MATH1112 CurrentCoursePack

Mathematical Analysis in Business
MATH 1112
University of Colorado Boulder
Course packet written by:
Elizabeth L. Grulke, Department of Mathematics, University of Colorado Boulder
Laura J. Kornish, Leeds School of Business, University of Colorado Boulder
Delphy T. Shaulis, Department of Mathematics, University of Colorado Boulder
Spring 2021
Spring 2017
Table of Contents
HABITS AND ATTITUDES OF EXPERTISE IN MATHEMATICAL PROBLEM SOLVING ....................... 4
MODULE 1 - EXCEL INTRO.................................................................................................................................... 5
BACKGROUND ............................................................................................................................................................ 5
PART 1: REVENUE ...................................................................................................................................................... 6
PART 2: PROFIT .......................................................................................................................................................... 8
PART 3: DECISIONS .................................................................................................................................................... 9
SELECTED ANSWERS ................................................................................................................................................ 10
MORE EXCEL INTRO EXERCISES (FOR RETAKE 1) .................................................................................... 11
PART 1: REVENUE .................................................................................................................................................... 11
PART 2: PROFIT ........................................................................................................................................................ 13
ANSWERS ................................................................................................................................................................. 16
EVEN MORE EXCEL INTRO EXERCISES (FOR RETAKE 2) ........................................................................ 17
PART 1: FRACTION OF THE DAY SPENT ON EACH ACTIVITY ...................................................................................... 17
PART 2: FRACTION OF THE CATEGORY HOURS SPENT ON EACH ACTIVITY ............................................................... 19
ANSWERS ................................................................................................................................................................. 21
MODULE 2 – FOREIGN EXCHANGE .................................................................................................................. 23
BACKGROUND .......................................................................................................................................................... 23
PART 0: UNIT CONVERSIONS .................................................................................................................................... 23
PART 1: TRAVEL EXPENSES...................................................................................................................................... 24
PART 2: LESS FAVORABLE RATES ............................................................................................................................ 24
PART 3: CURRENT RATES ......................................................................................................................................... 26
PART 4: TRENDS IN RATES ....................................................................................................................................... 27
PART 5: BUYING AND SELLING CURRENCIES ........................................................................................................... 29
PART 6: REVENUES AND EXPENSES .......................................................................................................................... 31
MODULE 3 – STOCK PRICE DATA ..................................................................................................................... 35
BACKGROUND .......................................................................................................................................................... 35
PART 0: PERCENT CHANGE ...................................................................................................................................... 35
PART 1: CALCULATIONS FOR BUYING AND SELLING STOCKS .................................................................................. 36
PART 2: GRAPHING ................................................................................................................................................... 38
PART 3: DAILY CHANGES IN STOCK PRICES ............................................................................................................. 38
PART 4: CHANGES IN STOCK PRICES OVER TIME ..................................................................................................... 41
PART 5: APPLYING ADJUSTMENTS ........................................................................................................................... 43
PART 6: INVESTMENTS ............................................................................................................................................. 44
PART 7: DOLLAR-COST AVERAGING ........................................................................................................................ 46
PART 8: COMPOUND ANNUAL GROWTH AND EXTRAPOLATION ............................................................................... 48
MODULE 4 – PERSONAL INCOME TAXES ....................................................................................................... 53
BACKGROUND .......................................................................................................................................................... 53
PART 0: PIECEWISE-DEFINED FUNCTION .................................................................................................................. 53
PART 1: HYPOTHETICAL TAX CODE 1 ...................................................................................................................... 54
PART 2: HYPOTHETICAL TAX CODE 2 ...................................................................................................................... 55
PART 3: HYPOTHETICAL TAX CODE 3 (HTC 3) ........................................................................................................ 57
PART 4: REAL TAX CODE ......................................................................................................................................... 58
1
MODULE 5 - TIERED COMMISSION PLANS AT EBAY ................................................................................. 65
BACKGROUND .......................................................................................................................................................... 65
PART 1 ...................................................................................................................................................................... 65
PART 2 ...................................................................................................................................................................... 67
Part 1: ................................................................................................................................................................. 70
Part 2: ................................................................................................................................................................. 71
MODULE 6 - ORANGE JUICE SALES AND PRICES ........................................................................................ 73
BACKGROUND .......................................................................................................................................................... 73
PART 0: LINEAR MODELS ......................................................................................................................................... 73
PART 1: PRICE VS. QUANTITY SCATTER PLOTS AND CORRELATIONS....................................................................... 74
PART 2: ESTIMATING THE PRICE AND QUANTITY RELATIONSHIP FOR TROPICANA AT STORE 5............................... 75
PART 3: ESTIMATING THE PRICE AND QUANTITY RELATIONSHIP FOR MINUTE MAID AT STORE 5 .......................... 77
PART 4: PRICE AND PROFIT ...................................................................................................................................... 78
MODULE 7 - MARKET RESEARCH ON CAFFEINATED PRODUCTS ........................................................ 81
BACKGROUND .......................................................................................................................................................... 81
PART 0: MEAN AND WEIGHTED MEAN .................................................................................................................... 81
PART 1: PURCHASE INTENT ...................................................................................................................................... 82
PART 2: FREQUENCY ................................................................................................................................................ 87
PART 3: BY GENDER AND AGE ................................................................................................................................. 90
PART 4: EXCLUDING LOW QUALITY RESPONSES ..................................................................................................... 92
MODULE 8 – BIKE RITE KICKSTARTER CAMPAIGN .................................................................................. 95
BACKGROUND .......................................................................................................................................................... 95
PART 0: PROBABILITY DISTRIBUTION AND EXPECTED VALUE ................................................................................. 96
PART 1: PROJECT DATA............................................................................................................................................ 96
PART 2: SETTING LEVELS ......................................................................................................................................... 99
PART 3: CAPITAL EXPENDITURE ............................................................................................................................ 102
PART 4: PRICING .................................................................................................................................................... 103
PART 5: LARGER PLEDGES ..................................................................................................................................... 104
PART 6: ANALYZING BASE-CASE, PESSIMISTIC, AND OPTIMISTIC SCENARIOS ...................................................... 106
SELECTED ANSWERS .............................................................................................................................................. 107
MODULE 9 – FORECASTING.............................................................................................................................. 109
BACKGROUND ........................................................................................................................................................ 109
PART 0: BASICS OF PROBABILITY AND SUMMATION NOTATION.............................................................................. 109
PART 1: CONSISTENCY ........................................................................................................................................... 110
PART 2: LOOKING AT CONSISTENCY OF EACH PERSON’S FORECASTS ................................................................... 111
PART 3: HOW DID THEY DO? ................................................................................................................................. 113
MODULE 10 - SALES AT THE SANDWICH SHOP.......................................................................................... 117
BACKGROUND ........................................................................................................................................................ 117
PART 0: MATRIX MULTIPLICATION ........................................................................................................................ 117
PART 1: GRAPHING POINT-OF-SALE (POS) DATA .................................................................................................. 117
PART 2: UNDERSTANDING THE PRODUCT MIX ....................................................................................................... 118
PART 3: INGREDIENT USAGE PER DAY ................................................................................................................... 119
PART 4: INGREDIENT USAGE INVENTORY .............................................................................................................. 121
PART 5: ROLLING TOTALS ...................................................................................................................................... 123
PART 6: ROLLING AVERAGES VS. DAILY ACTUAL USAGE ..................................................................................... 125
2
FINAL EXAM MODULE ....................................................................................................................................... 129
EXAM INFORMATION .............................................................................................................................................. 129
PART 1: SALES PROJECTIONS FOR A CANDY COMPANY ......................................................................................... 129
PART 2: SURVEY DATA .......................................................................................................................................... 133
ANSWERS TO THE SAMPLE QUESTIONS .................................................................................................................. 134
COURSE LEARNING OBJECTIVES .................................................................................................................. 135
MODULE 1 (INTRO) LEARNING OUTCOMES:........................................................................................................... 139
MODULE 2 (FOREIGN EXCHANGE) LEARNING OUTCOMES: ................................................................................... 139
MODULE 3 (STOCKS) LEARNING OUTCOMES: ........................................................................................................ 140
MODULE 4 (TAXES) LEARNING OUTCOMES: .......................................................................................................... 141
MODULE 5 (AFFILIATE COMMISSIONS) LEARNING OUTCOMES: ............................................................................ 142
MODULE 6 (OJ) LEARNING OUTCOMES: ................................................................................................................ 143
MODULE 7 (CAFFEINATED PRODUCTS) LEARNING OUTCOMES: ............................................................................ 144
MODULE 8 (KICKSTARTER) LEARNING OUTCOMES: .............................................................................................. 145
MODULE 9 (FORECASTING REVISITED) LEARNING OUTCOMES: ............................................................................ 146
MODULE 10 (SANDWICH SHOP) LEARNING OUTCOMES:........................................................................................ 146
3
Habits and Attitudes of Expertise in Mathematical Problem Solving
1. There are lots of ways to approach every problem.
2. When I get help on a problem, I need to understand the suggestions, not just use them to
complete the task at hand.
3. I learn by helping.
4. To solve a big problem, break it down into smaller ones. Start with the simplest case and
build generality from there.
5. To build confidence that my work is complete and correct, I make predictions about
results and see if they match model outputs. If there are discrepancies, I resolve them.
6. Detours: Sometimes I need to make a detour from the problem at hand to refresh a skill
or learn a new skill that I think will be helpful to solve the problem.
7. Memorization can be helpful, but the fewer things that rely on memorization, the better.
It is better to be able to figure things out.
8. I can use systematic approaches to be efficient and avoid making manual errors. Every
time I perform a manual task, I should consider a more efficient alternative.
You may not hold these attitudes, but we hope you develop them during this course and during
your time at CU. You should know that your instructors do hold these attitudes. Knowing that
may help you understand their perspective. For example, instructors in this class may not just
“show you how to do it,” because they don’t consider there to be a single way to approach a
problem (#1).
4
Module 1 - Excel Intro
Background
Some student entrepreneurs are considering starting a business where parents subscribe to “good-
for-you” care packages for their college students. The entrepreneurs have two decisions to make.
1. What kind of care package should they sell?
The have narrowed it down to the following list from which they will select one:
o Shaving and grooming supplies
o Healthy foods: dried goods
o Fresh produce
o Pampering supplies
o Room decorations
2. What should the price point be?
They are considering four price points from which they will select only one:
$15, $25, $35, and $50.
The Excel workbook for this module consists of 5 tabs.
1. The “Sales estimates” tab contains results of some market research that they did to
determine how many subscriptions that they could sell of each product at each price
point.
2. The “Cost percentage estimates” tab provides the estimated costs given as a percentage
of the price charged.
3. *More Excel Intro Exercises
4. *Even More Excel Intro Exercises
* These tabs are to accompany the additional sections in this module provided for additional
practice.
• You will need to use the following relationships between quantities:
1. Revenue is computed by multiplying the price per unit and the quantity sold.
2. Profit is computed by subtracting the cost from the revenue.
• The primary objective of this Module is to familiarize you with the critical skills of cell
referencing and formula dragging. To become truly effective and efficient at these skills,
you will need to understand the difference between relative and absolute cell referencing.
To make this distinction, a $ is used within the formula.
The quiz for this Module will consists of problems where you must distinguish between
formulas that correctly calculate specified values, especially when dragged. You will be
required to pass this quiz in order to stay enrolled in this class.
Screencast
• To begin, watch the screencast Rev Table Demo for examples on how to use $.
• Now download the Excel file for this Module and use it to answer the following
questions.
5
Part 1: Revenue
1) Which of the following formulas will correctly calculate the revenue for Shaving and
Grooming Supplies at the $50 price point? Select all correct answers.
a. =B5*B6
b. =$B$5*$B$6
c. =$B5*$B6
d. =B$5*B$6
2) Of the formulas given in the question above,

a. Which of them, if any, can be entered into cell B19 and dragged down to correctly
calculate the revenue for the other services at the $50 price point?
b. Which of them, if any, can be entered into cell B19 and dragged to the right to
correctly calculate the revenue for Shaving and Grooming Supplies at the other price
points?
3) Say you write the formula =B5*B6 in cell B19. If you drag that formula down two cells,
a. What FORMULA will appear in cell B21?
b. What VALUE will appear in cell B21?
4) Write a formula for cell B19 that correctly calculates revenue, and can be dragged down and
to the right, and still correctly calculate revenue for the other services and price points.
5) Which of the following formulas can be entered into cell B19 and will correctly calculate the
revenue for Shaving and Grooming Supplies at the $50 price point? Select all correct
answers.
a. =B19
b. =$B$19
c. =A19*B18
d. =A$19*B$18
e. =B6*B18
f. =B6*B$18
6) Which of the correct answers to the previous question can be dragged both down and to the
right for correct revenue calculations?
6
7) Which of the following formulas will correctly calculate the revenue for Fresh Produce at the
$25 price point? There is exactly one correct answer.
a. =B5*B6
b. =A8*D5
c. =D18*D21
d. =D18*D8
8) Can the answer to the previous question…

a. Be dragged up and down to give the correct revenue calculations for the other
services at the $25 price point? If not, write a formula that can be dragged up and
down.
b. Be dragged left and right to give the correct revenue calculations for the other price
points for Fresh Produce? If not, write a formula that can be dragged left and right.
7
Part 2: Profit
On the second tab in the workbook, you are given costs as a percentage of the price charged.
1) Which of the following formulas will correctly calculate the profit for Shaving and
Grooming Supplies at the $50 price point? Select all correct answers.
a. =B29*B6*'Cost percentage estimates'!B2
b. =B29*B6 - 'Cost percentage estimates'!B2
c. =B29*B6 - B29*B6*'Cost percentage estimates'!B2
d. =B29*B6 - B29*'Cost percentage estimates'!B2
e. =B29*B6 - B6*'Cost percentage estimates'!B2
f. =B29*B6*(1 - 'Cost percentage estimates'!B2)
2) Write versions of the correct answers to the previous question that can be dragged both
down and to the right for correct profit calculations.
3) The graph below shows profit as a function of price for two of the services. Which two
services are they?
Profit as a Function of Monthly Price Point

40,000
30,000
Profit
20,000
10,000
0
$10 $15 $20 $25 $30 $35 $40 $45 $50 $55
Price
a. Fresh Produce and Pampering Supplies

b. Shaving and Grooming Supplies and Healthy Foods: Dried Goods
c. Room Decorations and Fresh Produce
d. Pampering Supplies and Healthy Foods: Dried Goods
8
Part 3: Decisions
1) If the students were to offer the Fresh Produce service, which price point maximizes
profit? How much is the profit for Fresh Produce at that price?
2) Which service and price point combination maximizes profit? How much is the profit for
that combination?
9
Selected Answers
Part 1
1) All four of those formulas will give the revenue for Shaving and Grooming Supplies at
the $50 price point.
2) a) None of them. b) Answers a and d can be dragged to the right.
3) a) =B7*B8 b) 3,000,000
4) =B$5*B6 and =B6*B$5 work. Other answers are possible.
5) Answers e and f give the right calculation.
6) Only answer f is draggable.
7) Answer d.
8) a) No. Here’s one draggable version: =D$18*D8. b) Yes.
Part 2
1) Answers c and f give the right calculation.
2) Draggable versions:
For answer c): =B$29*B6 - B$29*B6*'Cost percentage estimates'!$B2
For answer f): =B$29*B6*(1 - 'Cost percentage estimates'!$B2)
3) Answer d is correct.
Part 3
1) $50 for a monthly profit of $25,000.
2) $15 for Room Decorations results in (monthly) profit of $45,000.
10
More Excel Intro Exercises (For Retake 1)
For these exercises, make sure you have the file with the Monthly Sales Data for 10 products: the
first one is Split Stick.
Part 1: Revenue
1) Which of the following formulas will correctly calculate the revenue (retail price x units
sold) for the product Split Stick for the month of January? There is exactly one correct
answer.
a. =A:A*E:E
b. =A*E
c. =A4*E3
d. =B4*E4
2) Using the correct formula from the previous question,

a. If you enter that formula into cell E18, what VALUE shows in cell E18?
b. If you enter that formula into cell E18 and drag the formula down to cell E19,
i. What VALUE shows in cell E19?
ii. What FORMULA shows in cell E19?
iii. Is that the correct calculation for revenue for Bandits in January?
c. If you now drag the formula from cell E18 to the right to cell F18,
i. What VALUE shows in cell F18?
ii. What FORMULA shows in cell F18?
iii. Is that the correct calculation for revenue for Split Stick in February?
sold) for the product Converge for the month of April? Select all correct answers.
a. =A8*H3
b. =$A$8*$H$3
c. =B8*H8
d. =$B$8*$H$8

a. Which of them, if any, can be entered into cell H22 and dragged up and down to
correctly calculate the revenue for the other products (besides Converge) for
April?
b. Which of them, if any, can be entered into cell H22 and dragged to the left and
right to correctly calculate the revenue for the product Converge for the other
months?
11
sold) for the product Porter for the month of February? Select all correct answers.
a. =B7*F7
b. =$B7*$F7
c. =B$7*$F7
d. =$B7*F7

a. Which of them, if any, can be entered into cell F21 and dragged up and down to
correctly calculate the revenue for the other products (besides Porter) for
February?
b. Which of them, if any, can be entered into cell F21 and dragged to the left and
right to correctly calculate the revenue for the product Porter for the other
months?
12
Part 2: Profit
Note: profit is (Retail Price minus Production Cost) multiplied by Units Sold.
1) Which of the following formulas will correctly calculate the profit for the product
Bandits for April? Select all correct answers.
a. =B5*H5 - C5*H5
b. =B5*H5 + C5*H5
c. =B5*H5 * C5*H5
d. =B5 – C5 * H5
2) What is another correct way to write the formula from the previous question?
3) Write a formula to correctly calculate the profit for the product Split Stick for January.
4) Starting in row 30 on the spreadsheet, there is a table set up for the profit calculations for
all the products and all the months.
a. Enter the formula for profit for the product Split Stick for January into cell E32.
(You wrote that formula in the previous question.)
i. What VALUE do you see in cell E32?
ii. Is that the correct value?
b. Drag your formula from cell E32 down to cell E33.

i. What VALUE shows in cell E33?
ii. What FORMULA shows in cell E33?
iii. Is that the correct calculation for profit for Bandits in January?
13
c. Drag your formula from cell E32 to the right to cell F32.
i. What VALUE shows in cell F32?
ii. What FORMULA shows in cell F32?
iii. Is that the correct calculation for profit for Split Stick in February?
d. Use these questions to check to see if your formula is giving the correct values for
profit when you drag it down and to the right. Check the answers at the end to
make sure you have the right values.
i. What VALUE for profit do you get for the product SOLO in November?
ii. What VALUE for profit do you get for the product Slice in May?
5) If you used the formula =(B4-C4)*E4 in E32, then your formula does not drag properly
to the right. With that formula, the answer to Part 2, Question 4ciii is that the calculation
is not correct.
Instead of =(B4-C4)*E4, how can you write the formula for profit for the product Split
Stick in January (in cell E32) so that you can drag it both down and to the right, and all
the profit calculations are correct?
14
6) This is a graph of the monthly profit for one of the products. Which product?
Monthly Profits for _____

$25,000
$20,000
$15,000
$10,000
$5,000
$0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
a. Split Stick
b. Bandits
c. Slimline
d. Porter
WRITING DRAGGABLE FORMULAS IS THE KEY THING YOU NEED TO BE ABLE

