Class Test-II

MBA-Gen (A&B), MBA-EP

Business Statistics (MBA6102)
University Business School, Panjab University

Time: 60 minutes Max. Marks: 05

Instructions:
(i) Attempt all questions from 1-3
(ii) There is choice between Question no. (4,5 ) and 6. Attempt either question no. 4 and 5 or 6.
(iii) Last 10 minutes will be given to upload answer sheet.
(iv) Statistical Tables will be provided.
(v) Write your name in middle of each paper and encircle it.
(vi) Submit on Google Classroom Only.

Section -I
1. Transplant operations have become routine. One common transplant operation is for
kidneys. The most dangerous aspect of the procedure is the possibility that the body may
reject the new organ. Several new drugs are available for such circumstances, and the earlier
the drug is administered, the higher the probability of averting rejection. The New England
Journal of Medicine recently reported the development of a new urine test to detect early
warning signs that the body is rejecting a transplanted kidney. However, like most other
tests, the new test is not perfect. When the test is conducted on someone whose kidney will
be rejected, approximately one out of six tests will be negative (i.e., the test is wrong). When
the test is conducted on a person whose kidney will not be rejected, 7% will show a positive
test result (i.e., another incorrect result). Physicians know that in about 65% of kidney
transplants the body tries not to reject the organ. Suppose that the test was performed and
the test is positive (indicating early warning of rejection). What is the probability that the
body is attempting to reject the kidney? Comment on the result. (1)

2. Case Study: Waiting Lines

Everyone is familiar with waiting lines. We wait in line at banks, groceries, and fast-food
restaurants. There are also waiting lines in firms where trucks wait to load and unload and
on assembly lines where stations wait for new parts. Management scientists have developed
 mathematical models that allow managers to determine the operating characteristics of
waiting lines. Some of the operating characteristics are:
(i) The probability that there are no units in the system
(ii) The probability that an arriving unit must wait for service.
The number of trucks crossing at the Ambassador Bridge connecting Detroit, Michigan, and
Windsor, Ontario, is Poisson distributed with a mean of 1.5 per minute. Calculate
(i) What is the probability that in any 1-minute time span two or less trucks will cross the
bridge?
(ii) What is the variation in times of crossing at the bridge.
(iii) What is the probability that fewer than four trucks will cross the bridge over
the next 2 minutes. (0.75)

3. Because of the relatively high interest rates, most consumers attempt to pay off their credit
card bills promptly. However, this is not always possible. An analysis of the amount of
interest paid monthly by a bank’s Visa cardholders reveals that the amount is normally
distributed with a mean of $25 and a standard deviation of $5.
a. What proportion of the bank’s Visa cardholders pay more than $30 in interest?
b. What proportion of the bank’s Visa cardholders pay more than $40 in interest?
c. What proportion of the bank’s Visa cardholders pay less than $15 in interest?
d. What interest payment is exceeded by only 15% of the bank’s Visa cardholders?
(0.25*3+.5=1.25)
Section-II
Attempt questions no. 4 and 5 or 6 alone
4. As the baby boom generation ages, the number of employees injured on the job will
continue to increase. A recent poll by the GO sponsored by Philadelphia-based agency found
that about 30% of employees have missed work due to a back injury of some kind. Let x be
the number of sampled workers who have missed work due to a back injury.
(i) A random sample of 30 workers is to be drawn from a particular manufacturing plant.
find the mean and standard deviation of x, the number of workers that missed work due to
back injuries.
(ii) find the probability that exactly one worker missed work due to a back injury.
(iii) find the probability that more than two workers missed work due to a back injury (1)

5. A survey of Amazon.com shoppers reveals the following probability distribution of the

number of books purchased per hit.

x 0 1 2 3 4 5 6 7
P(X=x) .30 .25 .08 .13 .06 .03 .02 .01

(i) Is this a probability distribution?. If yes then continue to part (ii) otherwise adjust the
remaining probability in x=2 and go to part (ii)
(ii) What is the probability that an amazon .com visitor will buy two or more books?
(iii) What is the probability that an amazon .com visitor will buy at least one book?
(iv) What is the probability that an visitor will not buy any books? (1)
 or
6. Bank mergers in the 1990s in USA: Case Study

The last decade has witnessed an unprecedented pace of bank mergers and acquisitions. Between
1990 and 1998, the number averaged about 510 per year compared with 345 per year over the
198089 period. As a result of this activity, the number of banks operating in the U.S. has declined
about 30 percent since 1990. In this article, we examine the primary motivations for this massive
wave of bank mergers during the 1990s by analyzing the market prices of these mergers. A better
understanding of the factors that determine market prices for bank mergers will shed some light on
the implications of continuing mergers and acquisitions in the banking industry. We recognize that
rapidly changing supply and demand conditions are fundamental to understanding what drives bank
merger markets. For example, bank mergers may be driven by a desire to reduce overall risk by
diversifying into new geographic or product markets. Additionally, bank mergers may be motivated
by a strategic decision to exploit economies of scale, or to cut overhead and eliminate duplication
by closing branches, or to achieve synergies through economies of scope. Of course, bank mergers
may also be an attempt by banks to simply increase their market power or to quickly grow into
super regional or money center banks. To some extent, each of these motivations, and resultant
strategies, became more feasible in the 1990s with the relaxing of state and federal restrictions on
banks’ activities. For example, the Riegle Neal Interstate Banking and Branching Efficiency Act of
1994 allowed banks to branch interstate by consolidating existing out-of-state bank subsidiaries or
by acquiring banks or individual branches through mergers and acquisitions. Prior to the RiegleNeal
Act, federal and state laws prevented banks from expanding across state lines (with some
exceptions).1 The Riegle Neal Act allowed bank holding companies to acquire banks in any state,
effective September 29, 1995, and allowed mergers between banks located in different states
beginning June 1, 1997.2 On November 12, 1999, President Clinton signed the Financial Services
Modernization Act (GrammLeachBliley Act of 1999), allowing banks to merge with securities firms
and insurance companies within financial holding companies. This will further expand the merger
opportunities for banking organizations and may lead to a new wave of consolidation in banking
and other sectors of the financial services industry. Another potential regulatory effect on bank
merger trends is the Federal Deposit Insurance Corporation Improvement Act (FDICIA) of 1991.
FDICIA introduced mandatory procedures called prompt corrective actions (PCA), which require
regulators to promptly close depository institutions when their capital falls below predetermined
quantitative standards, thus eliminating the possibility of regulators providing special consideration
to large banks because of the possible systemic impact of large bank failure. Therefore, the notion
of too-big-to-fail should be less relevant since FDICIA. However, an increase of mega mergers has
been noticeable in the mid- to late-1990s.

Year No. of mergers

1 4
2 17
3 19
4 45
5 25
6 37
7 44
8 35
9 27
10 31
The above table , extracted from the Journal of Banking and Finance (Feb. 1999) lists the number
of U.S. bank mergers each year from 1990 (year 1) to 1999 (year 10) for which $50 million or more
changed hands in the transaction.
(i) Construct a regression line by using the least square principle. Also mention dependent
and independent variables in model.
(ii) Explain the model and its coefficients. Interpret them.
(iii) Estimate the no. of mergers in 2000 (year 11).
(iv) How regression analysis can be used in business. Give at least three examples
(2)