Sample questions for the final exam

Chapter 5: Probability Distribution of discrete Random variable:

Ex1: A production manager knows that 5% of components produced by a particular manufacturing

process have some defect. Six of these components, whose characteristics can be assumed to be
independent of each other, are examined.

1. a. What is the probability that none of these components has a defect?

2. b. What is the probability that one of these components has a defect?
3. c. What is the probability that at least two of these components have a defect?

Ex2: A family of mutual funds maintains a service that allows clients to switch money among accounts
through a telephone call. It was estimated that 3.2% of callers either get a busy signal or are kept on
hold so long that they may hang up. Fund management assesses any failure of this sort as a $10 goodwill
loss. Suppose that 2,000 calls are attempted over a particular period.

a. Find the mean and standard deviation of the number of callers who will either get a busy signal or
may hang up after being kept on hold.

b. Find the mean and standard deviation of the total goodwill loss to the mutual fund company from
these 2,000 calls

Chapter 6: Continuous Random variable

Ex1: A company services home air conditioners. It is known that times for service calls follow a normal
distribution with a mean of 60 minutes and a standard deviation of 10 minutes.

a. What is the probability that a single service call takes more than 65 minutes?

b. What is the probability that a single service call takes between 50 and 70 minutes?

c. The probability is 0.025 that a single service call takes more than how many minutes?

d. A random sample of four service calls is taken. What is the probability that exactly two of them take
more than 65 minutes?

Ex2: It has been found that times taken by people to complete a particular tax form follow a normal
distribution with a mean of 100 minutes and a standard deviation of 30 minutes.

a. What is the probability that a randomly chosen person takes less than 85 minutes to complete this
form?

b. What is the probability that a randomly chosen person takes between 70 and 130 minutes to
complete this form?

c. Five percent of all people take more than how many minutes to complete this form?

d. Two people are chosen at random. What is the probability that at least one of them takes more than
an hour to complete this form?
e. Four people are chosen at random. What is the probability that exactly two of them take longer than
an hour to complete this form?

f. For a randomly chosen person, state in which of the following ranges (expressed in minutes) the time
to complete the form is most likely to lie. 70-89, 90-109, 100-129, 130- 149

Chapter 7: Estimation:

Ex1: A random sample of 174 college students was asked to indicate the number of hours per week that
they surf the Internet for either personal information or material for a class assignment. The sample
mean response was 6.06 hours and the sample standard deviation was 1.43 hours. Based on these
results, a confidence interval extending from 5.96 to 6.16 was calculated for the population mean. Find
the confidence level of this interval.

Ex2: A corporation has 272 accounts receivable in a particular category. A random sample of 50 of them
was taken. The sample mean was $492.36, and the sample standard deviation was $149.92.

a. Find a 99% confidence interval for the population mean value of these accounts receivable.

b. Find a 95% confidence interval for the total value of these accounts receivable.

c. Without doing the calculations, state whether a 90% confidence interval for the population total
would be wider or narrower than the interval found in part b

Ex3: What is the most common method to renew vehicle registration? In checking a random sample of
500 motor vehicle renewal registrations in one county, the finance department found that 200 were
mailed, 160 were paid in person at the county finance department office, and the remainder was paid
online at the county’s Web site. Phone registration renewals were not available.

a. Estimate the population proportion to pay for vehicle registration renewals in person at the county
finance department office. Use a 90% confidence level.

b. Estimate the population proportion of online renewals. Use a 95% confidence level.

Ex4: An automobile dealer wants to estimate the mean mileage of these vehicles. Previous experience
suggests that the population standard deviation is likely to be about 12,000 miles. If a 90% confidence
interval for the population mean is to extend 2,000 miles on each side of the sample mean, how large of
a sample is required if simple random sampling is employed?

Ex5. We want to estimate the proportion favoring greater emphasis on business ethics in the curriculum.
How many observations are necessary to ensure that a 95% confidence interval for the population
proportion extends at most 0.06 on each side of the sample proportion.