TO UNDERSTAND AND TO DO TO PASS THE QUIZ. You should completely understand,
for every column and row reference in every formula, a) whether the $ must be there to have the
formula drag correctly, or b) whether it should not be there, or c) whether it doesn’t make a
difference. You will need to understand the use of $ in cell references for every module in this
entire course, and any serious use of Excel in the future.
15
Answers
Part 1
2) a) $140.00 (or 140, depending on formatting).
b) i) $8,456.00 ii) =B5*E5 iii) yes
c) i) $224.66 ii) =C4*F4 iii) no!
3) Answers c and d.
4) a. Answer c will correctly drag up and down but answer d will not.
b. Neither answer c nor answer d will correctly drag left and right.
5) All four answers will correctly calculate revenue for Porter for February.
6) a. Answers a, b, and d will correctly drag up and down but answer c will not.
b. Answer d is the only one that will correctly drag left and right.
Part 2
1) Answer a is the only correct answer. Answer d is not correct.
2) There are many possible other ways to write the formula correctly. Answer d can be
corrected by including parentheses: =(B5-C5)*H5. Also, if you are just writing a formula
in a single cell and not concerned about dragging, =$B$5*$H$5 - $C$5*$H$5 would also
work. Make sure you understand why that will not give you the right calculation for other
products or months if you drag it.
3) One correct answer: =(B4-C4)*E4
4) a. i. and ii. The formula from the previous question gives the correct profit: $106.54.
b. The answer you get here will depend on the formula you have in cell E32.
i. If you use the formula =(B4-C4)*E4 in E32, when you drag that down to cell E33, you
get a value of $8,300.47.
ii. and a formula of =(B5-C5)*E5.
iii. Yes, that is the correct calculation for profit for Bandits in January.
c. Like the previous part, the answer you get here will depend on the formula you have in
cell E32.
i. If you use the formula =(B4-C4)*E4 in E32, when you drag that to the right to cell F32,
you get a value of $224.66.
ii. And a formula of =(C4-D4)*F4.
iii. No, that is NOT the correct calculation for profit for Split Stick. (The correct value is
$715.34.)
d. i. The profit for SOLO in November is $44,143.34.
ii. The profit for Slice in May is $9,145.10.
5) Hint: you need to add two $s to =(B4-C4)*E4. You can check your answer by entering
your answer into cell E32 and dragging across the table and down and making sure you
get the values given in the previous question (SOLO November and Slice May).
6) The answer is c (Slimline).
16
Even More Excel Intro Exercises (For Retake 2)
For these exercises, you need the file with the tab called Time Use. The U.S. Bureau of Labor
Statistics (BLS) conducts an annual Time Use Survey to understand how Americans use their
time, and this data set comes from that survey.
The first rows of data are show below. Each Activity is in a Category, and you have a
spreadsheet that shows the average hours per day for each activity and for each category, for the
total population and for men and women separately.
A B C D E F G H I J
Average hours per day on the Average hours per day spent
4 Category Activity Activity on the Category
5 Total Men Women Total Men Women
6 Personal care activities Sleeping 8.80 8.69 8.90 9.59 9.33 9.83
7 Personal care activities Grooming 0.68 0.55 0.81 9.59 9.33 9.83
8 Personal care activities Health-related self care 0.08 0.06 0.10 9.59 9.33 9.83
9 Personal care activities Personal activities 0.01 0.01 0.00 9.59 9.33 9.83
10 Personal care activities Travel related to personal care 0.02 0.02 0.02 9.59 9.33 9.83
11 Eating and drinking Eating and drinking 1.07 1.10 1.04 1.17 1.21 1.13
12 Eating and drinking Travel related to eating and drinking 0.10 0.11 0.09 1.17 1.21 1.13
13 Household activities Housework 0.55 0.27 0.82 1.79 1.37 2.14
14 Household activities Food preparation and cleanup 0.59 0.34 0.82 1.79 1.37 2.14
Part 1: Fraction of the day spent on each Activity

1) Which of the following formulas will correctly calculate the fraction of the day that men
spent sleeping? There is exactly one correct answer.
a. =E6/M2
b. =L2/E6
c. =E5/I5
d. =L2/E5
2) Using the correct formula from the previous question,

a. If you enter that formula into cell M6, what VALUE shows in cell M6?
b. If you enter that formula into cell M6 and drag the formula down to cell M7,
i. What VALUE shows in cell M7?
ii. What FORMULA shows in cell M7?
iii. Is that the correct calculation for the fraction of the day that men spent
grooming?
c. If you now drag the formula from cell M6 to the right to cell N6,
i. What VALUE shows in cell N6?
ii. What FORMULA shows in cell N6?
iii. Is that the correct calculation for the fraction of the day that women spent
sleeping?
3) Which of the following formulas will correctly calculate the fraction of the day that
women spent on lawn and garden care? Select all correct answers.
17
a. =F15/M2
b. =$F$15/$M$2
c. =N5*B15
d. =$N$5*$B$15

a. Which of them, if any, can be entered into cell N15 and dragged up and down to
correctly calculate the fraction of the day that women spent on the other activities
(besides lawn and garden care)?
b. Which of them, if any, can be entered into cell N15 and dragged to the left to
correctly calculate the fraction of the day that men spent on lawn and garden care?
5) Which of the following formulas will correctly calculate the fraction of the day that the
total population spent on socializing, relaxing, and leisure (one of the activities)? Select
all correct answers.
a. =D45/$M$2
b. =$D45/$M2
c. =D45/M$2
d. =D$45/M2

a. Which of them, if any, can be entered into cell L45 and dragged up and down to
correctly calculate the fraction of the day that the total population spent on the
other activities (besides socializing, relaxing, and leisure)?
b. Which of them, if any, can be entered into cell L45 and dragged to the right to
correctly calculate the fraction of the day that men and women spent on
socializing, relaxing, and leisure?
18
Part 2: Fraction of the Category hours spent on each Activity
In this part, we will look at the fraction of hours in each category were spent on each activity.
For example, the sheet shows that men spent 9.33 hours on the category “Personal care
activities.” Of those 9.33 hours, they spent 5.89% of them, or 0.55 hours, on the activity
“Grooming.” (The 9.33 and 0.55 are given in the spreadsheet, and note that 0.55/9.33 is 0.0589.)
1) Which of the following formulas will correctly calculate the fraction of the hours that
women spent on the activity “Grooming” out of all the hours they spent on the whole
category “Personal care activities”? There is exactly one correct answer.
a. =F7/M2
b. =J7/M2
c. =N7/M2
d. =F7/J7
e. =N7/J7
f. =R7/J7
2) Which of the following formulas will correctly calculate the fraction of the hours that
women spent on the activity “Health-related self care” out of all the hours they spent on
the whole category “Personal care activities”? Select all correct answers.
a. =F8/J8
b. =$F$8/$J$8
c. =$F8/$J8
d. =F$8/J$8
e. =$F$8/J8
f. =F8/$J$8

a. Which of them, if any, can be entered into cell R8 and dragged up and down to
correctly calculate the fraction of a category’s hours that women spent on the
other activities (besides health-related self care)?
b. Which of them, if any, can be entered into cell R8 and dragged to the left to
correctly calculate the fraction of a category’s hours that men spent on health-
related self care?
c. Which of them, if any, can be entered into cell R8 and dragged both up and
down and to the left and still give the correct calculation?
19
d. Are there any other variations of the formula, beyond the combinations in
Question 2, that can be dragged both up and down and to the left and still give the
correct calculation?
WRITING DRAGGABLE FORMULAS IS THE KEY THING YOU NEED TO BE

ABLE TO UNDERSTAND AND TO DO TO PASS THE QUIZ. You should completely
understand, for every column and row reference in every formula, a) whether the $ must be
there to have the formula drag correctly, or b) whether it should not be there, or c) whether it
doesn’t make a difference. You will need to understand the use of $ in cell references for
every module in this entire course, and any serious use of Excel in the future.
20
Answers
Part 1
1) Answer a is correct.
2) a. 0.362
b. i. #DIV/0! ii. =E7/M3 iii. No. #DIV/0! is an error message: you are trying to
divide by 0.
c. i. #DIV/0! ii. =F6/N2 iii. No. #DIV/0! is an error message: you are trying to divide
by 0.
3) Answers a and b are correct.
4) a. Neither.
b. Neither.
5) All four answers are correct.
6) a. Answers a and c can be dragged up and down and still give the correct calculation.
b. Answer a can be dragged to the right and still give the correct calculation.
Part 2
2) All six answers are correct.
3) a. Answers a and c can be dragged up and down and still give the correct calculation.
b. Answers a and d can be dragged to the left and still give the correct calculation.
c. Answer a is the only one that can be dragged both directions and still give the correct
calculation.
d. No. =F8/J8 is the only one that is draggable all directions. You need both the row and
column in both the numerator and the denominator to change as you drag
21
22
Module 2 – Foreign Exchange
Background
This module focuses on using currency exchange rates, which represent the value of one
country’s money in terms of another. In this course exchange rates are expressed as a single
number along with a ratio of monetary units (for example, 1.1567 USD/EUR). Such notation
will always be interpreted as the quantity of the currency in the numerator that is equivalent to 1
unit of the currency in the denominator (for example, 1.1567 USD = 1 EUR).
• In looking up exchange rates, you may find two rates: a “selling” (bid) rate and a
“buying” (ask) rate. More specifically, the bid rate for a currency is the amount you
would receive, if you sold one unit of that currency. The ask rate for a currency is the
amount you would pay, to buy one unit of that currency. These rates are not very far
apart, but the small difference in the rates is how foreign exchange brokers (companies
that exchange currencies for clients) make money.
• Currency exchange rates are in constant fluctuation. Not only will exchange rates change
day-to-day, they can even change multiple times throughout one day. So, unless
otherwise stated, you must use the exchange rates as stated in the course materials. Do
not rely on an online currency converter to determine answers in this class since it may
have different rates.
• The Excel workbook for this module consists of 3 tabs.
1. The “Expenses” tab provides a table of travelling expenses from a recent
international business trip and currency exchange rates relevant to countries
visited.
2. The “Historical Rates” tab provides a list of historical exchange rates between the
U.S. Dollar and some foreign currencies.
3. The “2 Dealers” tab provides a table of bid and ask rates used by two different
dealers simultaneously on the same day. Note that the small differences in rates
are reflective of the fact that because rates are in constant fluctuation, they are not
in sync at every moment.
Part 0: Unit Conversions

The skill of unit conversion can be widely applied. Specifically, currency conversion can be
classified as a specific kind of unit conversion.
1) To begin this Module, view the screencast Unit Conversions.
Screencast 2) Complete CANVAS Homework “Module 2 – Part 0”.
23
Part 1: Travel Expenses
You were traveling internationally for business. Use the expenses and exchange rates provided
on the first tab of the Excel workbook to answer the following questions. Note that the expenses
are in the local currencies: (EUR), (INR), and (CNY) and that the exchange rates are between
these currencies and U.S. Dollars.
1) How much, in terms of U.S. Dollars, did you spend on Food in Germany?
2) How much, in terms of U.S. Dollars, did you spend on Miscellaneous in China?
3) In which country did you spend the most on Lodging? How much was that expense, in
USD?
4) In which country did you spend the most money on your trip? How much did you spend
in that country, in USD?
5) Using the rates in the table:

a. You bought a present for your host for 50 CNY, how many USD was that?
b. If you had a limit of 100 USD to spend on a hotel room per night, how many
CNY would that be?
Part 2: Less Favorable Rates

The exchange rates shown in Part 1 are the rates available to your company because it exchanges
large amounts of currency. If you went to a bank or an exchange counter at a hotel or an airport,
the rates for you would be less favorable.
1) What would the USD/EUR exchange rate be if it were 10% worse than the rate in shown
in Part 1 (i.e., EUR is 10% weaker relative to USD)?
_________________ USD/EUR
2) What would the USD/INR exchange rate be if it were 15% worse than the rate shown in
Part 1 (i.e., INR is 15% weaker relative to USD)?
_________________ USD/INR
24
3) If you change money at a tourist location, like an exchange counter at an airport, you may
see “service charges” in addition to unfavorable rates. Say, on your trip, you decide to
change some money at the airport in India. You want to change the 325 EUR you still
have in your pocket to INR.
a. Based on the exchange rates given in Part 1, how many INR could you get for 325
EUR? (Assume you exchange EUR for USD and then USD for INR.)
b. What is the effective exchange rate from part a?
______________________ INR/EUR
c. Suppose the INR/EUR exchange rate at the airport is 17% worse than the rate you
calculated in part b. How many could you get for 325 EUR?
d. Now assume that in addition to the worse rate from part c, there is a 100 INR
service charge. How many INR will you be left with after you exchange your 325
EUR?
e. The net exchange from part d is equivalent to what rate?
______________________ INR/EUR
f. The rate calculated in part e is what percent worse than the rate in part b? (Hint: it
has to be more than 17% worse; there is a service charge on top of the 17% from
part b.)
4) Complete CANVAS Homework “Module 2 – Parts 1 & 2”.
25
Part 3: Current Rates
1) Use a foreign exchange website (such as www.oanda.com: try searching for the currency
converter on that site) to find current exchange rates. If you see both an ask rate and a
bid rate, then report your answers as the average of the two rates. Report the rate with the
same amount of precision as you see on the website.
a. Find the exchange rate between EUR and USD

Note that conventions vary about whether this is referred to as USD/EUR or
EUR/USD. We use USD/EUR to denote the quantity of USD that is equivalent to
1 EUR.
______________________ USD/EUR
b. Find the exchange rate between INR and USD.
______________________ USD/INR
c. Find the exchange rate between CNY and USD.
______________________ USD/CNY
d. Where did you find your data? (What was the URL?)
Depending on which website you look at, and the time you look it up, the rates may differ from
what your classmates find. However, they should be approximately the same.
2) Using the following rates:

Germany India China
1.2431 USD/EUR 0.01337 USD/INR 0.1453 USD/CNY
and the expense tables from Part 1, answer the following questions.
a. How much, in terms of U.S. Dollars, did you spend on Food in China?
b. How much, in terms of U.S. Dollars, did you spend on Miscellaneous in

Germany?
c. What was the total amount you spent, in USD, on the whole trip?
26
Part 4: Trends in Rates
Here is a graph of the average weekly rates for exchanging EUR for USD from July 2011 to June
2016.
Remember that conventions vary about the use of USD/EUR vs. EUR/USD. We use USD/EUR
to denote the quantity of USD that is equivalent to 1 EUR.
1.5
Average Weekly Bid Rate for USD/EUR
1.4
1.3
1.2
1.1
1
7/2011 1/2012 7/2012 1/2013 7/2013 1/2014 7/2014 1/2015 7/2015 1/2016
1) In approximately which month was the EUR the strongest compared to the USD? That is,
in which month could one buy the most USD with one EUR?
2) In approximately which month was the USD the strongest compared to the EUR? That is,
in which month could one buy the most EUR with one USD?
3) Use the rates for exchanging INR for USD on the “Historical Rates” tab.
a. Create a graph like the one above, showing the rates for exchanging INR for
USD.
b. Over the last five years, in approximately which month was INR strongest
compared to USD?
c. In the last year, is there a trend? Specifically, is INR getting stronger or weaker
compared to USD?
4) Use the rates for exchanging CNY for USD on the “Historical Rates” tab.
a. Create a graph like the one above, showing the rates for exchanging CNY for
USD.
27
b. Over the last five years, in approximately which month was CNY the strongest
compared to USD?
c. In the last year, is there a trend? Is CNY getting stronger or weaker compared to
USD?
5) When the USD got weaker compared to CNY, was it also weaker compared to INR? To
answer that question, look at the correspondence in the two sets of historical rates.
a. Create a scatter plot of the rates for exchanging CNY for USD and the rates for
exchanging INR for USD. Make sure that the dates line up in the two data sets.
b. What is the correlation coefficient for the two sets of rates from part a? For this
question, use the full five years. (If you are unfamiliar with what a correlation
Screencast coefficient measures and how to compute it, view the screencast Correlation
Coefficient.)
c. Just looking at the most recent 12 months of data, what is the correlation (i.e., the
correlation coefficient) between the two sets of rates?
d. Is the correlation stronger or weaker for the most recent year than for the longer
data set?
6) Complete CANVAS Homework “Module 2 – Part 4”.
28
Part 5: Buying and Selling Currencies
1) The (bid) rate for selling 1 CNY for INR is 9.74534. The (ask) rate for buying 1 CNY
with INR is 10.8418.
a. If you start with 1000 CNY and sell them to buy INR, how many INR do you
have?
b. If you then take those INR and buy CNY, how many CNY do you have?
c. How much money did the broker make? What currency is your answer in?
2) Use the same rates as in Question 1.

a. If you start with 1000 INR and sell them to buy CNY, how many CNY do you
have?
b. If you then take those CNY and buy INR, how many INR do you have?
c. How much money did the broker make? What currency is your answer in?
29
3) The bid and ask rates for three currencies (EUR, JPY, and MXN) in terms of the U.S.
Dollar (USD) offered by two different dealers are in the “2 Dealers” tab. Use that
information to answer the following questions.
a. For Dealer 1:
i. If you have 1 JPY, how many USD can you get?
ii. If you have 1 USD, how many JPY can you get?
iii. If you have 1 JPY, how many EUR can you get (assuming you convert via
USD)?
iv. If you have 1 MXN, how many JPY can you get (assuming you convert
via USD)?
b. For Dealer 2: answer the same questions as you did for Dealer 1.
i.
ii.
iii.
iv.
30
c. Comparisons
i. If you have 1200 MXN, from which dealer can you get more EUR? How
many EUR?
ii. If you use both dealers instead of just one, can you get more EUR for your
1200 MXN than you can from one dealer alone? If so, how many EUR
can you get?
Part 6: Revenues and Expenses
Suppose your company has international operations and is generating revenue in CNY but has to
pay expenses in USD.
In the questions below, you will compute a profit margin, which is the profit as a percentage of
revenue. The profit margin answers the question: “Of all the revenue a company makes, what
percentage of that is profit?”
Profit margin = (revenue – expenses) / revenue
= profit / revenue
1) If the revenue last quarter was 9.3 million CNY and the expenses were 1.2 million USD,
what was the profit margin, using the USD/CNY rate from Part 1? (You can ignore the
difference between bid and ask prices and just use the rate given in Part 1.)
____________%
2) If the revenue last quarter was 9.3 million CNY and the expenses were 1.2 million USD,
what would the exchange rate have to be for the profit margin to be 17.00%?
_________ USD/CNY
3) Create a graph in Excel that shows the profit margin (%) as a function of the exchange
rate (USD/CNY). Show USD/CNY rates from 0.1 to 0.2 in your graph.
4) If the USD gets stronger compared to the CNY, does that increase or decrease the profit
margin?
31
Selected Answers
Part 1
1) $831.02
2) $260.02
3) You spent the most on Lodging in Germany ($761.42).
4) You spent the most total in Germany ($1,818.00).
5) a) $7.52 b) 665.34 CNY
Part 2
1) 1.0410 USD/EUR (rounded to four decimal places)
2) 0.0139 USD/INR
3) a) 22,964.42 INR b) 70.6597 INR/EUR c) 19,060.47 INR d) 18,960.47 INR e)
58.3399 INR/EUR f) 17.44%
Part 3
2) a) 364.31 USD
b) 242.40 USD
c) 3917.64 USD
Part 4
1) August 2011
2) November 2015
3) a)
0.023
Average Weekly Bid Rate for USD/INR
0.021
0.019
0.017
0.015
0.013
7/2011 1/2012 7/2012 1/2013 7/2013 1/2014 7/2014 1/2015 7/2015 1/2016
b) July 2011
4) b) January 2014
32
USD/INR vs. USD/CNY
0.166
0.164
0.162
0.16
USD/CNY
0.158
0.156
0.154
0.152
0.15
0.014 0.015 0.016 0.017 0.018 0.019 0.02 0.021 0.022 0.023
USD/INR
5) a)
b) -0.178817209
c) 0.925855969 (using the data from 6/21/15 to 6/19/16)
Part 5
1) a) 9745.34 INR b) 898.87 CNY c) 101.13 CNY
2) a) 92.24 CNY b) 898.87 INR c) 101.13 INR
3) a) (i) 0.00888 USD (ii) 112.48594 JPY (iii) 0.00774 EUR (iv) 6.39258 JPY
b) (i) 0.00895 USD (ii) 111.60714 JPY (iii) 0.00773 EUR (iv) 6.38728 JPY
c) (i) You can get 59.4446 EUR from Dealer 1 (vs. 59.2852 from Dealer 2)
(ii) Hint: Yes, you can get more (59.863) if you use both. Can you see how?
Part 6
1) 14.15%
2) The answer is 0.15546 USD/CNY.
3)
Profit Margin (%) Based on

Rate (USD/CNY)
0.4
0.3
0.2
0.1
0
-0.1 0.10 0.12 0.14 0.16 0.18 0.20
-0.2
-0.3
-0.4
4) The profit margin decreases as USD gets stronger.
33
34
Module 3 – Stock Price Data
Background
• In this module, you will be working with stock price data for Amazon.com. This stock is
listed on the NASDAQ Stock Market (the second largest U.S. stock market, after the
New York Stock Exchange). You will analyze the change in the stock prices over time as
well as the value of investments over time.
1. The “December 2014” tab contains the Amazon stock prices for trading days in
the entire month of December 2014.
The “Table” tab contains the full history of Amazon stock prices from its start in
May 1997 until November 2017.
• For each trading day of the stock, a record of each of the following is posted.
o Open = the price when the market opened in the morning.
o Close = the price when the market closed in the afternoon.
o High = the highest price during that trading day.
o Low = the lowest price during that trading day.
o Volume = number of shares of the stock traded that day.
o Adj Close (Adjusted Close) = a price adjusted to make prices comparable over
time.
• Note that the dates are listed from most recent to least recent.
• The Adjusted Close price on specific day reflects all the dividends and splits since that
day. If no such dividends or splits have occurred since that day, the adjusted close equals
the close on that day. The change in adjusted closing price is used to calculate the total
return of an investment made on some previous date in history.
Part 0: Percent Change

