JGU Id. No.

_____________

O.P. Jindal Global University

Jindal School of Banking & Finance
Resit Examination

Course Name : Business Statistics and Decision Science

Course Code : BF-C-QUA-204/ DNA-130
Programme : B.Com.
Session : 2019, 2020
Time Allowed : 24 hours
Maximum Marks : 100

This question paper has two (2) printed pages (including this page).

Instructions to students:

Answers should be submitted as an MS Excel spreadsheet. Each answer needs to be in a separate

sheet. All explanations and discussions will need to be inserted as textboxes in the same sheet.
Please make sure that the file you submit is less than 20 MB in size.

This is an open book take-home examination.

Warning: Plagiarism in any form is prohibited. Anyone found using unfair means will be
penalized severely.

1. In 2019 the government decided to provide a choice to Indian taxpayers between the old and a
new scheme for income tax payment. The new scheme does not provide tax incentives for
savings. Your task is to design an observational study to test the impact of the new tax regime
on household savings.
a. Identify the key comparison that you will need in this study? Specify your control and treatment
group and the variable of interest.
b. What confounding factor should you be worried about?
c. Describe your design for an observational study, which best achieves the objective.
[5+5+5]

JSBF [Re-sit Examination – Spring 2022] Page 1

 a.
Reduced tax rates and compliance: The new government provides tax rates against the
existing or existing government rates. In addition, as many exemptions and deductions
are not available, the required documents are small and tax filing is easy.

The investor will not prefer to lock in funds for fixed-term instruments: Under the new
regime, all taxpayers will be treated equally and profits / benefits will not be a condition
for obtaining tax exemptions. This may be helpful to those categories of taxpayers who
may not be subscribing to the specified types of investments, as most investments have
a closing period, which cannot be withdrawn before then. They can invest in mutual funds
/ tools / open deposits, which provide them with good returns and flexibility and
withdrawal. For example, some suitable tools with long locks such as bank deposits and
post offices have a five-year lock, equity-linked savings schemes (ELSS) for three years,
National Savings. Five-year (NSC) certificates, etc. Increased expenditure in the hands
of the taxpayer: The reduced tax rate will provide income for the taxpayer, who may not
be able to invest in the specified tools for some financial or other personal reasons.

Flexible Investment Preferences: The existing tax system provides for tax deductions,
provided that they invest in specific instruments and in the manner prescribed in the Act.
This limits the taxpayer's investment options as they should only invest in the specified
tools. However, the new system gives taxpayers the flexibility to choose their investment
options.

b.
Tax benefits under the old regime are available in investments in specified tools and there
are special locks set for most tools from three to five years. This may not be a viable
option for taxpayers for the millennium, who prefer to spend money on savings, as well
as the elderly, as they would like to have money in their hands and invest in flexible and
transparent tools.
An investor may not be able to select any other star rating funds, which may be
performing better than the specified tools, which are generally naturally resistant to risks
and may not provide significant returns during the investment period. In the case of
vetting proceedings before tax authorities, documents and investment evidence are
required to be kept in the old government, which may not be required in the new
government.

c.
We believe that the provision of financial advice should be managed in a coordinated
manner with other established activities, such as medicine, law and accounting. A
concerted effort is needed in this regard where governments set expectations for financial
advisory practice, market integrity, and consumer protection, and regulators in
consultation with professional organizations determine professional practices,

JSBF [Re-sit Examination – Spring 2022] Page 2

 monitoring ethics, and setting minimum certification standards. We also recognize here
that financial literacy efforts should complement financial advisory businesses. In the
current situation, Indian families are unable to distinguish between the topics of
"Investment", "Independent Financial Adviser", or "Insurance Advisor". We suggest that
a clear term with the same rules should apply to all financial advice providers regardless
of specialization. An urgent need is to deal with regulatory arbitrage that may now occur
if there is a discrepancy between the control of financial advice and the regulator
responsible for the basic product.

2. Temperature in degrees Fahrenheit has been collected from a sample of 50 individuals. The mean
is 98.5 and standard deviation is 3.2. If we convert each observation into degrees in the centigrade
scale ((X°C × 9/5) + 32 = Y°F) then what would be the new mean and standard deviation of the
set of temperatures?
Answer –

Variance = (𝑆𝑡𝑎𝑛𝑑𝑎𝑟𝑑 𝐷𝑒𝑣𝑖𝑎𝑡𝑖𝑜𝑛)2

= (3.2)2 = 10.24 = 𝑥

(𝑥 − 32) × 5/9
5
(10.24 − 32) × = −12.08
9

New standard deviation

= 3.2-12.08 = 8.8

3. According to IT department of leading financial firm, 50% of emails received by their employees
are spam. They are planning to install a software which filters the spam emails. A reputable
cybersecurity brand has launched a software which claims to detect 99% of spam emails.
However, they have also reported 5% as the chance of detecting a non-spam email as spam. If
an email is detected as spam, what is the probability of it in fact being a non-spam email?

