University of Botswana

Department of Statistics
STA 114: Business Statistics I

SPECIAL TEST 2
Duration: 1 Hour 30 Minutes
11 May 2021
Marks: 75
Instructions
 Answer All Questions in Section A
 Answer ANY TWO Questions in Section B
 Begin every main question attempted on a new page.
 Use of provided Formula Sheet allowed.

A1. Indicate whether or not each of the following statements is TRUE or FALSE

i) A seasonal index is an index which measures the average magnitude of seasonal

effects in a particular time series.
ii) Coefficient of Determination, R2 measures the proportion of variation in Y that is
explained by X and is often expressed as a percentage.
iii) In the multiple linear equation Y = β0 + β 1 X1 + β 2 X2 + e β 1 and β 2 are
called multiple regression coefficients.
iv) The conditional probability of A given B denoted as P(A|B) is similar to the
conditional probability of B given A denoted as P( B|A).
v) The mean of a binomial distribution with n= 12 and  = 0.5 is 5.
vi) fx = ; 1 <  < 3 is a valid probability density function.

vii) The mean squared error (MSE) and the mean absolute deviation (MAD) are two
components of time series
viii) The classical definition of probability assumes that all the outcomes of an
experiment are equally likely.
ix) If the number of potholes per kilometer along the Gaborone – Palapye –
Francistown road follows a Poisson distribution, then the number of potholes
found between Gaborone and Palapye does not depend on the number of
potholes between Palapye and Francistown
x) If A and B are complementary events, then P ( A) = P(B)

[1.5Mark×10=15 Marks]

2
A2: Answer the following questions by filling in the missing word or short sentence

i) If you flip a coin three times, the probability of getting a head at first trial, a tail at
second trial and a head on third trial is ______

ii) In a random experiment, if the occurrence of one outcome prevents the occurrence of
any other outcome, then the outcomes are said to be _________________.

iii) If A and B are events defined on a sample space, S and P ( A ∩ B ) = 0 then A and B
are ___________________events.

iv) The ratio-to-moving average method is used to ____________ the series.

v) If A and B are events defined on a sample space, S such that P ( A / B ) = P ( A) then A

and B are ______________events.

[2×5=10 marks]

2
 SECTION B
Answer ANY TWO Questions
QUESTION B1
a) The following table shows the quarterly sales for Toys International for the years 1996
through 2001. The sales are reported in millions of Pula. The table also presents the
deseasonalized series using the method of Ratio to moving average. Complete the table for
the missing values A-J

Fitted Value
^ Detrended Scaled
Yt = Series Dt = Seasonal
92.0558+0.743047t ^ Indices De-seasonalised
Month Yt ( Yt / Yt )*100 (SSIt) series (Yt/SSIt)* 100

2015 Jan 81.3 92.8 88 89.32 91.0

Feb A 93.54 F 86.07 91.7
Mar 93.8 94.28 99 98.08 95.6
Apr 94 95.03 99 98.58 95.4
May 97.8 95.77 102 104.09 94.0
Jun 100.6 96.51 104 102.34 98.3
Jul 99.6 97.26 102 99.83 99.8
Aug 100.2 D 102 H 97.7
Sep 98 98.74 99 98.33 99.7
Oct 100.7 99.49 101 99.83 100.9
Nov 103.9 100.23 104 100.83 103.0
Dec 125.7 100.97 124 120.10 104.7
2016 Jan 93.1 E 92 89.32 104.2
Feb 93.7 102.46 91 86.07 108.9
Mar 104.3 103.2 101 98.08 106.3
Apr B 103.94 100 98.58 105.8
May 111.3 104.69 106 104.09 106.9
Jun 112 105.43 106 102.34 109.4
Jul 106.6 106.17 100 99.83 106.8
Aug 110.7 106.92 104 102.59 107.9
Sep 103.9 107.66 97 98.33 105.7
Oct C 108.4 101 99.83 J
Nov 113.3 109.15 104 100.83 112.4
Dec 131.8 109.89 120 I 109.7
2017 Jan 98.8 110.63 89 89.32 110.6
Feb 95.6 111.37 G 86.07 111.1
Mar 110.2 112.12 98 98.08 112.4
Apr 113.1 112.86 100 98.58 114.7
May 120.3 113.6 106 104.09 115.6
Jun 115 114.35 101 102.34 112.4
Jul 115.5 115.09 100 99.83 115.7
Aug 121.1 115.83 105 102.59 118.0
Sep 114.2 116.58 98 98.33 116.1
Oct 116.1 117.32 99 99.83 116.3
Nov 118.6 118.06 100 100.83 117.6
Dec 139.5 118.81 117 120.10 116.2

b) An exponential model and linear model were fitted separately on the same set of data.
The actual observations and their corresponding forecasted values from the two models
are as follows.

