5. Bakari must decide which of the two securities is best for him.

By using
probability estimates, he computed the following statistics:
Statistic Security X Security Y
Expected Return (r) 12% 8%
Std. deviation ( ) 20% 10%
(a) Compute the coefficient of variation for each security
(b) Explain why the standard deviation and the coefficient of variation
give different ranking of risk. Which method is superior and why?
6. A factory finds that on average 20% of the products produced by a given
machine will be defective for certain specific requirements. If 10 products
are selected at random from the day’s production of this machine, find:
i. The probability that 2 or more products will be defective.
ii. What is the expected number of defective products?
7. Maisha Company Ltd has 60 employees. It pays its employees an average
wage of Tshs. 725 per hour with a standard deviation of Tshs. 60. If the
wages are approximately normally distributed:
i. Determine the proportion of workers receiving wages above Tshs.
770 per hour.
ii. Determine the number of workers receiving wages between Tshs.
675 and Tshs. 770 per hour inclusive.
iii. Determine the minimum hourly wage received by the highest 5%
of the employees.
8. To act as a guide to expected tax returns, the government is interested in
knowing the average income per day of daladala bus owners. These
incomes are known to be approximately normally distributed. However,
the owners will not give out much information about their incomes,
except they only admit that they receive below Tshs. 6,240 on 20% of the
days and over Tshs. 9,420 on 10% of the days. Find the mean and
variance of this income distribution.
9. A sample of 81 observations is taken from a normal population. The
sample mean is 40 and the sample standard deviation is 5. Determine
the 95% confidence interval for the population mean.
10. A company’s market share is very sensitive to both its level of
advertising and the level of its competitors advertising. A firm known to
have a 56% market share wants to test whether this value is still valid in
view of recent advertising campaigns of its competitors and its own
increased level of advertising. A random sample of 500 consumers reveals
298 use the company’s product. Is there evidence to conclude that the
company’s market share is no longer 56% at the 1% level of significance?
11. Distinguish between the following:
i) A statistic and parameter
ii) An estimator and an estimate
iii) Level of confidence and level of significance