Expressing the percent (or relative) change is often more effective when you are concerned with
comparisons over time than the absolute change of the quantity. For an example, an absolute
change of 10 units is almost unnoticeable when the value of a quantity observed is 1000 units.
However, that same 10 units more than doubles the value of a quantity of 8 units.
1) To begin this Module, view the screencast Percent Change.
35
Part 1: Calculations for Buying and Selling Stocks
The Part 1 questions here refer only to data from December 2014. In that trading month, there
are no adjustments (i.e., Adj Close = Close for every date.) To simplify your navigation in the
spreadsheet, use the “December 2014” tab for these exercises.
1)
a. How much did the stock price change, in dollars and cents, from the Close price
the previous day to the Close price on 12/11/14?
b. What was the percentage change in the stock price from the Close price the
previous day to the Close price on 12/11/14?
For all of the following questions, assume there are no transaction fees.
2) You bought 100 shares of stock at the Close price on the first trading day of the month.
How much did that cost?
a. You bought 100 shares of stock at the Close price on the first trading day of the
month, held them until the last trading day of the month, and sold at the Close
price.
i. Did you make or lose money?
ii. How much (in dollars and cents)? (In other words, how much more or less
did you have after the sale compared to before the purchase?)
iii. By what percentage did your money change?
b. You bought 500 shares of stock at the Close price on the first trading day of the
month, held them until the last trading day of the month, and sold at the Close
price.
i. Did you make or lose money?
ii. How much money (in dollars and cents)?
iii. By what percentage did your money change?
c. Are the answers to part a in this question the same as or different from the
answers to part b in the previous question. Why?
36
3) You had $5,000 to spend on AMZN stock, and you bought stock at the Close price on
the first trading day of the month. Note: You can only buy whole shares (not fractional
parts).
a. How many shares did you buy?
b. And how much of your $5,000 did you spend?
c. You held those shares until the end of the month and sold at the Close price on
the last day of the month.
i. Did you make or lose money? How much money (in dollars and cents)?
ii. By what percentage did the money you invested change?
4) You bought 100 shares of stock at the Close price on the first trading day of the month
and the stock price went up by 10% from that purchase price.
a. How much did your investment increase in value (in dollars and cents)?
b. If the stock price then decreased by 10%, is the stock worth more, less, or the
same as the initial amount you paid for the 100 shares? If more, how much more?
If less, how much less?
5) You bought some stock, and then the stock price went down by 10% from the purchase
price. By what percentage would the price then have to increase for the investment to be
back at the original value?
37
Part 2: Graphing
Using all the trading days on the “Table” tab, create a graph of Adjusted Close price as a
function of time. Label the horizontal axis with dates in a readable manner.
Here is an example of a nicely labeled graph using Close prices for 2013. Create a graph for all
the trading days in the data set.
AMZN Close Price, 2013

425
405
385
365
Price (USD)
345
325
305
285
265
245
225
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Date
Check your work by going to finance.yahoo.com and examining the historical price charts for
AMZN over the whole life of the stock.
Part 3: Daily Changes in Stock Prices

1) Create a column in Excel that shows the difference, in dollars and cents, between the
High and Low prices for each day. Call the column Daily Range. Note: you will write
an Excel formula in the first row of data and drag it down the whole column.
a. What was the Daily Range on 12/1/15?
2) Create a column in Excel that shows the percentage increase of the High over the Low.
Call the column Daily Range %. Show your answer as a percentage with two decimal
places, e.g., 10.12%.
a. What was the Daily Range % on 12/1/15?
3) Create a column in Excel that shows the difference, in dollars and cents, between the
Adjusted Close that day and the Adjusted Close the previous day. Call the column
Daily Change.
a. What was the Daily Change on 12/1/15?
38
4) Create a column in Excel that shows the percentage change (either increase or
decrease) of the Adjusted Close that day compared to the Adjusted Close the previous
day. Call the column Daily Change %. Show your answer as a percentage with two
decimal places, e.g., 10.12%.
a. What was the Daily Change % on 12/1/15?
5) For this problem, the Excel function VLOOKUP is useful. If you are unfamiliar with
Screencast
VLOOKUP, first view the screencast VLOOKUP. To use VLOOKUP for these questions,
you will need to copy the date column (A:A) to a column to the right of the new columns
you just created in 1)-4). Another approach (which does not require a copy of the date
column) is to use the INDEX and MATCH functions together.
a. Which day in the data set had the largest Daily Range?
b. Which day in the data set had the smallest Daily Range?
c. Which day in the data set had the largest Daily Range %?
d. Which day in the data set had the smallest Daily Range %?
e. Which day in the data set had the largest positive Daily Change (i.e., biggest
increase from the previous day)?
f. Which day in the data set had the most negative Daily Change (i.e., biggest drop
from the previous day)?
g. Which day in the data set had the largest positive Daily Change %?
h. Which day in the data set had the most negative Daily Change % (i.e., biggest
percentage drop)?
39
6) For what percentage of days in the data set was the Daily Change percentage strictly
greater than
7) 2.00%
8) For what percentage of days in the data set was the Adjusted Close on the day lower
than the Adjusted Close the previous day? Show your answer as a percentage with two
decimal places, e.g., 10.12%.
9) For what percentage of days in the data set was the Adjusted Close on a day higher than
the Adjusted Close the previous day? Show your answer as a percentage with two
decimal places, e.g., 10.12%. Is the sum of the answer to this question and the previous
question equal to 100%? Why or why not?
10) (OPTIONAL): Consider all the days in the data set for which the stock dropped (i.e.,
Adjusted Close that day < Adjusted Close the previous day). For what percentage of the
days following a day on which the stock dropped did the stock rise?
11) (OPTIONAL): Comparing your answers to the last two questions, answer this: if the
stock dropped one day, does that increase the chance of it rising the next day?
40
Part 4: Changes in Stock Prices Over Time
1) Write formulas in Excel, using cell references, to calculate the following.
a. How much did the Adjusted Close price change, in dollars and cents, from the
first trading day in the data set until the most recent day in the data set?
b. How much did the Adjusted Close price change, in percentage growth, from the
first trading day in the data set to the most recent day in the data set? Show your
answer as a percentage with two decimal places, e.g., 10.12%.
2) Find how much the Adjusted Close price changed, in dollars and cents, from the first
trading day to each date shown in the table below.
Change in Adj. Close, from the first trading

Date
day until the given day
1/2/98 $3.00
1/3/00
1/2/02 $9.00
1/3/05
3) Find how much the Adjusted Close price changed, as a percentage, from the first trading
day to each date shown in the table below.
Change in Adj. Close, as a percentage, from

Date
the first trading day until the given day
1/2/98 153.06%
1/3/00
1/2/02 459.18%
1/3/05
41
4) You invested $10,000 in AMZN stock on the first day of trading in the data set,
purchased at the Close price (not the Adjusted Close), purchasing only whole shares.
b. How much did you spend?
c. Calculate the value of your investment on the following dates. Hint: The
percentage growth in investment value is the same as the percentage growth in
the Adjusted Close price.
Date Value of investment, on the given day

First day in the data set
(amount of original
investment)
1/2/98 $25,274.49
1/3/00
1/2/02 $55,848.47
1/3/05
Most recent trading day in
the data set
42
Part 5: Applying Adjustments
The data set shows the Adjusted Close prices. Adjustments help make the prices comparable
over time and are necessary when the stock splits or pays dividends. (For this class, don’t worry
if you don’t understand those actions.) The data set does not show the adjustments for the other
prices given (Open, High, and Low). However, you can adjust those other prices using the ratio
of the Adj. Close to the Close price.
1) Find the ratio of Adj. Close to Close price for every trading day in the data set. Fill in the
blank cells in the table below
Date Adj. Close/Close
6/2/97 0.083
8/23/99
1/5/01
10/25/05 1.000
3/4/16
2) Create a line graph for the Adjustment Ratio as a function of trading days (Hint: Use the
data for all the days in the data set, not just the values from the table in Question 1.)
3) Looking at the graph, how many adjustments were made?
4) Create columns in the data for Adjusted High price (=Adjustment Ratio x High) and
Adjusted Low price (=Adjustment Ratio x Low). Use those columns to fill in the blank
cells in the following table.
Date Adj. High Adj. Low
8/21/97
7/7/99 60.00
8/1/03 41.63
43
5) Create a line graph showing both the Adjusted High and Adjusted Low prices for days
from the first trading day until December 31, 1999.
Part 6: Investments
1) You invested $10,000 in AMZN stock on 1/3/00, purchased at the Close price,
purchasing only whole shares.
b. How much did you spend?
c. Calculate the value of your investment on the following dates.
Date Value of investment on the given day

1/3/00
(date of original investment)
1/2/02
1/2/04
1/2/09 $6,033.96
Most recent trading day in
the data set
44
2) You invested $10,000 in AMZN stock on 9/16/98, purchasing only whole shares at the
Close price, and then sold it on 5/3/99. You then used the proceeds of the sale to buy
(whole) shares again on 11/14/02 at the Close price.
a. How many shares did you buy on 9/16/98? Your answer should be a whole
number.
b. How much did you spend on 9/16/98? Show your answer in dollars and cents.
c. By what percentage did the Adj. Close price grow from 9/16/98 to 5/3/99? Show
your answer as a percentage with two decimal places, e.g., 10.12%.
d. What was the value of your shares when you sold on 5/3/99? Show your answer
in dollars and cents.
e. What was the Close price on 11/14/02? Show your answer in dollars and cents.
f. How many shares did you buy on 11/14/02? Your answer should be a whole
number.
g. How much did you spend on 11/14/02? Show your answer in dollars and cents.
h. Counting the original (9/16/98) purchase and the second purchase (11/14/02),
how much unspent cash did you have? Show your answer in dollars and cents.
i. By what percentage did the Adj. Close price grow from 11/14/02 to the last
trading day in the data set? Show your answer as a percentage with two decimal
places, e.g., 10.12%.
j. How much were the shares you purchased on 11/14/02 worth on the last trading
day in the data set? Show your answer in dollars and cents.
k. Using the value of the shares on the last trading day in the data set plus the
unspent cash, by what percentage did your original $10,000 grow? Show your
45
Part 7: Dollar-Cost Averaging
“Dollar Cost Averaging” means sticking to a regular investment pattern, such as investing
$1,000 every year, without trying to anticipate whether the price of the stock (or other
investment) will rise or fall.
1) You bought as many whole shares of AMZN stock as you could with $1,000 at the Close
price on the first trading day of each calendar year from 2001 until 2010. Fill in the blank
cells in the following table that show how many shares you bought and owned in each
year.
a. Table of Shares Bought in Each Year and Total Owned
As of # new shares Total # of shares

just purchased owned
1/2/01 72 72
1/2/02
1/2/03 51
1/2/04
1/3/05 22
1/3/06
1/3/07
1/2/08 311
1/2/09
1/4/10
b. How much were the shares owned worth on the most recent trading day in the
data set? Is it correct to simply multiply (the total number of shares owned as of
1/4/10) by (the Close price on the most recent trading day)? Why or why not?
c. How much did you spend in total on these shares? (The answer will be under
$10,000 : somewhat less than $1,000 per year for ten years.)
46
2) Fill in the table below, under the assumption that you bought as many whole shares of
AMZN stock as you could with $1,000 at the Close price on the first trading day of the
month of July each year.
a. Fill in the blanks cells in the following table:
As of # new shares just Total # of shares

purchased owned
7/2/01 68 68
7/1/02
7/1/03
7/1/04 19 186
7/1/05
7/3/06 241
7/2/07
7/1/08 13
7/1/09
7/1/10
b. How much were the shares owned worth on the most recent trading day in the
data set?
c. How much did you spend in total on these shares? (The answer will be under
$10,000 : somewhat less than $1,000 per year for ten years.)
3) Complete CANVAS Homework “Module 3 – Part 6 & 7”.
47
Part 8: Compound Annual Growth and Extrapolation
1) How much did AMZN Adjusted Close grow, as a percentage, from the last trading day
of 2012 (12/31/12) to last trading day of 2013 (12/31/13)? Show your answer as a
percentage with two decimal places, e.g., 10.12%.
2) The compound annual growth rate (CAGR) for a span of years is a growth rate that,
Screencast
when compounded annually, yields the actual percentage growth over the whole period.
Watch the screencast CAGR for more information on computing the CAGR. (Note that
to be consistent with the selected answers at the end of this section, use 1 year is equal to
365.25 days.)
What was the compound annual growth rate (CAGR) in Adjusted Close from the last
trading day of 2008 (12/31/08) to the last trading day of 2013 (12/31/13)? Show your
3) If the annual growth rate in Adjusted Close from the last day of 2013 to the last day of
2014 was the same as the CAGR in Adjusted Close from the end of 2008 through 2013
calculated above, what would the Adjusted Close of the stock be on the last trading day
of 2014 (12/31/14), assuming no further adjustments and annual compounding? Show
your answer in dollars and cents, e.g., 150.25.
4) If the annual growth rate in Adjusted Close from the last day of 2013 through the last day
of 2016 was the same as the CAGR from the end of 2008 through 2013 calculated above,
what will the Adjusted Close of the stock be on the last trading day of 2016 (12/30/16),
assuming no further adjustments and annual compounding? Show your answer in dollars
and cents, e.g., 150.25.
48
5) Create a graph in Excel that shows
a) the actual daily stock prices (using Adjusted Close prices) from the end of 2008
through the last trading day in the data set
b) the Adjusted Close over that period if it grew smoothly at the 2008-2013 CAGR.
Show the smooth growth trend starting from the end of 2008 out through the end of 2018.
6) How many years are in the data set? Show your answer as a number with two decimal
places, e.g., 10.25.
7) What was the CAGR of the Adjusted Close from the first trading day in the data set to
the last trading day in the data set?
8) Create a graph in Excel that shows a) the actual daily stock prices (using Adjusted Close
prices) from the first trading day through the last trading day in the data set, and b) the
Adjusted Close if it grew smoothly at the CAGR. Use the CAGR computed over the
whole data set. Show the smooth growth trend starting from the first trading day out
through the end of 2019.
9) Write the equation for the curve of the smooth growth of the Adjusted Close as a function
of time t, where t is in days since the first trading day.
49
Selected Answers
Part 1
1) a) 1.52 (price rose $1.52) b) 0.50%
2) $32,600
a) (i) You lost money. (ii) You lost $1,565.00. (iii) -4.80%
c) (ii) is different: it is exactly 5 times as much. Part (iii) is the same.
3) a) 15 b) $4,890.00 c) (i) You lost $234.75 (ii) -4.80%
4) a) $3,260.00
5) 11.11%
Part 3
1) On 12/1/15, Daily Range = 13.14.
2) On 12/1/15, Daily Range % = 1.97%.
3) On 12/1/15, Daily Change = 14.26.
4) On 12/1/15, Daily Change % = 2.15%.
5) a) 6/9/17 (largest daily range, 85.99) b) 6/26/97 (smallest daily range, 0.12)
c) 9/1/98 (largest daily range %, 33.33%) d) 3/17/17 (smallest daily range %, 0.38%)
e) 10/27/17 (largest increase, 128.52) f) 1/29/16 (largest drop, -48.35)
g) 11/26/01 (largest daily increase %, 34.47%) h) 7/24/01 (largest daily drop %,-
24.77%)
6)
20.42%
7) Down 49.20% of the days (2539 out of 5161 trading days--excluding the very first day--
because there's no previous day to compare to).
8) Up 50.13% of the days (2587 out of 5161 trading days). Note that 49.20% + 50.13% does
not equal 100%. There are 35 trading days where the adjusted close price was the same as
the previous day.
9) Of the 2538 days when the stock went down (excluding the most recent day in the data set
because we don’t know if what happened the subsequent day), for 1297 of them, i.e.,
51.10%, it went up the next day.
10) There is an increase in likelihood as 51.10% > 50.13%
Part 4
1) a) $1,124.73 b) 57384.18%
4) a) 425 b) $9,987.50 c) Value on most recent day: $5,741,232.84
50
Part 5
2) Note: this graph was created using all the points in the data set, not just the 5 you found in
the problem above.
Adj Close/Close Ratio

1
0.8
0.6
0.4
0.2
0
5/15/97 5/15/00 5/15/03 5/15/06 5/15/09 5/15/12 5/15/15
3) 3 adjustments were made.

5)
AMZN Adj High and Low Prices: May 1997-Dec 1999
120.00
100.00
80.00
60.00
40.00
20.00
0.00
5/15/97 9/15/97 1/15/98 5/15/98 9/15/98 1/15/99 5/15/99 9/15/99
Part 6
1) a) 111 b) $9,921.18 c) Value on most recent day: $125,062.59
2) a) 118 b) $9,971.00 c) 436.01% d) $53,445.41 e) $21.21 f) 2519
g) $53,427.99 h) $46.42 i) 5212.07% j) $2,838,132.11 k) 28281.79%
Part 7
1) b) $378,567.84. Multiplying the number of shares owned as of 1/4/10 by the Close price
on the most recent trading day will give the correct value IF there have been no adjustments
over that time period (i.e., Adj Close = Close). c) $9,805.29
2 ) b) $325,613.41 c) $9,806.32
Part 8
1) 58.96%
51
2) 50.72% (Or, if you do the calculations using whole years, the answer is 50.72%.)
3) 600.91 (Or, if you do the calculations using whole years, the answer is 601.04.)
4) 1364.36 (Or, if you do the calculations using whole years, the answer is 1365.28.)
5)
AMZN Adj Close Price with Extrapolation of

Dec 2008-Dec 2013 Growth
3500
3000
2500
2000
1500
1000
500
0
12/31/08 12/31/10 12/31/12 12/31/14 12/31/16 12/31/18
6) 20.50 years
7) 36.33%
8)
AMZN Adj Close Price with Extrapolation of

5/1997-11/2017 Growth
2500
2000
1500
1000
500
0
5/16/97 11/21/01 5/29/06 12/4/10 6/11/15 12/17/19
9) p(t) = 1.96 * (1+0.3633)^(t/365.25)
52
Module 4 – Personal Income Taxes
Background
• In this module, you will be calculating personal income taxes. You’ll start with some
simplified examples of calculations and build up to the real tax brackets. In all cases, to
calculate the taxes you need to pay, you must first compute your taxable income. You then
calculate the tax owed based on the tax rate schedules. You will not address other
adjustments such as tax credits.

