Business Statistics

Ans 1.

Sr.no Mfr 1-life of bulb (in hrs) Mfr 2-life of bulb (in hrs)
1 684 819
2 831 907
3 859 952
4 893 994
5 922 1016
6 939 1038
7 972 1096
8 1016 1153
9 697 836
10 835 912
11 860 959
12 899 1004
13 924 1018
14 943 1072
15 977 110
16 1041 1154
17 720 888
18 848 918
19 868 962
20 905 1005

i. Which manufacturer has better performance on the life of bulbs? What are
the different measures you can consider to calculate performance?

Answer: To calculate the performance of the life of bulbs, we can find out the
average of the life of bulbs. Using average function in excel,

  Mfr 1-life of bulb (in hrs) Mfr 2-life of bulb (in hrs)
Average
life of 881.65 940.65
bulb

From the calculated values, we can observe that the manufacturer 2 has better
performance on the life of bulbs.
 ii. How would you assess the variability in performance of the two bulb
manufacturers?

Ans There are four frequently used measures of the variability:

(a) Range : The most basic measure of variation is the range, which is the
distance from the smallest to the largest value in a distribution.

Range= Largest value – Smallest Value

Largest Value Smallest Value Range

Mfr 1-life of bulb 1041 684 357

(in hrs)

Mfr 2-life of bulb 1154 110 1044

(in hrs)

(b) Interquartile Range : The interquartile range (IQR) is the range of

the middle 50% scores in a distribution:

IQR= 75th percentile  – 25th percentile

It is based on dividing a data set into quartiles. Quartiles are the values that
divide scores into quarters. Q1 is the lower quartile and is the middle number
between the smallest number and the median of a data set. Q2 is the middle
quartile-or median. Q3 is the upper quartile and is the middle value between
the median set and the highest value of a data set. The interquartile range
formula is the first quartile subtracted from the third quartile

(c) Variance : The variance is the average squared difference of the

scores from the mean. To compute the variance in a population:

(i) Calculate the mean

(ii) Subtract the mean from each score to compute the deviation from mean
score
 (iii) Square each deviation score (multiply each score by itself)
(iv) Add up the squared deviation score to give the sum
(v) Divide the sum by the number of scores

(d) Standard deviation. The standard deviation is the average amount by

which scores differ from the mean. The standard deviation is the square
root of the variance, and it is a useful measure of variability when the
distribution is normal or approximately normal (see below on the normality of
distributions). The proportion of the distribution within a given number of
standard deviations (or distance) from the mean can be calculated. A small
standard deviation coefficient indicates a small degree of variability (that is,
scores are close together); larger standard deviation coefficients indicate large
variability (that is, scores are far apart).

Mean Mfr 2- Mean

Mfr 1-life of
Differenc life of Differenc
Sr.no bulb (in Mean Mean
e bulb e
hrs)
Squared (in hrs) Squared
39065.52 14798.72
1 684 -197.65 819
3 -121.65 3
2565.422 1132.322
2 831 -50.65 907
5 -33.65 5
3 859 -22.65 513.0225 952 11.35 128.8225
2846.222
4 893 11.35 128.8225 994
53.35 5
1628.122 5677.622
5 922 40.35 1016
5 75.35 5
3289.022 9477.022
6 939 57.35 1038
5 97.35 5
8163.122 24133.62
7 972 90.35 1096
5 155.35 3
18049.92 45092.52
8 1016 134.35 1153
3 212.35 3
34095.62 10951.62
9 697 -184.65 836
3 -104.65 3
2176.222
10 835 -46.65 912
5 -28.65 820.8225
11 860 -21.65 468.7225 959 18.35 336.7225
4013.222
12 899 17.35 301.0225 1004
63.35 5
 1793.522 5983.022
13 924 42.35 1018
5 77.35 5
3763.822 17252.82
14 943 61.35 1072
5 131.35 3
9091.622 689979.4
15 977 95.35 110
5 -830.65 2
25392.42 45518.22
16 1041 159.35 1154
3 213.35 3
26130.72 2772.022
17 720 -161.65 888
3 -52.65 5
1132.322
18 848 -33.65 918
5 -22.65513.0225
19 868 -13.65 186.3225 962 21.35455.8225
4140.922
20 905 23.35 545.2225 1005
64.35 5
178480.5 886024.5
Sum 17633   5 18813   5
Mean 881.65     940.65    
44301.
Variance 8924.0275     2    
Standar
d
Deviatio 94.4670709 210.47
n 8     9    