Answer –

Let the event A is that the email is detected as spam,

B1 - the email is a spam email,
B2 - the email is not a spam email.
50% of emails are spam,

𝑃(𝐵1 ) = 𝑃(𝐵2 ) = 0.5

𝑃(𝐴|𝐵1 ) = 0.99 , 𝑃(𝐴|𝐵2 ) = 0.05

The sought probability we'll find using Bayes theorem:

JSBF [Re-sit Examination – Spring 2022] Page 3

 𝑃(𝐴|𝐵2 ) × 𝑃(𝐵2 )
𝑃(𝐵2|𝐴) =
𝑃(𝐴|𝐵1 ) × 𝑃(𝐵1 ) + 𝑃(𝐴|𝐵2 ) × 𝑃(𝐵2 )

0.05 × 0.5
𝑃(𝐵2|𝐴) =
0.99 × 0.5 + 0.05 × 0.5

0.025
𝑃(𝐵2|𝐴) = = 0.048
0.52
[15]

4. A supervisor at an electric bulb factory examines bulbs produced in the factory for defects. She
usually finds that there are 14 defective bulbs in a week (7 days).
a. What is the probability that there are exactly 3 defective bulbs in one day?
b. What is the probability that there are less than 5 defects in a day?
c. Suppose the supervisor joins work, find the probability that time till the first defect is
discovered exceeds 2.712 days.

Answer –

14
𝜆= =2
7
23 𝑐 −2
d. 𝑃(𝑋 = 3) = = 0.18
3!

e. 𝑃(𝑋 < 5) = 𝑃(0) + 𝑃(1) + 𝑃(2) + 𝑃(3) + 𝑃(4)

−2
20 21 22 23 24
𝑃(𝑋 < 5) = 𝑒 ( + + + + )
0! 1! 2! 3! 4!

𝑃(𝑋 < 5) = 𝑒 −2 (1 + 2 + 2 + 1.33 + 0.67) = 5

f. 𝜆 = 2 × 2.712 = 5.424

5.4240 𝑐 −5.424
𝑃(𝑋 = 5.424) = = 0.0024
0!

[5+5+5]

5. The mean throwing distance of a football for Marco, a high school freshman quarterback, is
40 yards, with a standard deviation of two yards. The team coach tells Marco to adjust his
grip to get more distance. The coach records the distances for 20 throws. For the 20 throws,
Marco’s mean distance was 45 yards. The coach thought the different grip helped Marco

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 throw farther than 40 yards. Conduct a hypothesis test using a preset α = 0.05 distances for
footballs are normal.

a) Construct the null and alternate hypothesis.

b) What test statistic will you use? Give your reasons.
c) Find the critical values which denote your rejection zones. Draw a diagram to
demonstrate the rejection region.
d) Calculate the test statistic and conduct the test. State whether you reject the hypothesis
and interpret the result.

Answer –

𝜇 = 40, 𝜃 = 2, 𝑛 = 20, 𝑋̅ = 45, 𝛼 = 0.05

𝐻0 ; 𝜇 = 40

𝐻𝑎 ; 𝜇 > 40

a.

𝑋̅ −𝜇 45−40`
𝑍= 𝜎 = 2 = 11.80
√𝑛 √20

b.

When

𝑋̅= 45, its corresponding z-score is 11.1803.

The area to the right when

𝑋̅= = 45 = the area to the right of z-score = 11.1803

= blue shaded area

= p-value

= 2.6115 × 10−29

c.

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 d.

Because p <α, we reject the null hypothesis.

There is ample evidence to suggest that the change in grip improved Marco's throwing
range.

[5×4]

6. An interesting research question is the effect, if any, that different types of teaching formats
have on the grade outcomes of students. To investigate this issue one sample of students'
grades was taken from a hybrid class and another sample taken from a standard lecture
format class. Both classes were for the same subject. The mean course grade in percent for
the 35 hybrid students is 74 with a standard deviation of 16. The mean grades of the 40
students form the standard lecture class was 76 percent with a standard deviation of 9. Test
at 5% to see if there is any significant difference in the population mean grades between
standard lecture course and hybrid class.

Answer –

We begin by realizing that we have two groups, students from a mixed class and
students from a standard subject format class. We also recognize that random variables,
interests, student grades, random variables continue. We could ask the research
question differently and have random binary flexibility. For example, we can study the
percentage of students with a failing grade, or an A-grade. Both of these can be binary
and thus be a scale test and not a method test as is the case here. Finally, there is no
consideration of which format can lead to higher grades so hypothesis is referred to as a
two-tailed test.

H0: µ1 = µ2
Ha: µ1 ≠ µ2
As it would always be, we cannot know the population difference of the two
distributions so our survey statistics say:

(𝑥
̅̅̅1 − ̅̅̅)
𝑥2 − 𝛿0 (74 − 76) − 0
𝑡𝑐 = = = 0.65
𝑠2 𝑠2 2 2
√ + √16 + 9
𝑛1 𝑛2 35 40

In order to obtain a significant amount of Student t we need degrees of freedom. In this

case we use:
df = n1 + n2 - 2 = 35 + 40 -2 = 73

This is large enough to consider it as a normal distribution thus ta / 2 = 1.96. And as

always we determine that the calculated value is in the tail determined by the value. In
this case it is not even necessary to look at the significant value: the calculated value of

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 the difference in these two measurement ranges does not differ from even one common
deviation. Certainly not in the tail.

Conclusion: You cannot deny null to α = 5%. Therefore, there is no evidence to suggest
that marks in mixed and standard classes differ.

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