AB1202 - Statistics and Analysis Nanyang Business School

AB1202 – STATISTICS AND ANALYSIS

Tutorial : Quiz 2 Special Tutorial

Topics : 5-8

1. Suppose that the bivariate probability mass function of X and Y is specified in the
following table:
Y
X 0 1 2
0 1/6 1/4 1/8
1 1/8 1/6 1/6

a) Find P(X=0, Y≤1).

b) Find the marginal Probability Mass Functions of X and Y.
c) Find P(Y=1|X=0).
d) Are X and Y independent?

2. A consumer group wants to estimate the electricity bill for the hottest month of the year
for 3-room HDB flats in Hougang. Based on similar studies conducted earlier, the standard
deviation can be assumed to be $25.
a) What sample size is required if the group wants to estimate with 99% confidence,
the mean bill within +/-$5 ?
b) How many homes need to be selected if 95% confidence is desired instead?

3. A sample of 35 NBS students were invited to have their heights measured. The average
of the sampled heights was 1.68m and the std dev was s = 0.17m. We have good reasons
to believe these are good estimates of the respective population parameters.
If the heights of another random sample of 35 students were to be averaged, what is the
probability that the new sample mean would be larger than 1.72m?

4. Suppose you take a random sample of size 100 from a distribution with mean µ and std
dev σ = 6.5. The CI for the mean µ is found to be [64.7394, 67.5606]. Find the sample
mean of the sample and the confidence level used in the computation of this CI.

5. A multi-national mobile phone manufacturer wanted to outsource its touch-screen

production to a Singapore electronics factory. In the qualification exercise, a quick laser
measurement of 50 touch-screen units from the Singapore factory found the sample
deviation to be 0.00375mm.
At the minimum, how many more units must the phone manufacturer measure to ensure
that the tolerance of the 99% CI of the population average touch-screen thickness would
be no more than 0.001mm from the actual mean thickness?

chTan@NBS 2021S2 Quiz 2 Prep Page 1

AB1202 - Statistics and Analysis Nanyang Business School

6. In Q7 of Tutorial 7, you obtained a histogram by taking 1000 samples (sample size of 3

each), from a Binomial distribution.
Repeat 7(2) with the following probability distribution:
Pr(x=10) =0.3
Pr(x=30) =0.4
Pr(x=100) =0.2
Pr(x=150) =0.1
Gentle reminder:
Set the seeds equal to the serial numbers of the iterations, inside the loop.

7. Having attended an entrepreneurship course, Dawn was excited about starting her
dream business of selling durian face-masks she has spent 2 years formulating … She
started selling her exotic face-masks through 2 channels: online store at $15/mask and
at her Mum’s spa at $22/mask.
She modeled her revenue R as the total weekly revenues from these 2 sales channels.
She further defined Qo and Qs as RVs of no. of units sold per week from her 2 sales
channels, respectively. She supposed 𝑄𝑜 and 𝑄𝑠 have means 𝜇𝑜 and 𝜇𝑠 and
population std deviations 𝜎𝑜 and 𝜎𝑠 respectively.

After a few months of operations, Dawn discovered that she could quite accurately
estimate the covariance of her weekly sales as: Cov(𝑄𝑜 , 𝑄𝑠 ) = - 4.2
a) Write down the model relating R with 𝑄𝑜 and 𝑄𝑠
b) Explain to Dawn’s Mum, in layman’s terms what the negative covariance means
c) Find the expected value of R in terms of the means of 𝑄𝑜 and 𝑄𝑠
d) Find the variance of R in terms of 𝜎𝑜 and 𝜎𝑠
e) Suppose 𝜇𝑜 = 9.5, 𝜇𝑠 = 7.4, 𝜎𝑜 = 2.7, 𝜎𝑠 = 1.8, determine the expected mean
and std deviation of Dawn’s weekly revenue.

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AB1202 - Statistics and Analysis Nanyang Business School

8. Suppose you are deciding between 2 investments for the coming year - Dow Jones Fund,
X and Weak-Economy Fund, Y. The table below summarizes estimates of returns (per
$1000 investment) under 3 economic conditions, each with a given probability of
occurrence:
Investment ($)
Economic condition Pr Dow Jones Fund, X Weak-Economy Fund, Y
Recession 0.2 -300 200
Stable economy 0.5 100 50
Booming economy 0.3 250 -100

a) Compute:
i. The Covariance, 𝜎𝑥𝑦
ii. Var(X) and Var(Y)
iii. The variance of the sum of the 2 funds, (X+Y)

b) Suppose you invest (100w)% of your funds in X and the rest in Y …

i. Write down the expression for E(P), the expected return of the portfolio, P
ii. Write down the expression for the portfolio risk, 𝜎𝑝
iii. Hence, compute the expected return and the risk of the portfolio if you decide
to divide your funds equally between X and Y

9. The following 10 sets of data measurements for the 2 RVs, X & Y have been observed:

Y X
300 200
300 100
a) Tabulate X & Y in a 2x2 contingency table such that unique values
400 200
300 200 of Y and X are rows and columns respectively. Instead of showing
300 200 the absolute frequencies, show the relative frequencies.
300 100
300 200
b) Assuming the relative frequencies in part a) are the joint
400 100
300 200 probabilities for Y & X, calculate the population covariance and
300 200 population correlation.

chTan@NBS 2021S2 Quiz 2 Prep Page 3