University of Botswana

Department of Statistics
STA 114: Business Statistics I
Test 2: 29th April 2023
Duration: 2 Hours
Max. Marks: 100
Instructions:
Answer ALL questions in Section A and ANY THREE questions in Section B.
Begin every main question attempted on a new sheet
Use of provided Formula Sheet is allowed

SECTION A
ANSWER ALL QUESTIONS IN SECTION A.
A1: State whether the following statements are TRUE or FALSE
i) Two events A and B are mutually exclusive if the occurrence of one precludes the
occurrence of the other.
ii) The sum of the probabilities of all the 𝑘 possible outcomes of a random experiment
must add up to 1.

iii) Deseasonalizing data is a process of removing seasonal variation from time series data.
iv) The following probability mass function is a valid probability distribution.
𝑥−2
𝑃(𝑋 = 𝑥) = 𝑝(𝑥) = , 𝑓𝑜𝑟 𝑥 = 0, 1,2,3,4,5.
5

v) A continuous random variable is described by a probability function called a

probability mass function.
vi) For events A and B in a sample space, P(A  B) = P(A) P(B) only if A and B are
independent events.
vii) A seasonal index of 83 indicates that the variable of interest (i.e unemployment) is
17% below the average of the year.
viii) Suppose 𝑆 = {𝐴, 𝐵, 𝐶} then the number of subsets of size 2 that can be formed from S
is 3.
ix) In the multiple linear model 𝑌 = 𝛽0 + 𝛽1 𝑋1 + 𝛽2 𝑋2 + 𝑒, the error term, e is assumed
to follow a normal distribution.
x) Given an event E defined on a sample space S, the complementary of an event E is
defined to be the event consisting of some sample points that are in E.
[1.5 X 10=15 marks]

1
A2: Answer the following questions by filling in the missing word or short sentence

i) If you flip a coin three times, the probability of getting a head at first trial, a tail at second
trial and a head on third trial is ______

ii) If A and B are events defined on a sample space, S and P( A  B)  0 then A and B are
___________________events.

iii) The ratio-to-moving average method is used to ____________ the series.

iv) If A and B are events defined on a sample space, S such that P( A / B)  P( A) then A and
B are _____________events.

v) The______________ definition of probability assumes that all the outcomes of an

experiment are equally likely.
[2×5=10 marks]

SECTION B

Answer ANY THREE questions in Section B

Question B1

Data on the following table shows the monthly shipment of office tables (‘000) of a
leading manufacturing company for 2017 and 2018 as well as the de-seasonalised
series over the same period.

2
Use the table to complete the missing values A to L. Show all the working

Fitted Value Detrended Scaled De-

^ Series Seasonal seasonalised
Yt  92.05+0.74 t ^ Indices series
Month t Yt ( Yt / Yt )*100 (SSIt) 100*(Yt/SSIt)
2017 Jan 1 81.3 92.79 87.62 89.32 91.02
Feb 2 A 93.53 F 86.07 91.67
Mar 3 93.8 94.27 99.50 98.08 K
Apr 4 94.0 95.01 98.94 98.58 95.35
May 5 97.8 95.75 102.14 104.09 93.96
Jun 6 100.6 96.49 104.26 102.34 98.30
Jul 7 99.6 97.23 102.44 99.83 99.77
Aug 8 100.2 D 102.28 H 97.67
Sep 9 98.0 98.71 99.28 98.33 99.66
Oct 10 100.7 99.45 101.26 99.83 100.87
Nov 11 103.9 100.19 103.70 100.83 103.04
Dec 12 125.7 100.93 124.54 120.10 104.66
2018 Jan 13 93.1 E 91.57 89.32 104.23
Feb 14 93.7 102.41 91.49 I 108.86
Mar 15 104.3 103.15 101.11 98.08 106.34
Apr 16 B 103.89 100.39 98.58 105.80
May 17 111.3 104.63 106.37 104.09 106.93
Jun 18 112.0 105.37 106.29 102.34 109.44
Jul 19 106.6 106.11 100.46 99.83 106.78
Aug 20 110.7 106.85 103.60 102.59 107.91
Sep 21 103.9 107.59 96.57 98.33 105.66
Oct 22 C 108.33 101.08 99.83 L
Nov 23 113.3 109.07 103.88 100.83 112.37
Dec 24 131.8 109.81 G J 109.74

[3+(2 x 11)=25 marks]

