EXAMINATION 2

STAT 285: Business Statistics

Spring 2020

Solutions to questions on this examination are due by noon this coming Tuesday (March 24). That
should give you all plenty of time to finish your work. You may submit your work to me on Blackboard or
you may email your files directly to me at raehslerr@duq.edu.

The first file you submit should be a Word file with just the final answers to each question typed out. For
example, if the answer to part (a) of question 1 is 7 you will want to have 1a. 7 typed in. This file should
have your name typed in on the top followed by your typed answers. You will also be graded on the
work you show for each problem. On a separate set of papers, write your name on every page and write
out the work you do. Submit your work as a pdf file or a picture file. You may submit multiple files if
that’s the best you can do. This will take me some time to grade, but I want to make sure each of you
has the best chance at earning points for each question. Point totals for each question are provided in
parentheses.

1. Suppose X follows a uniform distribution between 100 and 200. Calculate each of the following
probabilities below. (5 points)

a. What is the probability that X will fall between 120 and 177?
b. What is the probability that X will be above 140?
c. What is the probability that X will be below 193?
d. What is the probability that X will be more than 25 units away from the midpoint?

2. Assume z is the standard normal random variable. Find each of the probabilities below.
(9 points)

a. P(0 < z < 1.99)

b. P(-2.22 < z < 0)
c. P(z > 0.99)
d. P(z > -2.75)
e. P(z < 1.55)
f. P(z < -2.06)
g. P(-1.99 < z < 2.98)
h. P(2.79 < z < 2.81)
i. P(-0.46 < z < -0.34)

3. Indicate whether the width of a confidence interval estimate for µ increases, decreases, or stays
the same for each of the following (3 points).

a. The sample size increases.

b. The level of confidence increases.
c. The value of the sample mean increases,

4. What is the name of the theorem that allows us to use the normal distribution for the sample
mean of X regardless of the distribution of X? (1 point)
5. Suppose X follows a normal distribution with mean µ = 200 and standard deviation σ = 40. Find
each of the following probabilities. (8 points)

a. P(160 < X < 232)

b. P(X > 160)
c. P(X < 100)
d. P(230 < X < 284)

6. Suppose we know that SAT scores have a population average µ = 1080 and a standard deviation
σ = 200. A university wants to give merit scholarships to all students with an SAT score above a
certain value. They also cannot afford to give scholarships to more than 1.50 percent of
applicants (so the probability of being above that cutoff score is .0150). What should the SAT
score cutoff to receive a merit scholarship be? (10 points)

7. Suppose we know that a random variable X has a population mean µ = 400 with a standard
deviation σ = 100. What are the following probabilities? (12 points)

a. The probability that the sample mean is above 376 when n = 1600.
b. The probability that the sample mean is above 376 when n = 400.
c. The probability that the sample mean is above 376 when n = 100.
d. The probability that the sample mean is above 376 when n = 64.

8. Suppose we know that the population standard deviation for wages (σ) is $15. A random sample
of n = 900 results in a sample mean wage of $50. (10 points)

a. Provide 95% confidence interval estimate of µ. Interpret the result. What is the value of the
margin of error?
b. Provide 90% confidence interval estimate of µ. What is the value of the margin of error?
c. Provide 99% confidence interval estimate of µ. What is the value of the margin of error?

9. Suppose we collect a random sample of n = 16 and find an average income of $38,500 with a
sample standard deviation s = $14,000. Provide each of the following confidence interval
estimates. (9 points)

a. A 95% confidence interval estimate of the population mean µ.

b. A 90% confidence interval estimate of the population mean µ.
c. A 99% confidence interval estimate of the population mean µ.

10. Suppose we plan on constructing a 95% confidence interval estimate of the population mean µ.
We also know that the population standard deviation σ = 400. What is the minimum sample size
necessary to guarantee that the margin of error will be less than 10? (8 points)
11. Assume we know that the population standard deviation of income in the United States (σ) is
$6,000. A labor economist wishes to test the hypothesis that average income for the United
States equals $53,000. A random sample of 2500 individuals is taken and the sample mean is
found to be $53,300. Test the hypothesis at the 0.05 and 0.01 levels of significance. Provide the
p-value. (10 points)

12. Suppose an educator believes average scores in a population on an important assessment

examination equals 78. A random sample of 9 students gives a sample standard deviation s = 15
and a sample mean of 86. Test this hypothesis at the 0.05 and 0.01 levels. (8 points)

13. A bank executive believes that average bank balances for individuals is smaller than $11,000.
The executive takes a random sample of 16 individuals and finds a sample mean of $9,530 and a
sample standard deviation (s) of $2,000. Test the hypothesis at the 0.05 and then at the 0.01
levels. (8 points)

14. Suppose the p-value of the z test statistic used in a two tailed test = 0.0247. Determine whether
you accept or reject the null hypothesis for each of the level of significance values (α) below.
(3 points)

α = 0.05 Accept or Reject: _____________________

α = 0.02 Accept or Reject: _____________________

α = 0.01 Accept or Reject: _____________________

15. Suppose we collect the examination performance for 8 students and the values are below:

60
70
70
80
85
90
90
95

Calculate (by hand) a 95% confidence interval estimate of the population mean. (Hint: you will
need to calculate the sample mean and sample standard deviation from scratch. You may use
Excel to help, but you must do the calculations by hand). (7 points)