1. The “HTC 1” tab contains information relevant to the tax code in Part 1.
2. The “HTC 2” tab contains information relevant to the tax code in Parts 2 and 3.
3. The “Actual Tax” tab contains information relevant to the tax code in Part 4.
• For this module, you will compute your taxes as an individual person with a “single” filing
status.
o First, the tax code provides for “deductions,” meaning certain expenses that you incur
can be subtracted from your taxable income. Examples of expenses that are tax
deductible include state income taxes paid, interest payments on home mortgages,
real estate taxes, and contributions to charities. When paying taxes, you can either
deduct the total amount of these expenses (called “itemized deductions”) or you can
deduct a set amount determined by tax law (called the “standard deduction”). For the
tax year 2020 (i.e., the taxes due in April 2021), the standard deduction for a single
person is $12,400.
o Second, the tax code allows a “personal exemption” for you, your spouse, and each of
your dependents. The personal exemption is a set amount, and for the tax year 2020,
the personal exemption is $0.
o If you are a single tax filer with $47,500 in income and you take the standard
deduction, you would only have to pay taxes on $47,500-$12,400-$0 = $35,100. The
$12,400 and the $0 are the real numbers from the tax code for the 2020 tax year; the
numbers are adjusted every year to account for inflation.
Part 0: Piecewise-defined Function

The U.S. income tax structure provides an excellent application of piecewise-defined functions.
1) To begin this Module, view the screencast Piecewise-defined Functions.
53
Part 1: Hypothetical Tax Code 1
Under Hypothetical Tax Code 1, the tax rate on all taxable income is 25%. For all of these
questions, assume you take the standard deduction and one personal exemption using the values
given in the background information.
1) If you earn $47,500 a year, how much tax would you pay?
2) If you earn $47,500 a year, what percentage of your total income would you pay in taxes?
3) If you earn $8,000 a year, how much would you pay in taxes? What percentage of your
total income would you pay in taxes?
4) Write a function (by hand) to model the total tax paid, T(x), for a single person with a
total income of x dollars.
5) Create a graph that shows taxes paid as a function of total income for total income
Screencast between $0 and $80,000. In order to build a table of values to reference in the graph, you
may find a Data Table useful. If you are unfamiliar with the Data Table tool, first view
the screencast Data Table Demo.
6) Create a graph that shows the percentage of income that you would pay in taxes as a
function of total income for total income between $0 and $80,000.
7) Do people who have higher total income pay more or less in taxes than people who have
lower total income?
8) Do people who have higher total income pay a higher or lower percentage of their
income than people who have lower total income?
54
Part 2: Hypothetical Tax Code 2
Under Hypothetical Tax Code 2, the tax rate on the first $25,000 of taxable income is 18% and
the tax rate on any additional income is 27%. Another way to explain these rates is as follows:
• For taxable income from $0 to $25,000, you pay 18% of your taxable income in taxes,
plus
• For taxable income above $25,000, you pay 27% of your taxable income.
Remember that there is a difference between total income (i.e., your salary from your employer
plus other money you earn) and taxable income (your total income minus your deductions and
your personal exemptions). Throughout these exercises, assume that you use the standard
deduction. Please use the values given in the background information for those quantities.
1) The following assume a total income of $47,500 under Hypothetical Tax code 2.
a. With a total income of $47,500 what would be your taxable income?
b. Of the taxable income calculated above, how much of it would be taxed at 18%?
How much of it would be taxed at 27%?
c. Complete the following tables assuming a total income of $47,500:

Tax Brackets (for Taxable Income)
Lower Upper Rate Money in Bracket Tax per Bracket
$0 $25,000 18%
$25,000 No Limit 27%
Tax Brackets (for Total Income)
Lower Upper Rate Money in Bracket Tax per Bracket
$0 $0
18%
No Limit $2,727
d. What is the total tax owed under Hypothetical Tax Code 2?
55
2) Write a function (by hand) to model the total tax paid, T(x), for a single person with a total
income of x dollars for Hypothetical Tax Code 2.
Set up the calculations in Excel and fill in the following table based on Hypothetical Tax Code 2.
The values from this question are in a data file for this exercise. Later, you will use the real tax
brackets, with 7 different levels, and you will want to do those calculations in Excel, so it’s good
to practice with this simpler example. For the Percent of Total Income Paid in Taxes, show your
answer as a percentage with two decimal places.
Hypothetical Tax Code 2

Total Income Taxes Owed Percent of Total
Income Paid in
Taxes
$5,000 $0
$15,000
$25,000 $2,268 9.07%
$35,000
$45,000 $6,552 14.56%
If this is set up properly in Excel, then it’s easy to see how things change when the numbers
change.
3) Create a graph that shows taxes paid as a function of total income for total income between
$0 and $80,000.
4) Create a graph that shows the percentage of income that you would pay in taxes as a function
of total income for total income between $0 and $80,000.
56
Part 3: Hypothetical Tax Code 3 (HTC 3)
HTC 3 is exactly the same as Hypothetical Tax Code 2, except that the two tax rates are 8% and
22%. The standard deduction and personal exemptions still apply, the tax rate on the first
$25,000 of income is now 8%, and the tax rate on any additional income is now 22%.
1) Make a copy of your “HTC 2” tab and change the rates to create a sheet for
calculating HTC 3. Use it to fill in this table:
Hypothetical Tax Code 3

Income Paid in
Taxes
$5,000 $0
$15,000
$25,000 $1,008
$35,000
$45,000 $3,672
2) How much more do you pay in taxes under Hypothetical Tax Code 2 compared to
Hypothetical Tax Code 3,
a. If your total income is $21,000?
b. If your total income is $32,000?
3) What component(s) of the expression that you wrote for the function that defines T(x)
for HTC 2 need to be changed to define the analogous function for HTC 3?
4) Complete CANVAS Homework “Module 4 – Parts 1-3”.
57
Part 4: Real Tax Code
Now that you have your spreadsheet working, use the real tax brackets. You may need to adjust
your formulas from the hypothetical tax codes so that you can drag your formulas in a way that
handles all the brackets correctly.
Here are the actual tax brackets for the 2020 tax year for a single tax filer:
• For taxable income from $0 to $9,875, you pay 10% of it in taxes, plus
• For taxable income from $9,875 to $40,125, you pay 12% of it in taxes, plus
• For taxable income above $518,400, you pay 37%.
Note: The actual tax code contains additional complications, like the reduction in the personal
exemptions at certain levels. Ignore these complications and consider only the tax brackets
defined above, a fixed personal exemption, and fixed standard deduction.
1) Create a spreadsheet that calculates taxes for any level of total income. Using your
spreadsheet, fill in the table:
Real Tax Code

Income Paid in
Taxes
$5,000 $0.00 0.00%
$20,000
$45,000 $3,714.50
$60,000
$75,000 $9,562.00 12.75%
$95,000
$115,000 16.26%
2) Write a function (by hand) to model the total tax paid, T(x), for a single person with a total
income of x dollars.
58
3) Create a graph that shows the amount of tax paid as a function of total income. Use a range
of $0 to $80,000 for total income.
4) Create a graph that shows the percentage of income paid in taxes as a function of income
earned. Use a range of $0 to $80,000 for income earned.
5) Looking at your second graph, estimate the total income of a person who is paying 10.00% of
his or her total income in taxes.
6) Your spreadsheet can help you find that total income (where the person is paying exactly
10.00% of his or her total income in taxes) more exactly, to within $100.
Try the guess-test-revise method by adjusting the number in the Total Income cell. What is
the total income of a person who is paying 10.00% of his or her total income in taxes?
7) Now, try using the Goal Seek tool (which is one of the What-If Analysis tools in Excel) to
answer this same question. If you are unfamiliar with the Goal Seek tool, first view the
screencast Goal Seek Demo.
Screencast
(If you use Goal Seek, does the answer depend on the initial value of Total Income in sheet
when you start? Why?)
8) Compare the Real Tax Code to Hypothetical Tax Code 3. For what ranges of total income is
the tax bill higher under the Real Tax Code?
59
Selected Answers
Part 1
1) $8,775.00
2) 18.47%
3) $0.00, which is 0.00% of total income
0 # ≤ 12,400
4) !(#) = &
0.25(# − 12,400) # > 12,400
5) Graph:
Tax Bill as a Function of Total Income

$18,000
$16,000
$14,000
$12,000
$10,000
$8,000
$6,000
$4,000
$2,000
$0
$0 $20,000 $40,000 $60,000 $80,000
Total Income
6) Graph:
Percent of Total Income Paid in Taxes

as a Function of Total Income
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
$0 $20,000 $40,000 $60,000 $80,000
Total Income
60
7) Higher
8) Higher
Part 2
1) a. $35,100
b. $25,000, $10,100
d. $7,227
0 # ≤ 12,400
2) !(#) = 1 0.18(# − 12,400) 12,400 < # ≤ 37,400
4,500 + 0.27(# − 37,400) # > 37,400
3) Graph:

$18,000
$16,000
$14,000
$12,000
$10,000
$8,000
$6,000
$4,000
$2,000
$0
$0 $20,000 $40,000 $60,000 $80,000
Total Income
4) Graph:

24.00%
20.00%
16.00%
12.00%
8.00%
4.00%
0.00%
$0 $20,000 $40,000 $60,000 $80,000
Total Income
61
Part 3
2) (a) $860.00 (b) $1,960.00
3) Here is the T(x) function for HTC3. The parts that are different from HTC2 are highlighted.
Note that it is not just the marginal rates (8% and 22%) that change, but also the constant
0 # ≤ 12,400
term in the last part. !(#) = 1 0.08(# − 12,400) 12,400 < # ≤ 37,400
2,000 + 0.22(# − 37,400) # > 37,400
Part 4
2) Here are the first few parts of the function:
0 # ≤ 12,400
⎧ 0.10(# − 12,400) 12,400 < # ≤ 22,275
⎪
!(#) = 987.50 + 0.12(# − 22,275) 22,275 < # ≤ 52,525
⎨4,617.50 + 0.22(# − 52,525) 52,525 < # ≤ 97,925
⎪
⎩ =>?.
3) Graph

$12,000.00
$10,000.00
$8,000.00
$6,000.00
$4,000.00
$2,000.00
$0.00
$0 $20,000 $40,000 $60,000 $80,000
Total Income
4) Graph
62
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
$0 $20,000 $40,000 $60,000 $80,000
Total Income
5-7) The exact answer is $57,816.67, but answers within about plus or minus $40 from that
answer will give 10.00% to two decimal places.
8) The Real Tax Code is higher for total incomes greater than $12,400 up to $45,425.00
(when both tax bills are $3,765.50), and is also higher at total incomes greater than
$133,425.00 (when both tax bills are $23,125.50). You can see the crossing points in the
graph below, but to find the exact values, Goal Seek is useful.
63
Tax Bill as a Function of Total Income:
Comparing Real Tax Code and HTC 3
$30,000.00
$25,000.00
$20,000.00
$15,000.00
$10,000.00
$5,000.00
$0.00
$0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 $160,000
Total Income
HTC 3 Real Tax Code
64
Module 5 - Tiered Commission Plans at Ebay
Background
• Affiliate Marketing programs are a popular way for web-based companies to get
exposure and to drive more business to their site. Amazon and eBay are two well-known
online retailers that use affiliate programs. If you are an Amazon affiliate, you place
tagged links to Amazon products on your website. If a visitor to your site clicks the link
and then buys the product at Amazon within a certain amount of time, you get a check for
a (small) percentage of the sale. You are acting as a salesperson for Amazon and the
money you earn is your commission.
• Other affiliate programs have different conditions. For example, at one point, eBay had a
program that was based on how many “active, confirmed, registered eBay users”
(ACRUs) an affiliate website generated.
Here’s an example:
One of the eBay affiliates is https://thekneeslider.com/motorcycles-for-sale/. If someone clicks on
an eBay link from that site, goes to eBay, creates an account and makes a bid in an auction or
executes a “buy it now,” that person has become an ACRU.
Part 1
The payment structure was based on monthly volume of ACRUs. The affiliate earned $2.47 per
ACRU for the first 49 ACRUs in a month and $3.99 per ACRU for the 50th through
1,999 th ACRUs in a month. The full payment schedule below:
Total ACRUs recruited Compensation per ACRU
0 - 49 $2.47
50 - 1999 $3.99
2000 - 29999 $4.48
30000+ $5.00
65
1) Fill in the following table
ACRUs in a Month Total Payment Earned
20
51 $ 129.01
1,500
25,000
35,000
2) Create graphs in Excel that shows the total payment earned as a function of ACRUs in a
month.
a. First use a range of ACRUs from 45 to 55.
b. Now change the range of ACRUs to be from 0 to 32,000.
c. Do the graphs look like you expected? Why or why not?
3) What is the minimum number of ACRUs an affiliate would have to generate to earn
$5,000? (Your answer should be a whole number)
4) Let’s say that eBay changed the commission plan from the original one given above to
raise every level of commission (per ACRU) by $1.00. That is, instead of paying $2.47
per ACRU for the first 49, they paid $3.47. And instead of paying $3.99 at the next level,
they paid $4.99 (and so on).
a. Under this new plan, what is the total amount an affiliate earns in commission for
1,600 ACRUs in a month?
b. Compare the original plan with the new one. For what number of ACRUs do you
earn the same commission under the two plans?
66
Part 2
Consider the following definitions:
Marginal tax rate refers to the highest tax rate one will pay on their last dollar of income. For
example, in the context of Module 4, it would be the tax rate of the highest bracket you
reach given your total income.
Progressive tax is where the average tax rate (taxes/income) increases as taxable income
increases.
Regressive tax is where the average tax rate (taxes/income) decreases as taxable income
increases.
1) Which of the following statements comparing this eBay commission plan to the US personal
income tax code are true?
a. In the tax code, the marginal tax rate is decreasing. In the commission plan, the marginal
commission rate is also decreasing.
b. In the tax code, the marginal tax rate is decreasing. In the commission plan, the marginal
commission rate is increasing.
c. In the tax code, the marginal tax rate is increasing. In the commission plan, the marginal
commission rate is also increasing.
d. In the tax code, the marginal tax rate is increasing. In the commission plan, the marginal
commission rate is decreasing.
2) In the context of tax rates, what would it mean for the marginal rate to be decreasing?
Select all that are true.
a. People with a higher income level pay a lower marginal rate than people with a lower
income level.
b. People with a higher income level pay a higher marginal rate than people with a lower
income level.
c. People with a higher income level pay a lower percent of their total income in taxes
than people with a lower income level.
d. People with a higher income level pay a higher percent of their total income in taxes
than people with a lower income level.
67
3) Let’s say that eBay changed the commission plan from the one given in Part 1 to raise every
level of commission (per ACRU) by $1.00. That is, instead of paying $2.47 per ACRU for
the first 49, they paid $3.47. And instead of paying $3.99 at the next level, they paid $4.99
(and so on). What would happen to the graph of the total commission earned (on the y axis)
as a function of the number of ACRUs (on the x axis)? Select all that are true.
a. The x-intercept would change.
b. The y-intercept would change.
c. The slopes on all the parts of the graph would increase.
d. The slopes on all the parts of the graph would decrease.
4) Let’s say that eBay changes the commission plan from the one given in Part 1 so that for the
first 99 ACRUs, affiliates earned no commission, but for each one beyond that (100 and
more), they earned $10. How would the graph of total commission earned (on the y axis) as a
function of the number of ACRUs (on the x axis) change? Select all that are true.
a. The y-intercept would change.
b. The slopes on all the parts of the graph would increase.
c. The slopes on all the parts of the graph would decrease.
5) Compare the commission plan given in Part 1 to the one given in Question 4 above.
a. With 150 ACRUs, which plan earns more commission?
b. What is the lowest number of ACRUs where an affiliate earns more under the Question 4
plan than the Part 1 plan?
c. How many times do the graphs of these two plans [where the graph for each one is total
commission earned (on the y axis) as a function of the number of ACRUs (on the x axis)]
intersect?
68
6) In this comparison, consider these graphs for the US personal income tax code and the eBay
commission plan given in Part 1.
• For the tax code, use the graph of total tax paid (on the y axis) as a function of total
income (on the x axis).
• For the eBay commission plan, use the graph of total commission earned (on the y axis)
as a function of the number of ACRUs (on the x axis).
Which one the following statements are true?

a. For the tax code, part of the graph has a slope of 0. For the commission plan, part of the
graph also has a slope of 0.
b. For the tax code, part of the graph has a slope of 0. For the commission plan, none of the
graphs have a slope of 0.
c. For the tax code, none of the graphs have a slope of 0. For the commission plan, part of
the graph has a slope of 0.
d. For the tax code, none of the graphs have a slope of 0. For the commission plan, none
of the graphs have a slope of 0.
7) Which of the following is true of the US personal income tax code?

a. It is regressive.
b. It is progressive.
c. It is neither regressive nor progressive.
8) Which of the following is true? Select all that are true.

a. If the marginal tax rate is increasing, a tax code is regressive.
b. If the marginal tax rate is increasing, a tax code is progressive.
c. If the marginal tax rate is decreasing, a tax code is regressive.
d. If the marginal tax rate is decreasing, a tax code is progressive.
9) Is the eBay commission plan regressive or progressive?
69
Selected Answers
PART 1:
2)
Earnings from 45-55 ACRUs

$150.00
$145.00
$140.00
$135.00
Earnings
$130.00
$125.00
$120.00
$115.00
$110.00
45 46 47 48 49 50 51 52 53 54 55
ARCUs
Earnings from 0-32000 ACRUs

$160,000.00
$140,000.00
$120,000.00
$100,000.00
Earnings
$80,000.00
$60,000.00
$40,000.00
$20,000.00
$-
- 5,000 10,000 15,000 20,000 25,000 30,000 35,000
ARCUs
3)
1272
4) a)
$7,909.52
70
b)
You will never earn the same except when you don't have any ACRUs
PART 2:
1) C
2) A, C
3) C
4) None of them
5)
a) Commission plan in Part 1
b) 153
c) twice, at 0 and at approximately 152.33
6) B
7) B
8) B, C
9) Progressive.
71
72
Module 6 - Orange Juice Sales and Prices
Background
• In this module, you will be looking at sales and price data for orange juice in grocery
stores. You have data from 83 stores on three brands (Tropicana, Minute Maid, and the
store brand, Dominick’s) over about two years. Using this data, you will build a model to
estimate the quantity that will sell at a specified price point and assess what price point
will maximize profit.
• The Excel workbook for this module consists of 1 tab.
1. The “Filtered” tab contains all the data, but it is filtered to show only data for
Tropicana at Store 5. It also includes some additional calculations. Note that
if you change the filters different rows of the data are displayed and hidden. If
you are unfamiliar with working with filters, first view the screencast Working
Screencast
with Filters.
Part 0: Linear Models

Linear equations are very simple equations, but they can be quite powerful at modeling real-
world phenomenon. Once a model is created, it can be used to make predictions.
1) To begin this Module, view the screencast Linear Models.
Screencast
73
Part 1: Price vs. Quantity Scatter Plots and Correlations
1) Tropicana at Store 5
Here is a scatter plot for the price and quantity pairs for Tropicana at Store 5 for the 116
weeks of data available. A (modified) version of this scatter plot shows on the Filtered
tab.
Quantity vs. Price

100,000
Units
80,000
60,000
40,000
Screencast
20,000
0
$0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00
Price
What is the correlation between price and quantity for Tropicana at Store 5?
(If you need a review on correlation, view the screencast Correlation Coefficient.)
2) Minute Maid at Store 5

a. Create a similar scatter plot that shows the price and quantity pairs for Minute
Maid at Store 5.
b. What is the correlation between price and quantity for Minute Maid at Store
5?
74
Part 2: Estimating the Price and Quantity Relationship for Tropicana at Store 5
Above we looked at the scatter plot of price and quantity for Tropicana in Store 5. In the chart
below, you see a line that passes through the cloud of points. About half the points are above the
line and about half of them are below it.
Quantity vs. Price