2
 t Yt Forecasts (Linear Model) Forecasts (Exponential Model)
1 29 26.95 27.42
2 34 33.84 34.99
3 43 41.72 40.63

Using the Mean Absolute Forecast Error (MAFE), determine the best model for the
future forecasting and giving reasons why you think the chosen model is the best.

[(1.5×10)+10=25 marks]
QUESTION B2
a) A sample of 20 shoppers at a Pep Store was interviewed regarding their buying
habits. One question asked was: “How many times did you shop at this store during
the past week?” The Number of times a person shopped X, and associated number of
customers and probabilities are given below.

Number of times shopped: X 0 1 2 3 4 Total

Number of customers 2 a 10 2 1 20

P(X=x) 0.1 0.25 0.5 b 0.05 1.00

i) Use the information provided to fill in the blanks a and b

ii) What is the probability that if a person is randomly selected, they will have
shopped at least 2 times in a week?
iii) Determine the cumulative distribution function (CDF) of X.
iv) Compute the mean E(X) and the variance V(X)

b) A department store manager wishes to investigate whether the method of payment

chosen by customers is related to the size of their purchases. The manager has cross-
classified a sample of 250 customer purchases, as shown in the following table.
Method of payment
Size of purchase C1=Cash C2=Credit Card Total
P1=Less than P200 a 31 d
P2=P200 or more 65 b 168
Total 116 c 250

One of these 250 customers is selected at random.

i) Fill in the missing values denoted by a and b

ii) What is the probability that the customer selected made a purchase of less than
P200?
iii) Are the events “Payment by cash” and “Purchase of less than P200” independent?
Verify your answer.

[2+2+5+2+4+4+2+4 = 25 marks]

2
QUESTION B3
a) Tay-Sachs disease is a genetic disorder that is usually fatal in young children. If both
parents are carriers of the disease, the probability that their offspring will develop the disease
is approximately 0.25. Suppose that a husband and wife are both carriers and that they have
three children. If the outcomes of the three pregnancies are mutually independent, what are
the probabilities of the following events?

i) All three children develop Tay-Sachs.

ii) Only one child develops Tay-Sachs.
iii) At most two children develop Tay-Sachs.

iv) Find the standard deviation of the number of children who develop Tay-Sachs
disease.

c) The rate at which the number of cars arriving at a tollgate within 1 minute is assumed
to occur with an average of 2 cars arriving per minute.

(i) State the probability distribution for describing the number of cars arriving at
a tollgate.
(ii) What is the probability that no cars will arrive in the next minute?
(iii)What is the probability that less than 2 cars will arrive in the next minute?
(iv) What is the probability that 3 cars per minute arrive in a space of two minutes.

[3+3+4+3+3+3+4+4 = 25 marks]
FORMULAE SHEET

    ×

× 100 
× 100 
× 100 

∑!"  

m m  yt − yˆ t 
# (y t − yˆ t ) 
t =1  yt 

t =1
× 100
m m

' , -. /0
$% =  = & (  ) 1 − 

+)
$% =  = )!

λ '1 −  '

2
 STA 114 SPECIAL TEST 2_2021 SOLUTIONS
SECTION A
A1.

xi) TRUE
xii) TRUE
xiii) TRUE
xiv) FALSE
xv) FALSE
xvi) FALSE
xvii) FALSE
xviii) TRUE
xix) TRUE
xx) FALSE
[1.5marks ×10=15 marks]

A2.

i) 1/8
ii) Dependent

iii) Mutually exclusive

iv) Deseasonalise
v) Independent
[2marks × 5=10 marks ]

2
Solution B1

a)
A: 78.93 F: 84.38

B: 104.3 G: 85.84

C: 109.48 H: 102.59

D: 98.00 I: 120.1

E: 101.71 J: 109.67

[1.5marks ×10=15 marks]

b)

Model 1
29 26.95 2.05
34 33.84 0.16
43 41.72 1.28
3.49 1.163333

Model 2
29 27.42 1.58
34 34.99 0.99
43 40.63 2.37
4.94 1.646667

Linear Model
∑;<= − <>= ;
345678+,9: =
?

