COLOGNE-ROTTERDAM

EXECUTIVE MBA 2024

BUSINESS ANALYTICS

PROBLEM SET 1
Exercise 1

A retail organization has recently been investigating customer spending patterns at two of its stores, called
Stores A and B, and has obtained the following results:

Store A (€) Store B (€)

Mean spending per customer 12.25 30.05
Median spending per customer 10.88 29.91
Standard deviation 7.79 7.77
Lower quartile 6.34 25.04
Upper quartile 17.43 35.32

Interpret these statistics, and any others you can derive. Briefly explain the implications for management.

Exercise 2

Which of the following statements about the mean is not always correct?

a) The sum of the deviations from the mean is zero 1

b) Half of the observations are on either side of the mean

c) The mean is a measure of the middle (centre) of a distribution

d) The value of the mean times the number of the observations equals the sum of all of the observations

Exercise 3

In a probability distribution, the proportion of the total area which must be to the left of the median is (select
the most accurate alternative):

a) Exactly 0.50

b) Less than 0.50 if the distribution is skewed to the left

c) More than 0.50 if the distribution is skewed to the left

d) Between 0.25 and 0.60 if the distribution is symmetric and unimodal

hint: think about how the median generalizes for distributions instead of numbers.
COLOGNE-ROTTERDAM
EXECUTIVE MBA 2024

BUSINESS ANALYTICS

Exercise 4

The financial return of a commodity is estimated to be normally distributed with a mean of 1% and standard
deviation of 1.5%. Find the probabilities that the return will be:

a) at least 1%

b) at least 2.5%

c) between –0.5% and 4%

(It is not neccessary to use Excel in this exercise).

Exercise 5

The web publisher www.exploreiceland.is provides information on travelling to Iceland. Access to the website
is free but revenues are generated by selling ads that are posted on the website. In the following month, the
website has committed to display ads to 650,000 viewers, i.e., 650,000 impressions. Based on data from
previous months the traffic to the website is estimated to be normally distributed with a mean of 850,000
viewers and a standard deviation of 150,000.

a) What is the probability that the web publisher will be able to deliver the promised impressions?
2
b) How many impressions should the web publisher have taken on, to be able to guarantee a 95% service
level?

Exercise 6

Colin, a first-year college student, is enrolled in a college algebra course and earned a score of 260 on a math
achievement test that was given out to all first-year students prior to enrolment. The instructor looked at two
distributions of scores:
• the distribution for all first-year students
• the distribution for the first-year students enrolled in this algebra course

Both are approximately normally distributed and have the same mean, but the distribution for the algebra
course has a smaller standard deviation. A Z score is calculated for Colin’s test score in both distributions (all
first-years and the first-years taking this algebra course). Given that Colin’s score is well above the mean,
which of the following is true about these two Z scores?

(a) The Z score based on the distribution for the first-year students taking algebra would be higher.

(b) The Z score based on the distribution for all first-year students would be higher

(c) The two Z scores would be the same

COLOGNE-ROTTERDAM
EXECUTIVE MBA 2024

BUSINESS ANALYTICS

(d) The two Z scores would be different, but we don’t have enough information to tell which Z score would
be higher

Exercise 7

True or false:

a) If we know the mean of the normal distribution we know its shape

b) In the normal distribution, the mean, median, mode, and standard deviation are all at the same position
on the horizontal axis since the distribution is symmetric.

c) Normal distribution that is wide has a high standard deviation

The Normal Table

The normal table (see next page) gives the area under the curve of a normal distribution. Instead of listing all
possible normal distributions (an impossible task!), the table is designed for the standard normal distribution
that has a mean 0 and a standard deviation 1, 𝑁(0,1).

If we have a normal distribution 𝑁(𝜇, 𝜎) and want to find the area under the curve above a number X (the
shaded area above), we need to go through the two following steps:

1. Find how many standard deviations X is from the mean 𝜇, i.e. the Z-value for Χ:
2. Go to the normal table and look up the area that corresponds to Z.

For example, if we have a distribution 𝑁(𝜇 = 2, 𝜎 = 0.5) and want to find the area above 2.23, we find the
Z-value:

2.23 − 2
𝑍= = 0.46
0.5

Hence, 2.23 is 0.46 standard deviations away from the mean, 2. Next we look up the area that corresponds
to the Z-value 0.46 in the normal table. To locate 0.46 in the table we first locate 0.4 in the first column, then
we locate 0.06 in the first row. The area is the value in the intersecting cell of the row and column, 0.3228,
i.e., 32.28%. Note that the table is only for positive Z-values. In order to determine the area under the curve
for a negative Z-value we still can use the table by utilizing the fact that the normal distribution is symmetric.
COLOGNE-ROTTERDAM
EXECUTIVE MBA 2024

BUSINESS ANALYTICS

Normal Distribution in Excel

We can find the area under the normal curve in Excel with the function:
NORM.DIST(X,mean,stdev,true) where “X” determines the area of interest, “mean” is the mean
of the distribution we are working with, “stdev” is the standard deviation and “true” is to indicate that we
want the area under the curve (not the height).

Note that this function gives the area below X (not above as in the normal table). Hence in order to get the
area above X (as listed in the normal table) we use: 1-NORM.DIST(X,mean,stdev,true)