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QM ProblemSet 1
QM ProblemSet 1
QM Problem Set 1
Fall Semester 2023
Exercise 1.1
Answer the following questions:
(a) Do outliers affect the mean and median in the same way?
(b) Given that the distribution is normally distributed, what is the difference between the
mean and the median?
(c) Which measure tends to reflect skewing the most: the mean or the median?
(d) Describe the relation between the mean and the median for a: (1) left skewed distribu-
tion, (2) symmetric distribution, and (3) a right skewed distribution.
Exercise 2.1
Between August 14 and August 19 (2021), a survey on the popularity of President Emmanuel
Macron has been conducted. Respondents had to indicate their ‘level of satisfaction’ with
the President on a scale from 1 (very unsatisfied) to 10 (very satisfied). The results of this
survey are summarized in the table below:
Satisfaction level 1 2 3 4 5 6 7 8 9 10
Number of respondents 25 24 45 65 63 23 34 14 12 2
(a) Calculate the mean and standard deviation. What can you conclude about Macron’s
popularity?
(b) Which statistical biases might affect the outcomes of this survey?
The following table presents the frequency distribution of the daily commuting times (in
minutes, rounded) from home to work for 25 professors at SKEMA business school.
Daily commuting time 10 min 20 min 30 min 40 min 50 min
Number of professors 4 9 6 4 2
(a) Which of the three distributions is most similar to a normal distribution? What does
this imply from an investor’s point of view?
Exercise 2.4
The following table summarizes the characteristics of three firms’ returns in the luxury car
industry.
(a) Which of the three distributions is most similar to a normal distribution? What does
this imply from an investor’s point of view?
(b) Discuss each of the 4 statistics from the perspective of Porsche and compare them with
those of the other two car manufacturers.
Exercise 3.1
At the end of the semester, the average score on your law course is 10.5 with a standard
deviation of 8. Moreover, the marks of this course follow a normal distribution. You obtained
a score of 8.5, while your friend got a score of 14.5. Your friend says: “I blew you away! I am
sure that about 50% of the students has obtained a score that lies between our scores.”.
2
(a) Convert the raw scores into z -scores.
(b) What is the proportion of marks that, according to the normal distribution, falls between
these two z -scores?
(a) What is the proportion of start-ups that does not survive longer than 9 months?
(b) After how many months will 1% of all start-ups have failed?