iii. Would your answer to the first question change based on your assessment of
the variability in performance of bulb manufacturers?
Ans Based on the variability in performance of bulb manufacturers, the
performance of manufacturer 1 is better than manufacturer 2. Considering the
deviation for manufacturer 1 is lesser the performance of manufacturer 1 is better.

Q2. Correlation Coefficient: It is a measure of correlation between 2 variables. It is a

linear correlation coefficient that returns a value of between -1 and +1.

Properties of Correlation coefficient (r):

1. r always lies between -1 and +1 i.e.-1 ≤ r ≤ 1.
2. r=1 indicates perfect positive correlation between 2 variables.
 3. r=-1 indicates perfect negative correlation between 2 variables.
4. r=0 indicates no correlation.
5. 0.5<r≤1 indicates strong positive correlation.
6. -1<r<-0.5 indicates strong negative correlation.
7. 0<r≤0.5 indicates weak positive correlation.
8. -0.5<r<0 indicates weak negative correlation.
9. r=0.5 indicates moderately strong positive correlation.
10. r=-0.5 indicates moderately strong negative correlation.

i. What do the correlation coefficients of 1, shaded in yellow, indicate?

Answer: When correlation coefficient r = 1, it indicates perfect positive correlation

between two variables which means that as one variable increases, the other variable
also tends to increase.

ii. The highest correlation coefficient is 0.84, shaded in green. What can
you infer from that score about the relationship between the two variables?

Answer: The correlation coefficient r= 0.84, we can infer that there exists a strong
positive correlation between the two variables 5-year return and 3-year return.

iii. The two lowest correlation coefficients are 0.06 and -0.06. What can
you infer from that score about the relationship between the two variables?

Answer: When r= 0.06, we can infer that there exists a weak positive correlation
between the two variables 5-year return and Assets.

When r= -0.06, we can infer that there exists a weak negative correlation between the
two variables 5-year return and Expense ratio.

Q3. The Indian cricket team is visiting New Zealand to play a test series comprising five
matches. In each match, assume that the Indian team has a 70% chance of winning.
Further, assuming that the matches are independent of each other, what is the
probability that:

a. The Indian team will win the series?

Answer: Using Binomial distribution function in excel,

BINOMDIST (number_s, trials, probability_s, cumulative)

Here,

 number_s = 1
 Trials = 3, To win the series there are 3 alternatives:
1. All the matches to be won by Indian cricket team.
2. Four matches won by Indian cricket team.
3. Three matches won by Indian cricket team.

 Probability of winning = 0.7

 Cumulative = FALSE

BINOMDIST (1,3,0.7, FALSE) = 0.189

Hence, the probability that Indian team will win the series is 0.189.

b. The team will win all five matches, and that the team will lose all?

Answer:

i) The team will win all five matches:

Using excel BINOMDIST function,

BINOMDIST (number_s, trials, probability_s, cumulative)

Here,

 Number_s = 5
 Trials = 5
 Probability of winning = 0.7
 Cumulative = FALSE

BINOMDIST (5,5,0.7, FALSE) = 0.168

Hence, the probability of the team winning all five matches is 0.168

ii) The team will lose all five matches

Using excel BINOMDIST function,

BINOMDIST (number_s, trials, probability_s, cumulative)

Here,

 Number_s = 5
 Trials = 5
 Probability of losing = 0.3
 Cumulative = FALSE

BINOMDIST (5,5,0.3, FALSE) = 0.00243

Hence, the probability of the team losing all five matches is 0.00243.