100,000
Units
80,000
60,000
40,000
20,000
0
$0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00
Price
The line above intersects the horizontal axis at ($3.4375, 0). In other words, on that line,
for a price of $3.4375, the quantity estimated by the line is 0.
1) Looking at the graph above and using the data in the spreadsheet, find the equation of
this line. (Note that the initial line appearing in the Excel workbook may not be the same
as the line shown above.)
Hint: you can find the equation of a line if you know two points on the line. One of the
points on this line is ($3.4375, 0). What is another one? If you move your curser over the
data points in the graph on your spreadsheet, you can see the exact values.
75
2) There is a graph with a scatter plot of price versus quantity combined with the graph of
an equation of quantity as a function of price.
a. If you type in 110,000 for the Intercept (b) and -32,000 for the Slope (m) under
the linear model, what is the value for the quantity estimated for a price of $3.00?
b. Adjust the intercept (b) and slope (m) values in the spreadsheet until you have
what looks to you from your graph like a “best” fit. What are your intercept (b)
and slope (m) values?
b=
m=
c. Notice that there is a column for “Estimated Quantity” and one for “Squared
Difference.”
• The Estimated Quantity is the y-value of the line (y=mx+b) where the m and
the b are in cells on the spreadsheet, and the x is the price value for that row.
• To find the Squared Difference, subtract the Quantity Sold (actual value from
the data) from the Estimated Quantity (predicted by the line). Then, square
that difference.
Looking at the graph, how would you describe what Squared Difference
represents?
d. There is also a cell on that tab that shows Total Squared Difference (i.e., the sum
of the values in the Squared Difference column). The lower that total is, the better
the fit of the line to the data. Find the Total Squared Difference when the
intercept is 100,000 and the slope is -30,000?
e. Find the Total Squared Difference when the intercept is 100,000 and the slope is
-40,000?
f. Find the values of the intercept and slope that make the Total Squared Difference
as low as possible. (Hint: Try using the Solver tool in Excel. This is an add-in and
Screencast you may need to add it.) If you are unfamiliar with the Solver Tool, first view the
screencast SOLVER.
b=
m=
76
Part 3: Estimating the Price and Quantity Relationship for Minute Maid at Store 5
1) Answer the following questions about Minute Maid at Store 5:
a. What was the price of Minute Maid in Store 5 in week 53?
b. What was the quantity sold of Minute Maid in Store 5 in week 68?
2) Determine the equation of the linear model that passes through the (price, quantity) pair
for Minute Maid at Store 5 in Weeks 58 and 60. What is the Total Squared Difference
for all weeks for Minute Maid at Store 5 with this specific slope and intercept?
3) Find the values for the intercept (b) and the slope (m) that make the Total Squared
Difference as low as possible.
b=
m=
4) The steps above are the building blocks for running a simple regression, which is
procedure for finding the best fit, y, as a linear function of x by minimizing the sum of
squared differences between the points and the line. There are (at least) two other ways to
find that best fit line in Excel. See if you can get them to replicate your optimal m and b.
a. Look for an option to add a Trendline to your scatter plot. There should also be a
formatting option for the Trendline to display to equation of the line, if it doesn’t
display by default.
b. The SLOPE() and INTERCEPT() functions can by used to determine the slope
and intercept of the line of best fit. Excel also contains a function for a linear
regression, called LINEST() (“linear estimate”). In this case, you want to regress
Quantity Sold on Price. (You will almost certainly have to look online for help on
using the LINEST function.)
5) Complete CANVAS Homework “Module 6 – Parts 1-3”.
77
Part 4: Price and Profit
You will calculate the store’s actual profit (Actual profit = (price – cost) * actual quantity sold)
for each product for each week.
1) For Tropicana at Store 5, assume that Tropicana costs the store $0.90:
a) Create a scatter plot of price (on the horizontal axis) and actual profit (on the
vertical axis) for all weeks.
b) What was the price during the week with the highest profit?
2) For Minute Maid at Store 5, assume that Minute Maid costs the store $0.80:
a) Create a scatter plot of price (on the horizontal axis) and actual profit (on the
vertical axis) for all weeks.
b) What was the price during the week with the highest profit?
3) For Tropicana at Store 5,
a) Using the cost for Tropicana listed above, calculate estimated profit for price
levels of $1.00, $1.50, $2.00, …, $4.00.
Estimated profit = (price – cost) * estimated quantity.
For estimated quantity, use the quantity predicted by the best-fit line from the end
of Part 2. These come from the m and b values that minimized Total Squared
Difference. What is the estimated profit for a price of $3.00?
b) Write a function (by hand) for the weekly estimated profit f(x) where the price is
x dollars.
c) Create a graph that has both the data for actual profit in a scatter plot and the
curve for estimated profit.
d) Looking at the curve, what was the price associated with the highest estimated
profit? (Note that this not a precise method, but the visual tool of the graph is a
very quick method for approximating the optimal price point for the model.)
78
4) For Minute Maid at Store 5,
a) Using the cost for minute maid listed above, calculate the estimated profit for
price levels of $1.00, $1.50, $2.00, …, $4.00.
Estimated profit = (price – cost) * estimated quantity.
For estimated quantity, use the quantity predicted by the best-fit line from the end
of Part 3. What is the estimated profit for a price of $3.00?
b) Write a function (by hand) for the weekly estimated profit f(x) where the price is
x dollars.
c) Create a graph that has both the data for actual profit in a scatter plot and the
curve for estimated profit.
d) Looking at the curve, what was the price associated with the highest estimated
profit?
79
Selected Answers
Part 1
1) -0.6716
2b) For Minute Maid at Store 5, correlation is negative: -0.5403.
Part 2
1) Using the point ($2.39, 32449) which also falls on the line, an equation is y = -30978 x +
106485
2a) At $3.00, the estimated quantity is 14,000.
2d) Total Squared Difference = 19,251,134,076 for intercept = 100,000 and slope = -30,000
2e) Total Squared Difference = 141,308,445,076 for intercept = 100,000 and slope = -40,000
2f) The Total Squared Difference is minimized when the intercept is approximately 66,441 and
the slope is approximately -17,951.
Part 3
1a) The price of Minute Maid in Week 53 at Store 5 is $2.19
1b) The quantity of Minute Maid sold in Week 68 at Store 5 is 10,049.
2) The intercept is approximately 88,104.31 and the slope is approximately -29,897.14. The
Total Square Difference for this linear model is approximately 29,452,839,689 .
3) The Total Squared Difference is minimized when the intercept is approximately 74,801 and
the slope is approximately -25,191 (with Total Square Difference approximately
28,280,498,834 ).
Part 4
1b) The price during the week with the highest profit is $2.49. (Profit is $146,332; Week is 143.)
2b) The price during the week with the highest profit is $1.99. (Profit is $118,963; Week is 128.)
3a) At $3.00 the estimated profit $26,438.
3b) Using the approximate values from Part 2 Question2f, the function is
f(x)=(x-0.90)(-17951x+66441)
3d) With the given data points, the high point of the curve is 2.50. If we consider a smaller step
size of 0.25, then the high point of the curve is at about $2.25.
4a) At $3.00 the estimated profit is approximately -$1,702.
4b) Using the approximate values from Part 3, f(x)=(x-0.80)(-25191x+74801)
4d) The high point of the curve is at about $2.00.
80
Module 7 - Market Research on Caffeinated Products
Background
• A start-up company in Boulder has an idea for a new energy product: caffeinated
chocolate. Many details about the exact product concept are yet to be decided, however,
the company wanted to get some consumer input before it moved ahead with developing
the new product. To do that, they created concept statements for seven related product
ideas and administered a survey regarding those concepts. You will analyze the data
collected from the surveys.
o The seven concepts are
1. Caffeinated chocolate bar
2. Caffeinated cookies
3. Caffeinated chocolates
4. Caffeinated potato chips
5. Caffeinated water
6. Caffeinated cereal/granola
7. Caffeinated hamburger meat
o The concepts numbered 1 and 3 (chocolate bar and chocolates) are closest to what
the company has in mind for the new product. Concept number 2 is a similar idea,
while concepts 4-6 are quite different categories from their focal idea. Concept 7
(hamburger meat) served as a benchmark: it was designed as an intentionally
unattractive idea, and it was used to see if people were really paying attention to
the survey or just answering randomly.
o The survey first asked some background questions (gender, age, employment
status, and usage of energy products), then asked four questions for each of the
seven concepts. The four questions for each concept were about 1) purchase
intent, 2) uniqueness of the product idea, 3) projected usage frequency, and 4)
substitution behavior. The content of the module focuses on the analysis of the
responses to the intent, uniqueness, and frequency questions.
1. The “survey-results” tab contains all the raw data gathered from the 150 survey
respondents.
2. The “concepts” tab contains the exact statements of the concepts.
3. The “response codes” tab contains the meaning of the response values for the
gender, age, intent, uniqueness, and frequency questions.
Part 0: Mean and Weighted Mean

Given a large set of data, it can be desirable to summarize the general tendencies of the data.
One of the most common summarizing computations is that of the mean of the data. In some
cases, you may want to allocate more/less weight to certain data and compute a weighted mean.
1) To begin this Module, view the screencast Mean and Weighted Mean.
81
Part 1: Purchase Intent
Each respondent was asked a purchase intent question for each concept: “Based on the
description, how likely would you be to purchase this product?” This is a standard question in
market research for consumer products.
In the data file, the responses to the purchase intent questions are in columns labeled INTENT(1)
through INTENT(7), corresponding to Concept 1 through Concept 7 above.
In those columns,
• 1 means the respondent answered “Definitely would not,”
• 2 means “Probably would not,”
• 3 means “Might or might not,”
• 4 means “Probably would,” and
• 5 means “Definitely would."
1) Average Purchase Intent

a. For each concept, find the average purchase intent response. Also, find the
number of people who answered the purchase intent question for each concept.
# Concept Name Average Purchase Intent Number of

Responses
1 Caffeinated chocolate bar 2.49 140
2 Caffeinated cookies
3 Caffeinated chocolates 140

4 Caffeinated potato chips
5 Caffeinated water 2.04 139

6 Caffeinated cereal/granola 1.72
7 Caffeinated hamburger meat 142
b. Which concept has the highest average score for purchase intent?
c. Which concept has the lowest average score for purchase intent?
82
2) Distribution of Responses
For each concept, what percentage of the responses are 1s, 2s, etc.? Give your answers as
percentages to two decimal places.
Distribution of Responses for Purchase Intent

# Concept %1s %2s %3s %4s %5s
2 Caffeinated cookies 42.25% 35.92% 15.49%
3 Caffeinated chocolates 29.29% 27.14%
3) Graph of Distribution of Responses

Below is a bar graph showing the distribution of responses for caffeinated cookies
(Concept 2).
Relative frequency of Purchase Intent reponses for the Caffeinated

cookies concept, n = 142
45.00%
40.00%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
Definitely would not Probably would not Might or might not Probably would Definitely would
purchase purchase purchase purchase purchase
a. Create a similar graph in Excel showing the distribution for caffeinated chocolates
(Concept 3).
83
4) Top-Two Boxes
Some companies look at the “top-two boxes” score for concepts. The top-two boxes score
is the percentage of respondents who answered “Probably would” plus the percentage of
respondents who answered “Definitely would.” For example, if 6% of respondents
answered “Definitely would” (a response of 5 in the data) for one of the concepts and 20%
of respondents answered “Probably would” (a response of 4 in the data) for that concept,
then the top-two boxes score for that concept is 26%.
a. What is the top-two boxes score for the Caffeinated chocolate bar (Concept 1)?
b. Which of the seven concepts has the highest top-two boxes score?
Purchase intent responses can be coded as probabilities. One way of translating the response
phrases to probabilities is as follows:
• Definitely would not = 0% chance,
• Probably would not = 25% chance,
• Might or might not = 50% chance,
• Probably would = 75% chance, and
• Definitely would = 100% chance.
5) Average Purchase Probabilities

a. Using the probabilities above, what is the average probability of purchase for each
of the seven concepts? Use all the responses, not just the top-two boxes.
Average Purchase Probabilities, Using 0%, 25%, 50%, 75%, 100%

# Concept Average Purchase Probability
1 Caffeinated chocolate bar 37.14%
2 Caffeinated cookies 21.83%
3 Caffeinated chocolates
5 Caffeinated water
6 Caffeinated cereal/granola 18.04%
7 Caffeinated hamburger meat
84
b. Which concept has the highest average probability of purchase?
c. Which concept has the lowest average probability of purchase?
d. If Concept A has a higher Average Purchase Intent (using the 1-5 scale) than
Concept B, will Concept A necessarily have a higher Average Purchase
Probability (using the 0%, 25%, 50%, 75%, 100% scale) than Concept B?
(Note that you should not answer this question considering only the data
presented from this survey, but in general for any survey results.)
People often overstate their intention to purchase. Instead of 0%, 25%, 50%, 75%, and 100%, a
more realistic translation from response phrases to probabilities is as follows:
• Definitely would not = 0% chance,
• Probably would not = 2% chance,
• Might or might not = 10% chance,
• Probably would = 25% chance, and
• Definitely would = 50% chance.
6) Using these values, what is the average probability of purchase for each of the seven
concepts?
Average Purchase Probabilities, Using 0%, 2%, 10%, 25%, 50%

# Concept Average Purchase Probability
1 Caffeinated chocolate bar 9.65%
2 Caffeinated cookies 4.20%
5 Caffeinated water
6 Caffeinated cereal/granola
7 Caffeinated hamburger meat 0.86%
85
a. Which concept has the highest average probability of purchase?
b. Which concept has the lowest average probability of purchase?
c. If Concept A has a higher Average Purchase Intent (using the 1-5 scale) than
Concept B, will Concept A necessarily have a higher Average Purchase
Probability (using the 0%, 2%, 10%, 25%, 50% scale) than Concept B?
(Note that you should not answer this question considering only the data
presented from this survey, but in general for any survey results.)
7) Comparing Top-Two Boxes Percentages and Average Purchase Probabilities

TRUE or FALSE: If a concept has the largest top-two boxes score, it will also have the
highest average purchase probability. Explain your answer.
86
Part 2: Frequency
Each respondent was asked, “If you tried this product and it met your expectations for taste and
effectiveness, how often could you see yourself using it?” This is a standard question in market
research for non-durable consumer products.
In the data file, the responses to the frequency questions are in columns labeled FREQ(1)
through FREQ(7), corresponding to Concept 1 through Concept 7 as shown at the beginning of
the module.
In these columns,
• 1 means the respondent answered, “Once a month or less often,”
• 2 means “More than once a month, but less than once a week,”
• 3 means “1 to 3 times a week,”
• 4 means “More than 3 times a week,” and
• 5 means “Don’t know.”
For each concept, what percentage of the responses are 1s, 2s, etc.? Give your answers as
percentages to two decimal places.
Distribution of Responses for Frequency

# Concept %1s %2s %3s %4s %5s
2 Caffeinated cookies 61.76% 2.94% 23.53%
3 Caffeinated chocolates 57.46% 11.19%
You can use the frequency responses to estimate annual usage behavior. Similar to our
translation of intent responses to probabilities, you can translate the frequency responses to
annual usage numbers. Of course, these are just estimates, but they give a reasonable
approximation. Use the following values.
• Once a month or less often = 5 times a year
• More than once a month but less than once a week = 15 times a year
• 1 to 3 times a week = 60 times a year
• More than 3 times a week = 100 times a year
• Don’t know = 0 times a year.
Notice that these values are conservative translations, once again assuming that people overstate
their intentions.
87
2) Estimated Annual Usage
Using these values, find the estimated annual usage for each concept.
Estimated Annual Usage, Using 5, 15, 60, 100, 0

# Concept Estimated Annual Usage
1 Caffeinated chocolate bar 11.30
2 Caffeinated cookies 7.87
5 Caffeinated water
3) TRUE or FALSE: If the numeric values of annual usage were changed from 5, 15, 60,
100, and 0 to the values 6, 20, 60, 110, and 0, the estimated annual usage of every
concept would increase or stay the same, no matter what the actual responses to the
survey were. Why?
4) Normalizing: Excluding the Don’t Knows

Above, you treated “Don’t know” as “won’t buy.” That is, you estimated 0 annual usage
for people who responded “Don’t know” to the frequency question. That’s a somewhat
extreme assumption.
a. Instead, you could just ignore or exclude the “Don’t know” responses. To do that,
look at the percent of each response out of the total number of responses 1-4. Find
those percentages and fill in the chart below.
Distribution of Responses for Frequency, Excluding Don’t Know (5)

# Concept %1s %2s %3s %4s
2 Caffeinated cookies 13.46% 3.85%
Caffeinated
6 16.19% 4.76%
cereal/granola
88
b. Using the same estimates of frequency for responses 1-4 from above (e.g., a
response of 1, which is “Once a month or less often” means 5 times a year), find
the estimated annual usage for each concept.
Estimated Annual Usage, Excluding Don’t Know (5)

# Concept Estimated Annual Usage
1 Caffeinated chocolate bar 13.38
2 Caffeinated cookies 10.29
5 Caffeinated water
c. The estimated annual usage for each concept is higher when the “Don’t know”
responses are excluded. Why?
89
Part 3: By Gender and Age
The column labeled GEN has responses to a question about gender. The responses are coded as
follows:
• 1 means Male
• 2 means Female
The column labeled AGE has responses to a question about age. The responses are coded as
follows:
• 1 means the respondent answered under 18 years old
• 2 means 18-25 years old
• 8 means over 75 years old
1) For each concept, find the average purchase intent (INTENT) response by Male
respondents.
Purchase Intent by Male Respondents

# Concept Average Purchase Intent Number of
Responses
2 Caffeinated cookies 41
3 Caffeinated chocolates 39
4 Caffeinated potato chips 1.51
5 Caffeinated water 2.13
7 Caffeinated hamburger meat 40
2) For which of the seven concepts do males have higher average purchase intent than
females?
90
3) Find the average purchase intent (INTENT) response by respondents 45 and under.
Purchase Intent by Respondents 45 and under

Responses
2 Caffeinated cookies 1.94 99
3 Caffeinated chocolates 2.66
5 Caffeinated water
6 Caffeinated cereal/granola
7 Caffeinated hamburger meat 1.22 98
4) For which of the seven concepts do respondents aged 45 and under have higher average
purchase intent than respondents over 45?
For each concept, determine what percentage of the frequency (FREQ) responses from
Male respondents 45 and under are 1s, 2s, etc.? Give your answers as percentages to two
decimal places.
# Concept % 1s %2s %3s %4s %5s

2 Caffeinated cookies 54.84% 3.23%
3 Caffeinated chocolate 60.00% 13.33%
91
Part 4: Excluding Low Quality Responses
The “caffeinated hamburger meat” concept wasn’t a real concept—it was just a check to see if
people were paying attention to the survey. Although it is possible that someone would have a
high purchase intent for that concept, the concept was included to help screen out people who
were not taking the survey seriously. When people took the survey, the response for “Definitely
would” was the closest to the “advance to the next screen” button, so people who were just trying
to speed through the survey would be more likely to give that response.
The company also wants to screen out people who didn’t answer all the questions.
1) Find the average purchase intent responses, excluding “low quality” responses. By
definition, a low quality response is a response in any row in the data set that meets at
least one of these criteria:
• a response of 3, 4, or 5 for purchase intent on Concept 7 (INTENT(7))
• failure to answer all twenty-one INTENT, UNIQ, and FREQ questions.
There are many ways to exclude the low quality responses. Try to avoid using a manual
process like deleting each of the low quality rows. (Imagine if the data set had 150,000
rows instead of 150: you wouldn’t want to go through all of them, one by one.)
Purchase Intent, Excluding Low Quality Responses

Responses
2 Caffeinated cookies
5 Caffeinated water 2.01

92
Selected Answers
Part 1
1b) Caffeinated chocolates (Concept 3) has the highest average purchase intent (2.56).
1c) Caffeinated hamburger meat (Concept 7) has the lowest average purchase intent (1.21).
3)
Relative frequency of Purchase Intent reponses for the
Caffeinated chocolates concept, n = 140
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
Definitely would not Probably would not Might or might not Probably would Definitely would
purchase purchase purchase purchase purchase
4a) 20.71%
4b) Concept 3 has the highest top-two boxes score (22.14%)
5b) Caffeinated chocolates has the highest average probability of purchase (39.11%)
5c) Caffeinated hamburger meat has the lowest average probability of purchase (5.28%)
5d) The answer is “yes”, independent of the specific survey results.
6a) Caffeinated chocolates has the highest average probability of purchase (10.44%)
6b) Caffeinated hamburger meat has the lowest average probability of purchase (0.86%)
6c) Although the answer is “yes” for the results of this specific survey, in general the answer is
“no”.
7) Although it will often be the case that the concept with the largest top-two boxes score is the
one with the highest average purchase probability, in general, the statement is false
Part 2
3) True. Because the usage estimate for every category of response increased or stayed the same,
the estimated annual usage for each concept will increase or stay the same, no matter what the
survey results were.
4c) When included, the “Don’t Know” responses were counted as “0 consumed” which lowered
the average.
Part 3
2) Males have higher average purchase intent than females for Concepts, 1,2,4,5,7.
4) Respondents 45 and under have higher average purchase intent than those over 45 for
Concepts 1,2,3,4,6,7.
93
94
Module 8 – Bike Rite Kickstarter Campaign
Background
Kickstarter (http://www.kickstarter.com/) is a popular crowdfunding site that was launched in
2009. Kickstarter was originally conceived to help artists raise funds to finance creative projects
(e.g., films, works of art, performances). Many of the projects on Kickstarter still relate to the
arts, but others are projects to raise money for new products or for new service businesses.
When an entrepreneur or artist starts a Kickstarter campaign, he or she sets the fundraising goal,
the funding period (defined by a start date and an end date), and the awards set for different
levels of funding pledges. For example, someone who is running a Kickstarter campaign to fund
the production of a documentary might offer “a thank you in the credits” to anyone who pledges
$20 or more. To see some examples of award levels, go to the Kickstarter site and look at some
examples of projects.
NOTE that if a campaign does not reach its fundraising goal, no pledged money can be collected.
Sarah and Matt are two friends who have been working on an idea for a uniquely designed
bicycle accessory used to mount a cell phone on the handlebars, BikeRite1. They have decided
to run a Kickstarter campaign to raise the money they need for initial production, distribution,
and marketing. They don’t want to set the fundraising goal too high. If they don’t meet it, then
they wouldn’t collect any of the money pledged. They also don’t want to set it too low and miss
out on some money. To help inform their decision about the fundraising goal, they found a blog
that had collected and posted several years’ worth of data on Kickstarter projects (over 30,000 of
them). They need to discuss two of their decisions: what should their Kickstarter fundraising
goal be, and what award levels should they offer?
The Excel workbook for this module consists of 3 tabs.