Question B2
a) A professor of statistics believes that there is a relationship between the number of missed
classes by a student and the student’s grade on his end of the semester examination. After
examining his records, the professor produced the following table of joint probabilities:

3
 Student fails the Student passes the
examination examination

Student misses fewer than 5 classes 0.02 0.86

Student misses 5 or more classes 0.09 0.03

i) What is the probability that a student passes the end of the semester examination?
ii) What proportions of students who miss 5 or more classes pass the end of the semester
examination?
iii) Calculate the probability that a student passes the end of semester examination given
that he/she missed fewer than 5 classes.
iv) Is the event that a student misses fewer than 5 classes independent of the event that the
student passes the end of the semester examination? Justify your answer using the data
provided.

b) The probabilities that a real estate broker will sell zero, one, two or three houses in a month
are 0.43, 0.27, 0.23, and 0.07 respectively.

i) Show that the above distribution is a valid probability mass function

ii) Find the mean and the standard deviation of this probability distribution.

[2 +3+ 5 + 6 +2+(2+5)=25 marks]

Question B3

a) A sample of 20 shoppers at a Pep Store was interviewed regarding their buying habits.
One question asked was: “How many times did you shop at this store during the past
week?” The Number of times a person shopped X, and associated number of customers
and probabilities are given below.

Number of times shopped: X 0 1 2 3 4 Total

Number of customers 2 a 10 2 1 20

P(X=x) 0.1 0.25 0.5 b 0.05 1.00

i) Use the information provided to fill in the blanks a and b

ii) What is the probability that if a person is randomly selected, they will have shopped
at least 2 times in a week?
iii) Determine the cumulative distribution function (CDF) of X.
iv) Compute the mean E(X) and the variance V(X)

4
 b) A department store manager wishes to investigate whether the method of payment chosen
by customers is related to the size of their purchases. The manager has cross-classified a
sample of 250 customer purchases, as shown in the following table.
Method of payment

Size of purchase C1=Cash C2=Credit Card Total

P1=Less than P200 a 31 d

P2=P200 or more 65 b 168

Total 116 c 250

One of these 250 customers is selected at random.

i) Fill in the missing values denoted by a to d

ii) What is the probability that the customer selected made a purchase of less than P200?
iii) Are the events “Payment by cash” and “Purchase of less than P200” mutually
exclusive? Verify your answer.

[2+2+5+(2+4)+4+2+4 = 25 marks]

Question B4

a) The table below contains data on the actual demand for a product in period t (𝑦𝑡 ) and forecasts
(𝑦̂𝑡 ) based on two hypothetical forecasting methods, named Model -1 and Model -2.

Model-I Model-2

Year Actual demand Forecast Forecast

(𝒚𝒕 ) (𝒚̂𝒕 ) (𝒚̂𝒕 )

1 310 315 370

2 365 375 455

3 395 390 305

Using the root mean squared error (RMSE),

i) Calculate the Root Mean Squared Error (RMSE) for each of the given models.
ii) Which of the two models is the best model for future forecasting over the 3-period.
Give reasons why you think the chosen model is the best.

5
b) A random sample of 45 university students were asked to personally decide which of a set
of 25 acts they would consider to be a crime. The number of acts selected was recorded as
the variable named “crimes”. Data were also collected on each student’s age, years in
college and income of parents. Multiple regression analysis was carried out. The parameter
estimates are given in the following table.

Crimes Regression
coefficients

Age 0.34

College 0.58

Income 0.32

Const. -11.18

i) Write down the multiple regression equation.

ii) Interpret each one of the partial regression coefficients.
iii) Predict the crime committed given that the student is aged 21 years, has been in college
for 4 years and parents income is 30 thousand per month.
iv) The coefficient of determination, 𝑅 2 is obtained to be 75%. Explain the meaning of the
value.
[(8+3)+(3+6+3+2)=25 marks]

END OF QUESTION PAPER

6
 FORMULAE SHEET

𝑦𝑡 𝑦𝑡 𝑦𝑡 𝑦̂𝑡 ×𝑆𝑆𝐼𝑡
× 100 × 100 × 100
𝑀𝐴 𝑦̂𝑡 𝑆𝑆𝐼𝑡 100

∑𝑛 ̂𝑡 ) 2
𝑡=1(𝑦𝑡 −𝑦  yt  yˆt 
√
m m

𝑛 
t 1
yt  yˆ t   
t 1  yt 

 100
m m

x P(X=x) x2 P(X=x) – [x P(X=x)]2