' ' ' ' '

OR ( E ∩ F ∩G) '

(e)
(i) State and prove the Bayes’ theorem. [Do not state and prove the simplest form of
the Bayes Theorem with regards to two events only] [5]
If B1,B2,…, Bn are mutually exclusive and exhaustive events such that P(B j)>0 for
all j, then for any event A (P(A)>0) and A ⊂ ¿ j=1 ¿ n B j then,
 Class Test –STAT 1011Y (28 November 2017)

P ( A|Bk ) P ( B k )
P ( B k|A ) = n

∑ P ( A|B j ) P ( B j )
j=1

Proof:
P ( Bk ∩ A )
P ( B k|A ) =
P( A)
P( Bk ∩ A )=P ( A|Bk ) P ( B k ) according to the multiplication rule
n
P ( A )=P ( A|B1 ) P ( B1 ) + …+ P ( A|B n ) P ( Bn ) =∑ P ( A|B j ) P ( B j ) according to the
j=1

total probability theorem.

P( Bk ∩ A) P ( A|Bk ) P ( B k )
∴ P ( Bk| A )= = n
P( A)
∑ P ( A|B j ) P ( B j )
j=1

(ii) In a certain place it rains on one third of the days. The local evening newspaper
attempts to predict whether or not it will rain the following day. Three quarters of
rainy days and three fifths of dry days are correctly predicted by the previous
evening’s paper. Given that this evening’s paper predicts rain, what is the
probability that it will actually rain tomorrow? [Use Bayes’ theorem to answer the
question] [3]
Let R represents the event that it actually rain.
Let P represents the event that it predicts rain.
1 3
P ( R )= ; P ( P|R )= ; P ( P' ∨R ' ) =3/5
3 4
3 1
×
P ( P|R ) P(R) 4 3
P ( R|P )= = =0.484
P ( P|R ) P ( R ) + P ( P| R' ) P(R ' ) 3 × 1 + 2 × 2
( 4 3 )(
5 3 )
(f) In a closet there are 10 pairs of shoes. If eight shoes are randomly selected, what is the
probability that there will be no complete pair? [3]

There are (208 )possible combinations of eight shoes which relates to the sample space.
10
There are ( ) ways of choosing unique shoes.
8
Since there are two possibilities of picking the shoe from each pair, this means there are

(108 ) ×2 ways to choose 8 shoes that are not paired.

8

Therefore required probability is

 Class Test –STAT 1011Y (28 November 2017)

(108) ×2 =0.09145
8

( 208)
Question 3

The following data relates to imports for years 1992 to 1996. The trend has been obtained
through the centered moving average.

Year Quarter Imports Trend

1992 1 114
2 142
3 155 137.0
4 136 138.25
1993 1 116 139.0
2 150 139.25
3 153 141.25
4 140 143.75
1994 1 128 146.75
2 158 151.125
3 169 154.625
4 159 158.5
1995 1 137 164.125
2 180 168.625
3 192 171.25
4 172 174.0
1996 1 145
2 194

(a) What does time series analysis involve? [1]

Time series analysis involves the separation of confounded effects and the evaluation of
their respective magnitudes.
 Class Test –STAT 1011Y (28 November 2017)

(b) Assuming an additive model for the data, obtain the seasonal components for the series.
[10]

Obtain deviations from trend first. The construct the following table

Quarter
Year
1 2 3 4
1992 +18.0 -2.25
1993 -23.0 +10.75 +11.75 -3.75
1994 -18.75 +6.875 +14.375 +0.5
1995 -27.125 +11.375 +20.75 -2.0
Average Deviation from Trend -22.958 +9.667 +16.219 -1.875 =+1.053
Adjusted SV -23.221 +9.404 +15.956 -2.138
SV -23 +9 +16 -2

(c) Interpret the seasonal variations obtained. [2]

Imports are lower than the average in quarters 1 and 4 by 23 and 2 units respectively.
However, imports are higher than the average in quarters 2 and 3 by 9 and 16 units
respectively.
(d) Why is it necessary to carry out time series analysis? [3]
For the purpose of explanation or description, decision making and forecasting purposes.