1. The “Database” tab is raw data downloaded from http://blog.thingswestart.com/our-data/.
Each row in the data set is a project. For each project, there are many details, including
“goal” (the fundraising goal) and “pledged” (the total amount backers committed to give if
the fundraising goal is met). Projects are also organized into a “category” (e.g., Narrative
Film) and a “category_parent” (e.g., Film & Video).
2. The “List of Comparables” tab contains specific data for twelve comparable projects that
were also for bicycle accessories. For each comparable project, the data shows up to ten
pledge levels, and for each of the pledge levels used in the project, there is a column showing
the number of backers at that level.
3. The “Pricing Research” tab displays a summary of the pricing research that is referred to in
Part 4.
1
BikeRite is a fictitious but realistic project, based on similar Kickstarter projects.
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Part 0: Probability Distribution and Expected Value
A probability distribution summarizes the outcomes and corresponding likelihood of each
outcome. Using a concept similar to a weighted mean, the average or expected value of the
probability distribution can be computed.
Screencast 1) To begin this Module, view the screencast Expected Value.
Part 1: Project Data

1) How many total projects are in the data set?
2) How many of them reached their funding goal (i.e., had pledges that reached or exceeded
the goal)? What percentage of all the projects reached their funding goal?
3) There are four years of data: 2012, 2013, 2014, and 2015. What percentage of projects in
the data set reached their funding goal each year? (Use the ending date to determine the
year of the project.)
% of Projects that Reached

Year (of End Date)
Funding Goal
2012 59.27%
2013 62.09%
2014
2015
4) Is the average of the four percentages in the table above equal to the percentage from
question 2) (the percentage of all projects that reached their funding goal)? Why or why
not?
5) What percentage of all projects under the Crafts category parent reached their funding
goal?
6) Did a higher percentage of projects under the Video Games category or the Jazz category
reach their funding goal?
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7) What percentage of all projects under the Art category parent ending in 2012 reached
their funding goal?
8) Using all projects in the data set,

a. How many projects had a goal of $50,000 or lower?
b. What percentage of the projects with goals of $50,000 or lower reached their
funding goal?
c. Fill in the missing cells in the following table, using all the projects in the
database.
Projects that meet their goal collect the pledged amount. Projects that do not meet
their goal collect no funds. Calculate the Average Funds Collected: the average
amount of money collected per project, including projects that collect nothing
because they did not meet their goal.
Number of % Reached Average Funds

Goal Level
Projects Funding Goal Collected
$0 -$10,000 62,929 53.21% $3,671.37
$10,000.01 - $20,000
$20,000.01 - $30,000 $21,682.75
$30,000.01 - $40,000 2,141
$40,000.01 - $50,000 29.74%
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d. Fill in the missing cells in the following table, using just the projects under the
Design category parent.
Number of % Reached Average Funds

Goal Level
Projects Funding Goal Collected
$0 -$10,000 2,055 68.86% $14,401.92
$10,000.01 - $20,000 $47,294.35
$20,000.01 - $30,000 270 83.70%
$30,000.01 - $40,000 113

$40,000.01 - $50,000 83.69% $252,413.27
e. From this data, can you conclude that projects with higher goals (up to $50,000 )
tend to collect more money?
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Part 2: Setting Levels
Setting the award levels is an important part of a Kickstarter campaign. Backers (people who
pledge to support the campaign) choose a level at which to contribute, and the project owners
provide an award at each level. For new products, some of the award levels usually involve pre-
sales of the product.
For example, here are the levels for a Bicycle Bell project (project 12) that was funded on
Kickstarter (https://www.kickstarter.com/projects/139160027/a-better-bicycle-bell-made-in-the-
usa):
• Pledge $1: “Thanks!”
• Pledge $35 or more: a bell in the raw metal color
• Pledge $45 or more: a bell in black
• Pledge $55 or more: a polished metal bell
• Pledge $80 or more: two bells, one raw and one black
1) Looking at the data for the Bicycle Bell project on the List of Comparables tab, find the
percentage of backers that pledged at each of the five levels. Fill in the missing cells in
the following table.
Pledge % of Total Backers for

Number of Backers
Level the Project
$1 86 1.48%
$35 2151
$45
$55
$80 29.82%
Sarah and Matt decide that they are going to use the same pledge levels with similar awards for
their campaign.
2) If Sarah and Matt can attract 500 backers in total, and the backers pledge in the same
proportions per level as they did for the Bicycle Bell project, how much money would
Sarah and Matt raise? (For this question, assume that if someone pledges at a level (say
$45), they contribute exactly at that level, not more. Also, in using the proportions, don’t
round the number of backers at each level to whole numbers.)
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3) Create a graph in Excel of the estimated money pledged as a function of the number of
backers for Sarah and Matt’s project. Use a range of 0 to 2000 backers in your graph.
a. Does your graph show a straight line?
b. If so, what is the slope of the line? What is the meaning of that slope? If not, how
can you explain the shape of the graph?
4) Write the equation, by hand, for the function shown in your graph in Question 4.
5) If the fundraising goal is set at $20,000, how many backers do Sarah and Matt need to
meet that goal? Get your answer three ways and confirm that they are all the same:
a. Solve the written equation from question 4) to find an exact answer.
b. Use the graph you created in question 3) above to estimate the answer.
c. Numerically check your answer in your spreadsheet to see if the number of

backers you found does, in fact, yield $20,000.
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6) Looking at the data for the Bicycle Bell project (on the List of Comparables tab), you see
that the reported amount pledged (in the column labeled Pledged) was $331,938.
a. If backers at each level in that project simply pledged the minimum for that level
and no more, how much would have been pledged in total? (To further clarify:
assume the 2151 backers who pledged at the $35 level each pledged exactly $35.)
b. In aggregate, by what percentage did the Bicycle Bell backers pledge more than
the minimum at each level? That is, if the pledge level was $15 and backers
pledged $18, they would be pledging 20% more than the minimum at that level.
You don’t have the individual pledges, but you have the total pledged (in the
Pledged column) as well as the number of backers at each level. You can
calculate the aggregate percentage above the minimum from that data.
c. Sarah and Matt consider the possibility that backers will pledge above the
minimum for each level for their project too. If backers pledge above the
minimum at each level at the same aggregate percentage as the Bicycle Bell
project, then how many backers would they need to meet a $20,000 fundraising
goal?
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Part 3: Capital Expenditure
If Sarah and Matt raise enough money, they can afford to invest in production equipment that
would save them money over the lifetime of their business, assuming they realize at least
moderate success.
They face a trade-off in production costs: they can invest more upfront for a lower per-unit cost,
or less upfront for a higher per-unit cost. In particular, they have an option to purchase a custom
mold that would allow production via a more automated, injection-molding production process.
• The custom mold costs $15,000 and lasts a long time. Once that mold is created, the per-
unit cost of producing each unit is $0.50 .
• If they don’t create the mold, they need to buy other equipment for $500 , and the more
labor-intensive process costs $5 per unit.
If they only end up making a small number of units, buying the custom mold would not be worth
it. For example, for 100 units, with the custom mold, they would spend $15,000 + 100 * ( $0.50 )
= $15,050 . But with the other approach, they would spend only $500 + 100 * ( $5 ) = $1,000 .
1) What is the breakeven number of units at which the custom mold is the better choice?
That is, how many units would they have to produce to make the custom mold a lower
cost option? Write the equation on paper and solve it.
2) Create a graph in Excel that shows the total cost under each of the two production
processes (custom mold vs. more labor-intensive) as a function of the number of units
produced. For number of units produced, use a range of 0 to 6,000. Label your graph to
show the answer you got for question 1).
3) Confirm the solution to your equation in question 1) works in your spreadsheet.
4) Using the pledge levels from Part 2 and the proportions of backers at each level from the
Bicycle Bell project (and once again assuming that backers pledge the minimum at each
pledge level), answer the following question. How many backers do they need to cover
the upfront cost (the $15,000 ) for the custom mold?
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Part 4: Pricing
If Sarah and Matt are able to raise the money and get their product produced, they are thinking
that they will charge $30-$70 for it, which is a middle-of-the-pack price for their product
category. It won’t be the cheapest, and it won’t be the most expensive. They think people will
want to buy it because of the unique design.
They did a little market research on the pricing using a survey. The survey showed people a
description of the product and a price, and then asked, “How likely would you be to purchase
this new product at this price?” The survey respondents were people who regularly ride bicycles.
They tested five price points (but each survey respondent saw only one price point). Below (and
on the tab called Pricing Research), you see a summary of the relevant responses.
Price
Percent of people surveyed who said they would “probably” or “definitely” buy
Point
$30 16.25%
$40 12.00%
$50 8.75%
$60 3.00%
$70 3.05%
1) Assume the product will be available in stores and 100000 regular bike riders will be
aware of it. Using the percentages in the chart above as purchase percentages, create a
graph that shows the amount of revenue at each of the price points.
2) If 200000 (instead of 100000) regular bike riders will be aware of the product, does that
change the revenue graph? Does it change the revenue-maximizing price? If so, how? If
not, why not?
3) If Sarah and Matt choose the custom-mold production process (as described in Part 3),
then of the price points considered, which one maximizes profit? (Profit is revenue minus
cost.)
4) If Sarah and Matt choose the labor-intensive production process (as described in Part 3),
then of the price points considered, which one maximizes profit?
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Part 5: Larger Pledges
In the Bicycle Bell project that Sarah and Matt used as a model, the highest pledge level amount
was only $80. However, some of the other comparable projects had pledge levels much higher
than that.
1) Looking on the List of Comparables tab, what was the highest pledge level amount
offered out of the projects listed?
How many people pledged at that level?
2) How many of the 12 comparable projects offered pledge levels at $100 or higher?
Considering all the backers of all 12 projects, what percent of them pledged at a pledge
level of $100 or higher?
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3) Sarah and Matt are considering offering a higher pledge level in addition to the five lower
pledge levels from the Bicycle Bell project. They are considering a $250 pledge level
and make the following assumptions:
• They will have at most three backers.

• The probability of getting at least one backer at this level is the same as the percentage of
all backers of all 12 projects at $100 or higher (found in question 2).
• The probability of getting exactly one backer at $250 is twice the probability of getting
exactly two backers at $250 .
• The probability of getting exactly three backers at $250 is equal to the probability of
getting exactly 2 backers at $250
Using this information:

i. What is the probability that they have 0 backers at $250 ?
ii. What is the probability that they have exactly 1 backer at $250 ?
iii. What is the probability that they have exactly 2 backers at $250 ?
iv. What is the probability that they have exactly 3 backers at $250 ?
Assume that any backers at the highest level ($250 ) are independent of what happens at the five
lower levels. What is the “expected value” of the total money pledged at the $250 level?
An “expected value” is a probability-weighted average of values. Assume that people that pledge
at that level pledge exactly $250 , not more.
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Part 6: Analyzing Base-Case, Pessimistic, and Optimistic Scenarios
In Part 2, Question 2, you computed an estimate of money pledged for the Bicycle Bell Product
with 500 backers. Use that as a base-case scenario, or most likely scenario. Sarah and Matt are
also considering a pessimistic scenario, with only 200 backers, and an optimistic scenario, with
1,200 backers. They assume that the proportions of people who would participate at the different
pledge levels would stay the same across the base-case, pessimistic, and optimistic scenarios. (As
before, don’t round the number of backers at each level to whole numbers.)
For the questions below, use only the initial pledge levels ($1-$80), not the higher ($250 ) pledge
level.
1) Pessimistic scenario.
a. Estimate the amount of money pledged under the pessimistic scenario.
b. Would they be able to afford the upfront cost of the custom-mold production
process (see Part 3) in this scenario?
c. Which price should they charge (see Part 4) in this scenario?
2) Optimistic scenario.
a. Estimate the amount of money pledged under the optimistic scenario.
b. Would they be able to afford the upfront cost of the custom-mold production
process (see Part 3) in this scenario?
c. Which price should they charge (see Part 4) in this scenario?
Sarah and Matt know that the three scenarios are just three cases of what could happen—of
course there are many variations on the outcomes. But as an approximation to help them think
through both possible outcomes and their likelihoods, they estimate probabilities for each of the
three cases.
They assign a
• 60% chance to the base scenario,
• 20% chance to the pessimistic, and a
• 20% chance to the optimistic scenario.
If the funding goal is set at $12,000, what is the expected value (using the scenario probabilities)
of money they would collect?
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Selected Answers
Part 1
1) 90,122 projects
2) 43,420 projects reached their funding goal; 48.18%
4) No, because the average of the four percentages does not take into account the number of
projects for each year. For instance, if one year has more projects than another, then its %
should affect the average more.
5) 25.06%
6) Jazz (62.88%) had a higher percentage than Video Games (52.05%).
7) 50.83%
8) a) 84,134 projects had a goal of $50,000 or lower; b) 50.17%
Part 2
2) $25,751.60 with 500 backers
Estimated Amount Pledged
$120,000.00
$100,000.00
$80,000.00
$60,000.00
$40,000.00
$20,000.00
$0.00
0 200 400 600 800 1000 1200 1400 1600 1800 2000
# Backers
3)
3b) Slope = $51.50, the average amount pledged per backer.
4) y = 51.5x
5) About 388.3 backers
6) a) $298,461; b) 11.22% more than the minimum; c) 349.2 backers
Part 3
1) 3222.22 units. For 3223 or more units, the custom mold option has a lower total cost.
Cost Comparison
$35,000
$30,000
$25,000
$20,000
Custom Mold
$15,000
Labor Intensive
$10,000
BREAKEVEN POINT
$5,000
$0
0 1000 2000 3000 4000 5000 6000
Number of Units
2)
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4) About 292 backers
Part 4
1)
Estimated Revenue for 100000 Aware Consumers
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
$0
$30 $35 $40 $45 $50 $55 $60 $65 $70
Price Point
2) The number of riders aware of the product will change the total revenue, but the shape of the
graph will remain the same, so the revenue-maximizing price will not change.
3) $30 will earn the greatest profit ($464,375).
4) $40 will earn the greatest profit ($419,500).
Part 5
1) The greatest pledge level was $6,000. The number of backers who pledged at that level was
1.
2) 11 of the 12 projects; 4.82% of the backers.
3) a)i. 95.18%; a)ii. 2.41%; a)iii. 1.21%; a)iv. 1.21%; b) $21.09
Part 6
1) a) $10,300.64; b) They cannot afford the custom mold.; c) $40 (optimal for labor-intensive
process)
2) a) $61,803.83; b) They can afford the custom mold.; c) $30 (optimal for mold process)
3) $27,811.72
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Module 9 – Forecasting
Background
• In this module, you will check other students’ forecasts to see how good they were at
predicting the future. A group of students assigned probabilities for 10 “binary” events.
(Binary events have two possible outcomes: they occur or they do not occur.) They
recorded their probabilities prior to the events occurring. Now that the time of the events
has passed, we can analyze how accurate the students were with their forecasts. The
Excel workbook for this module consists of 3 tabs.
1. The “Snowfall” tab contains hypothetical raw data of forecasts made to a question
regarding the probability of snowfall at a future date.
2. The “Responses” tab contains the raw data of forecasts made to 10 events. Each
row contains the forecasts for a single student
3. The “Occurrence” tab contains a list of the events forecasted into which the
outcome of 0 = “didn’t occur” or 1 = “occurred” has been recorded.
Part 0: Basics of probability and summation notation

Although in this module you will be relying primarily on subjective probabilities, it is important
to recall the basic concepts of computing probabilities. Additionally, when summing a long list
of values, the long-hand notation for the sum can be impractical or even impossible to display.
In mathematics, there is a compact notation to represent a sum of an indexed list of values.
1) To begin this Module, view the following screencasts:

Screencasts
Probability Introduction
Summation Notation
109
Part 1: Consistency
In making predictions about the likelihood of a future event, it is important to make sure those
probabilities are consistent. Consider the following list of questions:
i. What is the probability that tomorrow we will get 1 inch or more of snowfall?
ii. What is the probability that tomorrow we will get 3 inches or more of snowfall?
iii. What is the probability that tomorrow we will get 5 inches or more of snowfall?
iv. What is the probability that it will snow less than 1 inch or not at all tomorrow?
1) Please consider the relationships among the probabilities assigned to the questions above.
a. True or False: The probability assigned to question i) has to be greater than or
equal to the probability assigned to question ii). Explain.
b. True or False: The probability assigned to question ii) has to be greater than or
equal to the probability assigned to question iii) if the same time range is used for
both (e.g., tomorrow or some other range. Explain.
c. What can we say about the relationship between the probability assigned to i) and
iv) if the forecasts made are consistent?
2) Use the data on the “Snowfall” tab to answer the following questions:
a. How many individuals had consistent forecasts when just looking at questions i)
and ii)?
b. How many individuals had consistent forecasts when just looking at questions i)
and iv)?
c. How many individuals had consistent forecasts for all questions?
110
Part 2: Looking at Consistency of Each Person’s Forecasts
In this part, you are going to look at some forecasts of stock prices and other things that were
made prior to the event actually occurring. This is actual data related to forecasts made regarding
these events. The first 5 events relate to the percent change in trading price of Amazon stock and
the actual occurrences are listed on the “occurrence” tab. Here is a list of the events and whether
or not they occurred:
What is the probability that AMZN stock will close 5%, or more,
lower (that is, less than or equal to -5%) on the settlement date
Event 1 compared to the first trading day of the current calendar year? 0
lower (that is, less than or equal to -1%) on the settlement date
higher (that is, greater than or equal to 5%) on the settlement date
higher (that is, greater than or equal to 1%) on the settlement date
What is the probability that AMZN stock will close between 5%
lower and 5% higher (that is, between -5% and 5%, not inclusive)
on the settlement date compared to the first trading day of the
Event 5 current calendar year? 0
What is the probability of snow in Boulder on the settlement date
Event 6 (as recorded by the National Weather Service www.weather.gov)? 0
What is the probability that Allstate Corp (stock ticker ALL) will
Event 7 be part of the S&P 500 on the settlement date? 1
What is the probability that gold (GC=F) will be worth more than
$1150 per ounce on the settlement date? Finance.yahoo.com, "last
Event 8 price." 1
What is the probability that on the settlement date, you can get
0.90 or more EUR for 1 USD, according the Currency Converter at
Event 9 www.oanda.com? 0
What is the probability that light sweet crude oil(CLH18.NYM)
will be trading at more than $47 per barrel on the settlement date
Event 10 (finance.yahoo.com)? 1
Events 1-5 are related to each other because they are all about AMZN stock.
111
1) Of the people who made forecasts, how many had a probability for Event 4 that were
greater than or equal to their probability for Event 3?
2) Answer these questions:

a. TRUE or FALSE? For each person making a forecast, the probability (forecast)
for Event 2 should be greater than or equal to the probability for Event 1.
b. TRUE or FALSE? For each person making a forecast, the probability for Event 1
should be equal to the probability for Event 3.
c. TRUE or FALSE? For each person making a forecast, the probability for Event 1
plus the probability for Event 3 plus the probability for Event 5 should equal 1.
(For this question, assume that AMZN is still being traded on the settlement date.)
d. What other pairs of events do you need to examine for consistency?
112
Part 3: How Did They Do?
We can compare individual forecasting performance by looking at the total squared difference
for each person making a forecast. (Recall how you use the total squared difference in the OJ
module.) In this context, the difference for that person for a given event is the probability
assigned for that event minus the outcome of that event. The probability assigned is a number
between 0 and 1. The outcome is either a 1 or 0, meaning the event occurred or did not occur,
respectively. The squared difference is the square of that difference. The total squared difference
is the sum of the ten squared differences (one for each of the ten events).
1) Total Squared Difference
a. Write a mathematical expression for the total squared difference. To do that, use
this notation:
• Denote the probability assigned by person i for event j as xi,j. For example, the
probability for Event 8 by the person with ResponseID 103 would be written
x103,8.
• Denote the outcome of event j as yj. For example, if the outcome of event
three was “did occur,” then we represent it with a 1 as y3 = 1.
Using that notation, write the expression for the total squared difference Ti for
person i.
Note: Response ID 1 has a total squared difference of 1.6016
b. What is the lowest possible value that one of these total squared differences could
take on?
c. What is the highest possible value?
d. What percentage of the events did occur? What value would the total squared
difference be for a forecaster who assigned this percentage as their probability
forecast for all the events?
e. Who (by Response ID) has the lowest total squared difference?
What is that lowest total squared difference?
f. Why do you think you are asked to square the differences before you add them up
(rather than just adding up the differences)?
113
Another way to examine performance is to round the probabilities assigned and to see how well
the rounded values match the outcomes.
2) Rounding Probabilities
Round all the probabilities in the data set to 0 or 1. Use the usual rounding rule: round
probabilities of 0.5 and higher to 1; round probabilities of under 0.5 to 0.
a. After the rounding, how many probabilities are 0?
b. For the probabilities that were rounded down to 0, what percentage of those
forecasts had an outcome of 1 (did occur)?
c. After the rounding, how many probabilities are 1?
d. For the probabilities that were rounded up to 1, what percentage of those

forecasts had an outcome of 1 (did occur)?
e. If we were perfect forecasters, what would the answers to questions b and d

be?
f. How many people were perfect forecasters based on their rounded

probabilities? That is, once the probabilities are rounded, how many people
predicted all ten events?
114
Selected Answers
Part 1
1) a) True: The probability assigned to i) has to be greater than or equal to the probability
assigned to ii) because if it snows 3 inches or more, it also snowed 1 inch or more.
b) True: The probability assigned to ii) has to be greater than or equal to the probability
assigned to iii) because if it snows 5 inches or more, it also snowed 3 inches or more.
c) They should sum to 100%.
2) a) 10 b) 7, c)5
Part 2
1) 702 (out of 851 people who made forecasts)
2a) TRUE. If the stock is down 5% or more, it must also be down 1% or more. So, Event 1 is a
subset of Event 2.
2b) FALSE.
2c) TRUE. Assuming that the stock was still being traded on the settlement date, there is no
option remaining for the percent change in the close cost.
Part 3
1a)
%&
$
!! = @A#!,# − B# C
#'%
1b) 0 is the lowest possible value for total squared difference. The total squared difference would
be 0 if someone only assigned probabilities of 0 or 1 for each event and was perfectly correct.
1c) 10 is the highest possible value for the total squared difference. The total squared difference
would be 10 if someone only assigned probabilities of 0 or 1 for each event and was incorrect for
every event.
1e) Multiple Response IDs have the lowest total squared difference of 0.
2a) 4451 of the rounded probabilities are 0.
2b) 37.81%
2c) 4059 of the rounded probabilities are 1.
2d) 63.37%
2e) If we were perfect forecasters, then for b) 0% of the forecasts rounded to 0 would have
occurred and for d) 100% of the forecasts rounded to 1 would have occurred.
2f) There were 23 perfect forecasters based on their rounded probabilities. (Response ID:
Multiple Response IDs)
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116
Module 10 - Sales at the Sandwich Shop
Background
• In this module, you will look at how transaction data from a sandwich shop can be used
for analyzing performance and planning inventory. For this module, you may find the
aggregating effect of a Pivot Table quite useful. If you are unfamiliar with the Pivot
Screencast Table tool, first view the screencast Pivot Tables.
1. The “POS Data” tab contains a list of one full month of transaction data from the
point-of-sale system for the sandwich shop. Each transaction is recorded in a row
that identifies the product name, the date of sale, the transaction number, the
product type, and the price.
2. The “Ingredients” tab provides a recipe matrix for the sandwiches sold by the
shop.
3. The “Current Inventory” tab contains a list of the sandwich ingredients recorded
in stock as of the end of the month presented in the POS data.
Part 0: Matrix Multiplication

