University of Botswana

Department of Statistics
STA 114: Business Statistics I
Test 2 - ASSIGNMENT
Total Marks: 100
Date of Test 2 Assignment : 15 July 2020 (Wednesday)
Date of submission of Test 2 Assignment : 17 July 2020 (Friday)

INSTRUCTION: As this is a home-based Test assignment, it is expected that you will answer with all
required relevant steps.

ANSWER ALL QUESTIONS

Question 1

(a) The table below contains data on the actual demand for a product in period t (𝑦𝑡 ) and forecasts (𝑦̂𝑡 )
based on two hypothetical forecasting models, named Model 1 and Model 2.

Model-I Model-2
Year Actual demand Forecast Forecast
(t) (𝒚𝒕 ) (𝒚̂𝒕 ) (𝒚̂𝒕 )
1 310 315 370
2 365 375 455
3 395 390 305

Using the Root Mean Squared error (RMSE) and Mean Absolute Forecast Error (MAFE),
i. Determine the model that has provided more accurate forecasts over the 3-year period.
ii. Give reason for your choice of model.
[4+4+2=10 Marks]
(b)
(i) What do you understand by multiple linear regression model?

(ii) A random sample of 45 university students were asked to personally decide which of a set of 25 acts
they would consider to be a crime. The number of acts selected was recorded as the variable named
“crimes”. Data were also collected on each student’s age, years in college and income of parents. Multiple
regression analysis was carried out. The parameter estimates is given in the following table.

Crimes Regression
coefficients
Age 0.34
College 0.58
Income 0.32
Const. -11.18

I. Write the regression equation describing the model.

II. Interpret the regression coefficients.

[2+2+6=10 Marks]

1
Question 2

(a) Suppose two six-sided dice are thrown simultaneously.

(i) Prepare a table showing all possible events (outcomes) that can occur.
(ii) What is the probability that both dice will show the same number?
[4+4 =8 Marks]

(b) Let the random variable X represents the number of children under 18 years of age in a Botswana
family. According to the statistical abstract of Botswana 1992, the probability distribution of X is given as

X 0 1 2 3 4 5
P(X=x) 0.12 0.30 0.25 0.21 0.10 0.02

(i) Verify that X has a valid probability distribution

(ii) Find the cumulative distribution function (CDF) of X
(iii)Calculate the mean and variance of the random variable X
[3+4+ 2+3 =12 Marks]

Question 3

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 450 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 56 d
P2=P200 or more 117 b 302
Total 209 c 450

One of these 450 customers is selected at random.

i) Fill in the missing values denoted by a, b, c and d.

ii) Construct the Joint and marginal probabilities Table.
iii) What is the probability that the customer selected made a purchase of less than P200?
iv) What is the probability that the customer selected made a payment through Credit Card?
v) What is the probability that a randomly selected customer made a purchase of less than P200 if
we know that the payment was made through a Credit Card?
vi) What is the probability that a randomly selected customer made a purchase of P200 and more
and made a payment through a Credit Card?
vii) Are the events “Payment by cash” and “Purchase of less than P200” mutually exclusive? Verify
your answer.
viii) Are the events “Payment by cash” and “Purchase of less than P200” independent? Verify
your answer.
[2+3+ 2+2+3+3+3+2 =20 Marks]

2
Question 4

(a) The production process in a certain plastic company is known to produce 10% defective products. A
sample of 30 items was selected randomly from the production line.

Assuming the distribution follows the Binomial distribution; compute the following:
i) Probability that exactly five items are defective.
ii) Probability that at-least three items are defective.
iii) The average number of defective items.
[4+4+2=10 Marks]

(b) Suppose an antibiotic has been shown to be 70% effective against some common bacteria. Suppose the
antibiotic is given to 10 unrelated individuals with the bacteria.

(i) What is the probability that the antibiotic will be effective in none of the 10 individuals?
(ii) What is the probability that the antibiotic will be effective in nine or fewer individuals?
(iii) Find the expected number of individuals in whom the antibiotic will be effective.
[3+4+3=10]
Question 5

(a) A textile producer has established that a spinning machine stops randomly due to thread breakages, at
an average of 5 stoppages per hour.

(i) What is the probability that in a given hour 3 stoppages occur on the spinning machine?
(ii) Find the probability that at most 2 stoppages will occur in a given hour.
(iii) Find the probability that more than 4 stoppages will occur in a given hour.
[3+4+5=12 Marks]

(b) A life insurance salesperson sells on the average three (3) life insurance policies per week. Use
Poisson distribution to calculate the probability that in a given week he will sell

i) At least one policy.

ii) 2 or more policies but less than 5 policies.
[3+5 = 8 Marks]

END OF TEST 2 ASSIGNMENT QUESTIONS