= @ A|29 − 26.95| + |34 − 33.84| + |43 − 41.72|J [3marks]

= 1.163 [1mark]

Exponential Model
∑;<= − <>= ;
3456,)KL+,+=897 =
?

= @ A|29 − 2627.42| + |34 − 34.99| + |43 − 40.63|J [3marks]

= 1.647 [1mark]

The linear model l is best for future forecasting because it has a smaller value [2marks]

2
Solution B2
i) A=5
B=0.1
[2marks]

ii) The probability that the person will have shopped at least 2 times in a week

P(X ≥ 2) =P(X=2)+P(X=3)+P(X=4)

=+0.5+0.1+0.05=0.65 [2marks]

iii) CDF of X

Number of times shopped: X 0 1 2 3 4 Total

P(X=x) 0.1 0.25 0.5 0.1 0.05 1.00

F(X) 0.1 0.35 0.85 0.95 1

[5marks

iv) Mean and Variance

Number of times shopped: X 0 1 2 3 4 Total

P(X=x) 0.1 0.25 0.5 0.1 0.05 1.00

xP(X=x) 0 0.25 1.00 0.3 0.2 1.75

x2P(X=x) 0 0.25 2.00 0.9 0.8 3.95

Mean

E(X) = ∑)M $% =  = 1.75 [2marks]

Variance

E(X2) = ∑)M  N $% =  = 3.95 [2marks]

Var(X) = 6% N − O6% ]N [1mark]

= 3.95 − 1.75 N
= 0.8875 [1mark]

2
b)
Events
P1: Purchase less than P200
P2: Purchase P200 or more
C1: Cash Payment
C2: Credit Card payment

Joint and Marginal Probabilities

Jointl Prob.
Method of payment
Size of purchase Cash (C1) Credit Card (C2) Marginal Prob.
Less than P(P1∩C1)=51/250 P(P1∩C2)=31/250 P(P1)=82/250
P200(P1)
P200 or P(P2∩C1)=65/250 P(P2∩C2)=103/250 P(P21)=168/250
more(P2)
Marginal Prob. P(C1)=116/250 P(C2)=134/250 1

i) a=116-65 = 51 ; b=168-65 =103; c=250-116=134 and d =250-168=82 [4marks]

ii) $$PQRℎTUV WX YVUU ZℎT' $200 = $$1

51 31
= +
250 250
82
=
250
= 0.328 [2marks]

iii)Two events C1 and P1 are independent iff $[1 ∩ $1 = $[1 $]$1 [1mark]
^. V. ^XX 51⁄250 = 116/25082/250 'WZ ZQPV , [1marks]
because 0.204 ≠ 0.152 [1marks]
so C1, P1 are not independent [1marks]

2
Question B3
a) Let X be the number of children who will develop the disease
%~lm = 3;  = 0.25

i) Probability that all three children develop Tay-Sachs

$% = 3 = 0.25 @ = 0.0156 [3marks]

ii) Probability that only one child develops Tay-Sachs

$% = 1 = 30.25 0.75 N=0.4219 [2marks]

iii) Probability that all at most two children develop Tay-Sachs

PX ≤ 2 = 1 − PX > 2 = 1 − PX = 3 [2mark]

3
= 1 − O& ( 0.25 @ 0.75  ]
3
[1mark]

= 1 − 0.0156 = 0.9844 [1mark]

iv) rZT'sTQs sVt^TZ^W' WX % = u'v = √3 ∗ 0.25 ∗ 0.75 = 0.75 [2marks]

b)

% ∼ $Wz = 2 ;  = 0,1,2,3,4, . . . ..

i) Probability of x number of cars arriving at the tollgate in 1 minute

N0 , -
$% =  = ;  = 0,1,2,3,4, . . .. [3marks]
)!
ii) Probability that no cars will arrive in the next 1 minute
N| , -
$% = 0 = = V N = 0.1353 [3marks]
!
iii) Probability that at less than 2 cars will arrive in the next minute
P(X <2), =P(X=0) + P(X=1) [1marks]

N| , - N" , -
=} + ~ = OV N + 2V N ] = OV N 3 ] = 0.4060 [3marks]
! !

iv) Probability that 3 cars per minute arrive in a space of two minutes
2cars: 1 min
a: 2 min
a=4 cars hence z = 4; [1mark]
 , -€
$% = 3 = = 0.195
@!
[3marks]