Matrices have many applications. Any array of values can be considered a matrix. By using the
arithmetic of matrices, values of two separate matrices can be combined to form a new matrix,
the values of which have a particular (and useful) meaning.
1) To begin this Module, view the screencast Matrix Multiplication.
Screencast
Part 1: Graphing Point-of-Sale (POS) Data

On the tab called POS Data, you have one month of transaction data from the POS system
(point-of-sale system, also known as the “cash register”).
1) Revenue per day
a. What was the total revenue on July 8?
b. Create a graph of daily revenue.
2) Number of items per day

a. How many items were sold on July 15?
b. Create a graph of items sold per day.
3) What patterns do you notice in the graphs?
117
Part 2: Understanding the Product Mix
1) How many different product types does the sandwich shop sell?
2) How many different desserts?
3) How many different sandwiches?
4) What is the most expensive sandwich?
5) Create a graph that shows the frequency (number of units sold) for each of the products
sold on July 1.
6) What was the most popular product sold on July 1? How many units of that product were
sold?
7) What percentage of the sandwiches sold during July were Grilled Cheese sandwiches?
8) Which product(s) brought in the most revenue on July 1?
9) How much revenue did the Turkey Club sandwich bring in on July 10?
10) Create a graph that shows the top five products in terms of their percentage of total
revenue for the month.
118
Part 3: Ingredient Usage Per Day
1) Create a table showing the number of each sandwich type sold on July 5. Fill in the
missing cells below.
Sandwich Number Sold

BLT 11
Chicken Salad
Grilled Cheese
Ham and Cheese

Italian Sub
Meatball Sub 15
Philly Cheesesteak
Roast Beef
Tuna Salad
Turkey Club 16
Vegetarian
119
2) Using the information under the Ingredients tab, create a table showing the amount of
each ingredient used on July 5. Fill in the missing cells below
Ingredient Units Amount Used July 5

Bacon OZ 38
Bread
(Slice) EACH
Cheese OZ
Chicken OZ
Ham OZ
Lettuce OZ
Meatballs OZ
Onions OZ
Peppers OZ
Roast Beef OZ 84
Roll EACH
Salami OZ 54
Sprouts OZ
Tomato OZ
Tuna OZ 12
Turkey OZ 32
120
Part 4: Ingredient Usage Inventory
1) Create a table showing the number of each sandwich type sold during the 7-day period
from July 25-31. Fill in the missing cells below.
Sandwich Number Sold

BLT 112
Chicken Salad
Grilled Cheese
Ham and Cheese
Italian Sub
Meatball Sub 78
Philly Cheesesteak
Roast Beef
Tuna Salad
Turkey Club 105
Vegetarian
121
2) Create a table showing the amount of each ingredient used during the 7-day period July
25-31.
Then, use those amounts as an estimate (forecast) for the ingredient usage for the
subsequent week ( August 1-7). From that forecasted usage, calculate how much of each
ingredient you would need to order to have enough on hand to meet that forecasted
demand. The Current Inventory tab shows the inventory on hand for each ingredient on
the morning of August 1. Fill in the missing cells below.
Ingredient Units Amount Used July 25-31 Amount To Order

Bacon OZ
Bread (Slice) EACH 1058
Cheese OZ 680 480
Chicken OZ 47 0
Ham OZ 332 150
Lettuce OZ 557 377
Meatballs OZ 312 267
Onions OZ 335 236
Peppers OZ
Roast Beef OZ
Roll EACH
Salami OZ
Sprouts OZ
Tomato OZ
Tuna OZ
Turkey OZ
122
Part 5: Rolling Totals
Ordering based on the last seven days doesn’t take into account week-to-week fluctuations. You
will look at rolling totals (moving totals) to understand the fluctuations in usage.
Here is a graph that shows the seven-day rolling total of Meatballs usage. The graph shows how
many Meatballs were used in orders placed in each seven-day period ending on the listed date.
For example, during the period from 7/12 to 7/18, the sandwich shop used 344 ounces of
Meatballs.
Seven Day Rolling Total of Meatball Usage

380
370
360
350
340
Ounces
330
320
310
300
290
280
270
7/7/17
7/8/17
7/9/17
7/10/17
7/11/17
7/12/17
7/13/17
7/14/17
7/15/17
7/16/17
7/17/17
7/18/17
7/19/17
7/20/17
7/21/17
7/22/17
7/23/17
7/24/17
7/25/17
7/26/17
7/27/17
7/28/17
7/29/17
7/30/17
7/31/17
7-Day Period Ending on This Date
1) Looking at the chart above, approximately how many ounces of Meatballs were used in
the 7-day period ending on 7/10?
1) Create a graph like the one above that shows the 7-day rolling total for usage of Roll.
Hint: For the seven days ending 7/12, 302 ounces were used.
123
Now you are going to revisit the order quantities you calculated in Part 4 and take into account
fluctuations. To do so, use the data on the Current Inventory tab as well as the 7-day rolling
totals of usage of all of the ingredients (not just Roll and Meatballs).
2) How much of each ingredient would you need to order on 8/1 to have enough on hand to
meet the highest 7-day rolling total in the month of July? Fill in the missing cells below.
Amount To Order to Meet the Highest 7-Day

Ingredient Units
Rolling Total Usage
Bacon OZ 194
Bread
818
(Slice) EACH
Cheese OZ 541
Chicken OZ
Ham OZ
Lettuce OZ
Meatballs OZ
Onions OZ
Peppers OZ
Roast Beef OZ
Roll EACH
Salami OZ
Sprouts OZ
Tomato OZ
Tuna OZ 0
Turkey OZ 150
124
Part 6: Rolling Averages vs. Daily Actual Usage
In the previous part, you calculated rolling totals: the total usage of each ingredient over a 7-day
period. In this part, you will calculate rolling averages (moving averages).
Here’s a graph that shows the 7-day rolling average for Roll usage and the actual daily usage of
Roll for 7/7-7/31.
Seven Day Rolling Average of Roll Usage

vs.
Actual Daily Usage
90.00
80.00
70.00
60.00
Ounces
50.00
40.00
30.00
20.00
10.00
0.00
7
7
17
17
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
7/
9/
11
13
15
17
19
21
23
25
27
29
31
7/
7/
7/
7/
7/
7/
7/
7/
7/
7/
7/
7/
7/
For Rolling Average: 7-Day Period Ending on This Date
For Actual Usage: Date of Usage
1) Is the dashed line the rolling average or the actual daily usage? How can you tell? Hint:
You should be able to answer this question without doing any calculations with the data.
2) Generate the same type of graph for Ham. Hint: for the seven days ending 7/11, 40.86
ounces was the average usage, while actual usage was 47 ounces.
125
Selected Answers
Part 1
1a) $461.65
1b)
Daily Revenue, July

$2,000.00
$1,800.00
$1,600.00
$1,400.00
$1,200.00
$1,000.00
$800.00
$600.00
$400.00
$200.00
$0.00
7
7
17
17
17
17
17
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
1/
3/
5/
7/
9/
11
13
15
17
19
21
23
25
27
29
31
7/
7/
7/
7/
7/
7/
7/
7/
7/
7/
7/
7/
7/
7/
7/
7/
2a) 214
Part 2
1) 4
2) 6
3) 11
4) Philly Cheesesteak
5) The top part of the graph, just showing the top five:
Number Sold July/1
Fritos
Chocolate Chip Cookie
Potato Chips
Turkey Club
Roast Beef
0 5 10 15 20 25
126
6) Fritos, 21
7) 9.45% of the sandwiches during the month were Grilled Cheese
8) There are multiple products with the most revenue ($90.87).
9) The Turkey Club sandwich brought in $153.78 on July 10.
10) Graph:
Top Five Products as Percentage of Total Month

Revenue
0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00%
Turkey Club
Italian Sub
Roast Beef
BLT
Meatball Sub
Part 5
1) The exact answer is 316 ounces.
2)
Seven Day Rolling Total of Roll Usage

390
370
350
Ounces
330
310
290
270
7/7/17
7/8/17
7/9/17
7/10/17
7/11/17
7/12/17
7/13/17
7/14/17
7/15/17
7/16/17
7/17/17
7/18/17
7/19/17
7/20/17
7/21/17
7/22/17
7/23/17
7/24/17
7/25/17
7/26/17
7/27/17
7/28/17
7/29/17
7/30/17
7/31/17
7-Day Period Ending on This Date
127
Part 6
2)
Seven Day Rolling Average of Ham Usage

vs.
Actual Daily Usage
100.00
80.00
Ounces
60.00
40.00
20.00
0.00
17
17
7
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
/1
7/
9/
11
13
15
17
19
21
23
25
27
29
31
7/
7/
7/
7/
7/
7/
7/
7/
7/
7/
7/
7/
7/
For Rolling Average: 7-Day Period Ending on This Date
For Actual Usage: Date of Usage
128
Final Exam Module
Exam Information
The exam will have 25 questions.
Part 1: Sales Projections for a Candy Company

A candy company is planning to introduce a new product. They have built a spreadsheet model
to predict sales for the first seven years. There are four tabs in the spreadsheet: Price and Cost,
Units, Operating Costs, and Overall Financial Model.
Price and Cost Tab
Under this tab, you will find the following information:
• Wholesale Price: This is the per unit price the candy company plans to charge the
convenience, grocery, and mass merchandise stores (referred to as “mass stores”).
• Per Unit Cost: This contains the cost structure for production. Notice that above a certain
annual volume, the per-unit cost of production drops.
Units Tab
This tab contains information used to estimate number of units sold in three steps:
• Step 1: Estimate the number of stores in each of three distribution channels: convenience
stores, grocery stores, and mass stores. The estimates for Years 1 and 2 are numbers
based on the candy company’s sense of how current negotiations with the stores are
going. Estimates for Years 3-7 are based on the growth rate given in the spreadsheet. You
can display the store counts as whole numbers in your sheet, but don’t actually round the
values.
• Step 2: Estimate the number of units each type of store will sell annually using the
Annual Units per Store by Channel given in the spreadsheet.
• Step 3: Add up the total units across the three store types (convenience, grocery, and
mass).
Operating Costs Tab

This tab contains information for predicting operating costs. Like estimating the number of
stores, this value is directly estimated for Years 1 and 2. Use the growth rate given in the
spreadsheet to calculate operating costs for Years 3-7.
Overall Financial Model Tab

This tab contains an empty table which you will use to construct the financial model. The values
for Total Units, Wholesale Price, and Operating Costs can be filled in on this sheet with
references to other tabs.
The Cost of Goods is the total cost of producing the number of units needed for the year. Write a
formula to calculate this cost. Remember to account for the change in per unit cost above the
given volume (see Price and Cost tab for details).
The other values can be calculated as follows:
• Revenue = Total Units * Wholesale Price
• Operating Income = Revenue – Cost of Goods – Operating Costs
129
Exam Preparation for Part 1
To prepare for the exam, fill in the financial model using the estimates given for initial levels of
units and costs, for growth rates, and for costs.
To check your work once you have done this, here are the correct values for the Overall
Financial Model.
Financial Model
Year Year Year Year Year Year Year
1 2 3 4 5 6 7
Total Units 280,000 697,500 760,275 828,700 903,283 984,578 1,073,190
Wholesale Price $0.35 $0.35 $0.35 $0.35 $0.35 $0.35 $0.35
Revenue $98,000 $244,125 $266,096 $290,045 $316,149 $344,602 $375,617

Cost of Goods $58,800 $130,675 $138,836 $147,731 $157,427 $167,995 $179,515
Operating Costs $60,000 $110,000 $115,500 $121,275 $127,339 $133,706 $140,391
Operating Income -$20,800 $3,450 $11,761 $21,039 $31,383 $42,902 $55,711
Question Type 1: Calculating and Understanding the Model
Sample questions:
1) How much would it cost to produce 300,000 units in a year? Report your answer rounded
to the nearest dollar. NO CENTS.
2) How much would it cost to produce 710,000 units in a year? Report your answer rounded
to the nearest dollar. NO CENTS.
3) How many grocery stores will carry the new product in Year 6? Report your answer
rounded to the nearest whole number.
4) How many units will be sold in convenience stores in Year 7? Report your answer
rounded to the nearest whole number.
5) How many total units will be sold in Year 5? Report your answer rounded to the nearest
whole number.
6) Using the growth rate in the spreadsheet for operating costs, find the estimated operating
costs in Year 6. Report your answer rounded to the nearest dollar. NO CENTS.
7) In what years does the company project enough demand to take advantage of the lower
per unit cost?
8) Fill in the blank with the correct answer below. The growth rate for operating costs in
Years 3-7 is _____ for the dashed line than for the solid line.
130
a. Higher
b. Lower
Question Type 2: Mathematical Notation

Notation questions will be asked as multiple choice. Sample questions:
1) If M mass stores carry the new product in Year 2 and the annual growth rate in the
number of stores carrying the product is r, write an expression for the number of mass
stores carrying the product in Year 3.
2) If M mass stores carry the new product in Year 2 and the annual growth rate in the
number of stores carrying the product is r, write an expression for the number of mass
stores carrying the product in Year 4.
3) Let uC denote the number of units sold annually per convenience store, let C be the
number of convenience stores carrying the product in Year 2, and let r be the annual
growth rate in the number of stores carrying the product. Using summation notation,
write an expression for the total number of units sold in convenience stores from Year 2
to Year 7.
131
Question Type 3: Sensitivity to Assumptions
Sample questions:
1) What is the highest possible growth rate in operating costs that will result in non-negative
Operating Income in Year 4? Report your answer as a percentage rounded to exactly two
decimal places, e.g., 49.0185% would be entered as 49.02%, not 0.49.
2) Remember to RESTORE the original growth rate in operating costs before

answering this question. What is the lowest growth rate in number of stores carrying the
product that will result in non-negative Operating Income in Year 7? Report your answer
as a percentage rounded to exactly two decimal places, e.g., 49.0185% would be entered
as 49.02%, not 0.49.
You should be able to answer these questions numerically and create and/or recognize graphs
that represent the answers to these questions.
Question Type 4: Extrapolation of the Model

Remember to RESTORE the original growth rates in operating costs and number of stores
before answering these questions.
Sample questions:
1) Extend the model to Year 10. What is the Operating Income in Year 10? Report your
answer rounded to the nearest dollar. NO CENTS.
2) Extend the model to Year 12. Suppose the growth in number of stores carrying the
product is 15% annually instead of 9%. What would the Operating Income in Year 12 be,
in that case? Report your answer rounded to the nearest dollar. NO CENTS.
You should be able to answer these questions numerically and create and/or recognize graphs
that represent the answers to these questions.
Question Type 5: Other Questions About and Extensions to the Model

The list of possible extensions to the model includes another distribution channel, a change in the
production cost structure (e.g., upfront and per-unit costs), a change in the wholesale price, a
change in Year 2 estimates, and/or a change in other information you have been given about the
model.
132
Part 2: Survey Data
Part 2 is completely independent from Part 1.
The candy company collected survey data about people’s snacking habits. The responses from
the survey on are the tab called “Survey Responses. The columns are explained on the tab called
“Explanations”. For the final exam, you will download a file with similar, but not identical,
survey data.
In the sample questions below, there are helpful hints in parentheses. Terms like
agree_statement_3 and channel_1 tell you which column in the data set to look at. Hints like
(response = 5) tell you which values to look for within a cell.
Read the questions carefully. Some ask for a count (how many?) and some ask for a percentage.
Sample questions:
1) How many people in the data set responded that their gender was Male? Your answer
should be a whole number.
2) What percentage of all respondents strongly agreed (response = 5) with the statement “I
wish there were more healthy snack options” (column title = agree_statement_3)? Report
your answer as a percentage rounded to exactly two decimal places, e.g., 49.0185%
would be entered as 49.02%, not 0.49.
3) What is the correlation between agree_statement_3 and agree_statement_5? Report your

correlation as a decimal, not as a percentage. Round to exactly two decimal places. If the
value is 0.719, enter 0.72 as your response, not 72%. If the value is -0.040, enter -0.04 as
your response.
4) What percentage of all respondents buy snacks from a supermarket (column title =
channel_1)? Report your answer as a percentage rounded to exactly two decimal places,
e.g., 49.0185% would be entered as 49.02%, not 0.49.
5) What is the average daily snacking frequency (column title = frequency) for respondents
who answered that they DO shop for snacks in drugstores (column title = channel_5)?
Report your answer rounded to exactly two decimal places. If the value is 2.1 or 2.104,
enter 2.10 as your response.
6) For the people who are aged 30 to 39 in these survey results, how many of them say that
calorie content (column title = importance_reason_1) is either important (response = 4) or
very important (response = 5) as a reason for choosing a snack? Your answer should be a
whole number.
133
Answers to the Sample Questions
Part 1
Type 1
1) $63,000
2) $132,300
3) 92
4) 588,524
5) 903,283
6) $133,706
7) Years 2-7
8) Higher
Type 2
1) M(1+r) or M+Mr
2) M(1+r)2 or M(1+r)(1+r) or M+2Mr+ Mr2
3) ∑)!'$ E( F(1 + G)!*$ (other variations are possible)
Type 3
1) 13.74%
2) 3.29%
Type 4
1) $103,239
2) $401,612
Part 2
1) 576
2) 30.48%
3) -0.18
4) 85.78%
5) 2.12
6) 156
134
Course Learning Objectives
0. Determine the mathematical operations needed to guide decisions in business contexts.
1. Recognize situations in which unit conversions are useful and apply the conversions.
Sample applications:
Skill Mod # Mod Name
Convert currencies using foreign exchange rates. 2 Foreign Exchange
Determine number of whole shares of a stock that can be purchased 3 Stock Prices
with an amount of money for a given stock price.
Make adjustments in stock prices to account for dividends and stock 3 Stock Prices
splits.
Find total ingredient usage for an order of different quantities and 10 Sandwich Shop
types of sandwiches.
Detailed objectives:
1.1 Calculate the conversion factor and then apply it.
1.2 Apply multiple conversions.
1.3 Apply systematic sets of conversions using matrix multiplication.
1.4 Apply adjustments to conversions to account for whole number constraints.
2. Understand and describe how a quantity is changing over time.
Graphically show the time trend of a currency exchange rate and 2 Foreign Exchange
identify the dates with the strongest and weakest positions relative to
another currency.
Graphically show the actual vs. projected time trend of stock prices. 3 Stocks
For two dates, calculate the percentage change in a stock price and the 3 Stocks
Compound Annual Growth Rate (CAGR). Interpret those calculations.
Calculate forecasts of costs, revenues, and net income; build graphs to 11 Sales Forecasting
show trends; interpret the graphs.
2.1 Calculate and interpret positive and negative percentage change.
2.2 Calculate and interpret annualized percentage change.
2.3 Calculate and interpret positive and negative absolute change.
2.4 Extrapolate linear and geometric trends.
135
3. Understand and describe how two quantities change in tandem.
Use a scatter plot and the correlation coefficient to analyze the 2 Foreign Exchange
relationship between two currency exchange rates.
Use a scatter plot and the correlation coefficient to analyze the 6 OJ
relationship between price and quantity.
Investigate which questions on a survey have correlated responses. 7 Caffeinated
Products
Perform sensitivity analysis in a spreadsheet model: understand and 4, 11 Taxes, Sales
communicate how the inputs affect the outputs. Forecasting
3.1 Calculate and interpret correlation coefficients.
3.2 Understand and communicate how model inputs affect model outputs.
4. Find values that solve an equation or system of equations or that optimize an

expression. Use graphical, numeric, and symbolic approaches to find the answers.
Solve for the exchange rate that yields a given margin. 2 Foreign Exchange
Find the income at which taxes owed are equal under two tax plans. 4 Taxes
Find the equation of a line that best fits a cloud of points. 6 OJ
Find the quantity at which two production technologies have equal 8 Kickstarter
costs.
Find the price that optimizes profit for a given estimated demand 6, 8 OJ, Kickstarter
curve.
Calculate forecasting error. 9 Forecasting
Revisited
4.1 Recognize, write, and solve linear equations and systems of linear equations.
4.2 Solve equations of one variable.
4.3 Check solutions using multiple methods: numeric, symbolic, and graphical.
4.4 Find optimal values in various settings with discrete data.
4.5 Understand total squared difference as a measure of fit and find values that minimize it.
136
5. Understand and use mathematical notation. Be able to translate a symbolic expression
to a spreadsheet model. Make the connections between symbolic expressions and
graphs.
Identify the inputs and implement the expression for CAGR. 3 Stocks
Write piecewise linear functions to represent taxes owed under the 4 Taxes
U.S. personal income tax code.
Use summation notation to represent total costs, revenues, or units 11 Sales forecasts
over multiple periods.
5.1 Write and interpret functional notation, including piecewise definitions.
5.2 Write expressions that model linear relationships.
5.3 Write expressions that model aggregation, including summation notation (sigma
including an index).
5.4 Write expressions that model linear and geometric growth.
5.5 Translate verbal descriptions into mathematical expressions.
5.6 Interpret relationships presented graphically.
6. Select metrics to summarize data, calculate those metrics, and interpret them.
Find averages and weighted averages of survey responses or campaign 7, 8 Caffeinated
performance metrics. Products,
Kickstarter
In survey response data, determine whether an average of responses 7 Caffeinated
has a clear interpretation. Products
Build graphs to show the distribution of survey responses. 7 Caffeinated
Products
Combine logical rules with averaging to find the average funds raised 8 Kickstarter
over a set of crowdsourcing projects.
Calculate moving averages of ingredient usage to place orders to cover 10 Sandwich Shop
anticipated demand.
6.1 Find absolute frequencies (tallies or counts of observations that meet certain criteria).
6.2 Find relative frequencies (percentages from criteria-based tallies).
6.3 Convey data summaries by designing graphs and tables.
6.4 Calculate averages and weighted averages.
6.5 Calculate rolling (moving) totals and averages.
6.6 Interpret binary indicator variables (e.g., data flagged as 1 and 0) and their averages.
137
7. Use probabilities to express uncertainty about events.
Identify consistent and inconsistent sets of probability assessments. 9 Forecasting
Evaluate expected values for a reference metric for a set of scenarios 8 Kickstarter
with assigned probabilities.
7.1 Check for consistency of a set probability assessments.
7.2 Derive total probabilities from verbal descriptions of situations.
7.3 Calculate expected values and understand and interpret their meaning.
8. Use Excel efficiently to navigate, explore, analyze, and visualize large data sets.
Perform analyses on twenty years of daily stock price data. 3 Stocks
Analyze survey data. 7 Caffeinated
Products
Compare success rates of subgroups of a database of thousands of 8 Kickstarter
crowdfunding projects.
Identify time patterns in retail transaction data. 10 Sandwich Shop
8.1 Use cell references in formulas.
8.2 Write formulas that can be dragged and copied.
8.3 Integrate data sources using lookup functions.
8.4 Use logical statements within functions.
8.5 Use the “what-if” capabilities in Excel.
8.6 Select, create, and annotate graphs.
138
Module 1 (Intro) Learning Outcomes:
Mathematical Skills:
Translate verbal descriptions into equivalent mathematical expressions. (5)
Write expressions that represent percentage reductions. (2,5)
Relate tabular data and graphical data. (5)
Excel Skills:
Use the “=” symbol and other operators (+,-,*,/) to perform basic calculations.
Reference input cells to perform calculations. For example, the equation in cell B3 to
calculate 5*4 would be “=A1*A2” (cell-referencing) as opposed to “=5*4” (hard-
coding).
Understand relative and absolute cell references (proper use of the $ sign): for every row
and column reference, know whether the $ must be used, must be omitted, or can either
be used or omitted.
Applications
Write expressions for revenue and profit given verbal explanations of what they
represent.
Efficiently calculate revenue and profit based on demand projections at different price
points.
Module 2 (Foreign Exchange) Learning Outcomes:

Convert units using conversion ratios. (1)
Calculate percent change (increase or decrease) and interpret its meaning. (2)
Calculate the correlation coefficient and interpret its value. (3)
Interpret time trend (line) charts and scatter plots. (2, 5)
Translate verbal descriptions into equivalent mathematical expressions. (5)
Solve an equation of a single variable. Solve symbolically and confirm solution
numerically and graphically. (4)
Excel Skills:
Continue to use relative and absolute cell references (proper use of the $ sign).
Be able to predict how a formula will change when dragged or copied to another cell.
Be able to freeze panes and resize columns.
Recognize what ##### in a cell means.
139
Use the CORREL() function to find the correlation coefficient between two variables.
Use the SUM() function to add a list of numbers.
Generate various graphs in Excel (scatter, line, etc.).
Begin to learn common keyboard shortcuts:
o Command+shift+down to highlight (use Ctrl instead of Command on Windows).
o Command+c to copy, Command+v to paste (Ctrl+c, Ctrl+v on Windows).
o Hold Command to keep something highlighted.
Change cell formats (percent, decimal value, display settings, color, etc.) as appropriate,
but recognize that the underlying value does not change when the format changes.
Applications
Map increases and decreases in exchange rates to the idea of stronger and weaker
currencies.
Analyze trends in currencies graphically: trends over time and co-movement between two
exchange rates.
Use bid and ask rates appropriately to calculate value of currencies exchanged.
Calculate profit margin with revenue and costs in two different currencies.
Find an exchange rate that yields a specified profit margin.
Module 3 (Stocks) Learning Outcomes:

Write expressions that correctly use the order of operations (PEMDAS). (5)
Rounding Down. (5)
Understand the difference between absolute and percent gain (growth) and loss and
calculate these values. (2)
Apply growth rates in one quantity (e.g., Adjusted Close Price) to another quantity (e.g.,
initial investment value). (2)
Calculate, interpret, and apply ratios (e.g., Adjusted Close Price to Close Price). (1)
Understand how combinations of percentage gains and losses adjust prices (e.g., up 10%,
down 10%). (2)
Solve an equation of a single variable. Solve symbolically and confirm solution
numerically and graphically. (4)
Calculate and interpret Compound Annual Growth Rate (CAGR). (2)
Perform geometric extrapolations. (2)
Excel Skills:
Continue to use relative and absolute cell references (proper use of the $ sign).
Use VLOOKUP() to find a value from an array given a unique identifier. (Advanced but
more flexible version for look-ups: composition of INDEX() and MATCH()).
Use FLOOR(), ROUNDDOWN() or similar function to round a value down.
140
Use MAX() and MIN() to find the largest or smallest value in a set.
Use logical formulas like IF().
Use COUNTIF()/COUNTIFS() to count data given certain criteria.
Use COUNT() to count cells containing a number (COUNTA() to include alphanumeric
values).
Change format of displayed values (e.g., dates displayed as numbers to short date).
Graph data and add a trend line as appropriate.
Continue to use common keyboard shortcuts:
o Command+shift+down to highlight
o Command+c to copy, Command+v to paste
o Hold command to keep something highlighted
o Copy formulas down to fill a column (use plus sign and double click)
Begin to understand the meaning of various Excel errors (####, #NA, #VALUE, #DIV/0,
etc.)
Use parentheses in equations to ensure proper order of operations in Excel (PEMDAS).
Begin to be able to structure Excel spreadsheets in an organized manner.
Graph multiple series on one chart.
Applications:
Perform calculations on stock prie data (open, close, daily range, daily change, etc.)
Analyze graphs of stock prices over time.
Understand the difference between adjusted close and close prices.
Calculate value of stock using percent growth based on adjusted close values.
Determine the value of an investment given an initial dollar investment or number of
shares purchased.
Find the value of an investment on a specified date given a purchase date.
Understand and apply the concept of Dollar-Cost Averaging.
Project future prices using historical CAGR.
Module 4 (Taxes) Learning Outcomes:

Write simple (two-part) piecewise linear functions. (5)
141
Identify patterns to extend a simple (two-part) piecewise linear function to more complex
setting (five or more parts). (5)
Interpret the slope, the kinks, and the asymptote in piecewise linear functions, both in
functional notation and in a graph. (5)
Interpret the key features in graphs (kinks, asymptotes) of non-linear functions, beyond
piecewise linear. (5)
Find and interpret the intersection point(s) of non-linear functions, both graphically and
numerically. (4)
Excel Skills:
Structure Excel spreadsheets in an organized manner.
Write formulas that reference cells instead of hard-coding values.
Use previously introduced logical functions such as IF(), MAX(), and MIN().
Explore the use of more sophisticated logical expressions with AND() and OR().
Write draggable functions that allow you to easily extend a pattern of calculations.
Use the Data Table tool to explore the relationship between model inputs and outputs.
Create line graphs.
Refine graphs by using settings for the labels, axes, data series, etc.
Use the Goal Seek tool to find a target value of a calculated cell.
Use the Goal Seek tool to find points of intersection of two functions.
Applications:
Calculate taxable income from total income and other appropriate inputs,
Calculate tax owed and percentage of income paid in taxes for a simple bracketed tax
code.
Calculate tax owed and percentage of income paid in taxes for a realistically complicated
tax code.
Interpret the relationship between total income and percentage of income paid in taxes.
Module 5 (Affiliate Commissions) Learning Outcomes:

Write simple (two-part or three-part) piecewise linear functions. (5)
Write expressions that represent fixed and percentage reductions. (5)
Decompose a model with many parts into set of sub-models and then pull together the
parts to find the overall value. (5)
Interpret the slope, the kinks, and the asymptote in piecewise linear functions, both in
functional notation and in a graph. (5)
Find and interpret the intersection point(s) of non-linear functions, both graphically and
numerically. (4)
142
Excel Skills:
Build a spreadsheet independently, with no starter sheet provided.
Structure Excel spreadsheets in an organized manner, amenable to changes in input
values and extension of models.
Copy and rename sheets in Excel.
Applications:
Calculate affiliate commissions.
Compare compensation structures between plans.
Identify when a plan is progressive or regressive.
Module 6 (OJ) Learning Outcomes:

Write the equation of a line for a given slope and intercept. (5)
Find the equation of a line using two points. (4, 5)
Interpret a linear equation. (5)
Interpret the correlation between two variables (e.g., price and quantity). (3)
Graph scatterplots and trend lines and understand what they represent. (2, 3, 5)
Understand the difference between estimated and actual values and calculate them as
needed. (4)
Calculate the sum of squared differences and understand what it represents. (4)
Fit a line that minimizes the sum of squared differences on given data. (4)
Understand what a best-fit line represents. (4)
Understand the concept of an optimal value as a value that minimizes or maximizes an
expression. (4)
Numerically estimate an optimal value of a quadratic function. (4)
Excel Skills:
Manipulate filters to display desired information.
Understand the purpose and use of the SUBTOTAL() function, but no need to code it.
Add data series to existing graphs.
Add trendlines to graphs.
Add in and use “Solver.”
Use Excel to find the equation of a best-fit line (LINEST() or SLOPE() and
INTERCEPT()) for a set of points.
Applications:
Calculate actual revenue, estimated revenue, actual profit, estimated profit.
Use price and quantity data to estimate a demand curve.
Use a demand curve and a per-unit cost to find a profit-maximizing price.
143
Module 7 (Caffeinated Products) Learning Outcomes:
Write expressions that correctly use the order of operations (PEMDAS). (5)
Differentiate between relevant and extraneous data. (0)
Understand, calculate, and interpret weighted sums and averages. (6)
Understand and calculate averages based on subsets of data (e.g., by gender). (6)
Scale data as appropriate (e.g., assigning probabilities to purchase intent responses or
numeric values to ordinal frequency responses). (1, 6)
Understand the conditions needed for equivalence between two sets of scaling factors. (6)
Create and understand how to use frequency tables. (6)
Use averages and (cumulative) percentages as performance metrics. (6)
Excel Skills:
Freeze panes, color code, and resize columns in ways that enhance usability of the
spreadsheet.
Use keyboard shortcuts to select, fill, copy, paste items as needed.
Use relative and absolute cell references (proper use of the $ sign).
Use parentheses in equations to ensure proper order of operations (PEMDAS).
Use AVERAGE() to calculate the average of a set of data.
Use AVERAGEIF()/AVERAGEIFS() to calculate the average of values that meet
specified criteria.
Use COUNTIF()/COUNTIFS() to count data given certain criteria.
Structure Excel spreadsheets in an organized manner.
Transpose data or tables to facilitate dragging of formulas.
Use SUMPRODUCT() to multiply the arrays together and return the sum of the products.
Generate various graphs (column charts, scatter plots, etc.) and manipulate their elements
(labels, ranges of axes, etc.).
Understand the meaning of various Excel errors (####, #NA, #VALUE, etc.) and able to
debug code if necessary.
Anticipate tables/calculators that may be needed given a sample question that may be
asked.
Understand how to create new columns to “flag” items in a data set.
Write logical statements using IF().
Nest logical statements, e.g., IF(), OR(), AND() within IF().
Able to seek out new functions to use that may not have been explicitly discussed in
class.
Applications:
Understand and analyze survey data.
144
Calculate estimates of purchase intent, frequency, and uniqueness to compare appeal of
multiple concepts.
Understand what a top-two boxes score is and what it represents.
Understand why we consider removing “don’t know” from calculations (normalizing
distributions to exclude responses) and how to do that.
Module 8 (Kickstarter) Learning Outcomes:

Understand what it means to use a 0/1 indicator to describe “success” and interpret the
average value of a 0/1 indicator as a percentage of successful outcomes. (6)
Calculate weighted averages. (6)
Write linear expressions and interpret the slope and intercept. (5)
Solve for the intersection of two lines. (4)
Represent the intersection of two lines graphically. (4)
Use multiple solution approaches—equations, graphs, numerical values—to check for
correctness. (4)
Numerically find an optimal value (e.g., price) given data to calculate an objective
function (e.g., profit). (4)
Derive total probabilities from verbal descriptions of situations. (7)
Apply (scenario) probabilities to find probability-weighted averages (aka expected
values). (7)
Excel Skills:
Use previously learned functions (COUNTIFS(), AVERAGEIFS(), VLOOKUP() etc.) as
needed.
Seek out new functions to use that may not have been explicitly discussed in class as
needed and apply previously learned Excel skills to new problems.
Use SUMIF()/SUMIFS() to calculate the sum of an array given specific criteria.
May use YEAR() function to extract the year from a date string.
Remove duplicates from a set of data.
Create drop downs using Data Validation to help with speed and accuracy of data entry.
Use the Data Table tool.
Create graphs.
Applications:
Work with a large crowdfunding data set to calculate performance metrics (e.g.,
probability of success, amount raised) based on different criteria (e.g., year, project type,
funding goal).
Use data on comparable projects to estimate an amount raised per backer.
145
Find the required number of backers of a project to reach a funding goal, given an
estimate of amount raised per backer.
Write expressions for total costs that have both a fixed component and a variable
component (based on quantity).
Find the breakeven quantity of two production options.
Find an optimal price to charge based on survey data and cost estimates.
Use scenario analysis with a model (baseline, pessimistic, and optimistic scenarios) to
account for uncertainty.
Module 9 (Forecasting Revisited) Learning Outcomes:

Understand probabilities as forecasts about binary events. (7)
Understand what it means for a probability to be logically consistent. (7)
Calculate percent change (growth/loss). (2)
Ensure logical consistency of a set of probabilities. (7)
Interpret binary indicator variables (0/1) to represent outcomes of uncertain events. (6)
Use and understand total squared difference as a measure of fit. (4)
Tally observations that meet criteria (e.g., a value falls in a range and/or an associated
variable has a certain value). (6)
Excel Skills:
Create and refine histograms and column charts.
Organize a spreadsheet and use relative and absolute references so that a series of related
calculations can be accomplished by dragging the formula.
Applications:
Calculate and understand total squared difference as a measure of forecasting accuracy.
Identify the best forecasters in the group.
Confirm that set of related probabilities are logically consistent.
Module 10 (Sandwich Shop) Learning Outcomes:

Understand the difference and how to find absolute frequency (counts) and relative
frequency (percentages) and be able to calculate them both. (6)
Translate assortment quantities into component quantities. (1)
Understand and perform matrix multiplication 6. (1)
Understand and calculate rolling totals. (6)
Understand and calculate rolling (moving) averages. (6)
146
Excel Skills:
Use MMULT() to multiply two matrices.
Create and use Pivot Tables to display data in a useful way.
Adjust options in Pivot Tables to change how information displays.
Graph for absolute and relative frequency.
Graph line/trend charts with multiple data series, including observed data plus moving
averages.
Applications:
Efficiently summarize product sales and ingredient data by time period, product type, and
product.
Use historical orders to forecast anticipated future quantities.
Determine ingredient order requirements based on current inventory levels and stock on
hand.
147

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Mathematical Analysis in Business

Course packet written by:

Elizabeth L. Grulke, Department of Mathematics, University of Colorado Boulder

Laura J. Kornish, Leeds School of Business, University of Colorado Boulder

Delphy T. Shaulis, Department of Mathematics, University of Colorado Boulder

1. There are lots of ways to approach every problem.

2) Of the formulas given in the question above,

b. What VALUE will appear in cell B21?

8) Can the answer to the previous question…

Profit as a Function of Monthly Price Point

a. Fresh Produce and Pampering Supplies

2) Using the correct formula from the previous question,

4) Of the formulas given in the question above,

6) Of the formulas given in the question above,

ii. Is that the correct value?

b. Drag your formula from cell E32 down to cell E33.

ii. What FORMULA shows in cell E33?

ii. What FORMULA shows in cell F32?

Monthly Profits for _____

WRITING DRAGGABLE FORMULAS IS THE KEY THING YOU NEED TO BE ABLE

Part 1: Fraction of the day spent on each Activity

2) Using the correct formula from the previous question,

4) Of the formulas given in the question above,

6) Of the formulas given in the question above,

3) Of the formulas given in the question above,

WRITING DRAGGABLE FORMULAS IS THE KEY THING YOU NEED TO BE

Part 0: Unit Conversions

5) Using the rates in the table:

Part 2: Less Favorable Rates

b. What is the effective exchange rate from part a?

e. The net exchange from part d is equivalent to what rate?

4) Complete CANVAS Homework “Module 2 – Parts 1 & 2”.

a. Find the exchange rate between EUR and USD

b. Find the exchange rate between INR and USD.

c. Find the exchange rate between CNY and USD.

2) Using the following rates:

b. How much, in terms of U.S. Dollars, did you spend on Miscellaneous in

6) Complete CANVAS Homework “Module 2 – Part 4”.

2) Use the same rates as in Question 1.

Part 6: Revenues and Expenses

5) Complete CANVAS Homework “Module 2 – Parts 5 & 6”.

Profit Margin (%) Based on

Part 0: Percent Change

iii. By what percentage did your money change?

ii. How much money (in dollars and cents)?

iii. By what percentage did your money change?

b. And how much of your $5,000 did you spend?

ii. By what percentage did the money you invested change?

AMZN Close Price, 2013

1) Complete CANVAS Homework “Module 3 – Parts 1 & 2”.

Part 3: Daily Changes in Stock Prices

12) Complete CANVAS Homework “Module 3 – Part 3”.

Change in Adj. Close, from the first trading

Change in Adj. Close, as a percentage, from

a. How many shares did you buy?

b. How much did you spend?

Date Value of investment, on the given day

3) Looking at the graph, how many adjustments were made?

6) Complete CANVAS Homework “Module 3 – Parts 4 & 5”.

b. How much did you spend?

c. Calculate the value of your investment on the following dates.

Date Value of investment on the given day