Chapter 9, 10: Hypothesis Testing

Ex1: In a random sample of 545 accountants engaged in preparing county operating budgets for use in
planning and control, 117 indicated that estimates of cash flow were the most difficult element of the
budget to derive. a. Test at the 5% level the null hypothesis that at least 25% of all accountants find cash
flow estimates the most difficult estimates to derive.

Ex2: An insurance company employs agents on a commission basis. It claims that in their first-year
agents will earn a mean commission of at least $40,000 and that the population standard deviation is no
more than $6,000. A random sample of nine agents found for commission in the first year,

where xi is measured in thousands of dollars and the population distribution can be assumed to be
normal.

Find the sample mean and sample standard deviation

Test, at the 5% level, the null hypothesis that the population mean is at least $40,000.

Ex3: Dependent samples:

In a study comparing banks in Germany and Great Britain, a sample of 145 matched pairs of banks was
formed. Each pair contained one bank from Germany and one from Great Britain. The pairings were
made in such a way that the two members were as similar as possible in regard to such factors as size
and age. The ratio of total loans outstanding to total assets was calculated for each of the banks. For this
ratio, the sample mean difference (German – Great Britain) was 0.0518, and the sample standard
deviation of the differences was 0.3055.

Test, against a two-sided alternative, the null hypothesis that the two population means are equal.

Ex4: Independent random samples of business managers and college economics faculty were asked to
respond on a scale from 1 (strongly disagree) to 7 (strongly agree) to this statement: Grades in advanced
economics are good indicators of students’ analytical skills. For a sample of 70 business managers, the
mean response was 4.4 and the sample standard deviation was 1.3. For a sample of 106 economics
faculty the mean response was 5.3 and the sample standard deviation was 1.4.

a. Test, at the 5% level, the null hypothesis that the population mean response for business managers
would be at most 4.0.

b. Test, at the 5% level, the null hypothesis that the population means are equal against the alternative
that the population mean response is higher for economics faculty than for business managers.

Assume equal variance

Ex5: Of a random sample of 148 accounting majors, 75 rated a sense of humor as a very important trait
to their career performance. This same view was held by 81 of an independent random sample of 178
finance majors.

a. Test, at the 5% level, the null hypothesis that at least one-half of all finance majors rate a sense of
humor as very important.
b. Test, at the 5% level against a two-sided alternative, the null hypothesis that the population
proportions of accounting and finance majors who rate a sense of humor as very important are the
same.

Chapter 15: multiple Regression

TABLE 14-4

A real estate builder wishes to determine how house size (House) is influenced by family income
(Income), family size (Size), and education of the head of household (School). House size is
measured in hundreds of square feet, income is measured in thousands of dollars, and education is in
years. The builder randomly selected 50 families and ran the multiple regression. Microsoft Excel
output is provided below:

SUMMARY OUTPUT

Regression Statistics
Multiple R 0.865
R Square 0.748
Adjusted R Square 0.726
Standard Error 5.195
Observations 50

ANOVA
df SS MS F Signif F
Regression 3605.7736 1201.9245 0.0000
Residual 1214.2264 26.3962
Total 49 4820.0000

Coeff StdError t Stat P-value

Intercept – 1.6335 5.8078 – 0.281 0.7798
Income 0.4485 0.1137 3.9545 0.0003
Size 4.2615 0.8062 5.286 0.0001
School – 0.6517 0.4319 – 1.509 0.1383
1. Referring to Table 14-4, what fraction of the variability in house size is explained by income, size
of family, and education?
a) 27.0%
b) 33.4%
c) 74.8%
d) 86.5%

ANSWER:
c

2. Referring to Table 14-4, which of the independent variables in the model are significant at the 2%
level?
a) Income, Size, School
b) Income, Size
c) Size, School
d) Income, School

ANSWER:
b
3. Referring to Table 14-4, when the builder used a simple linear regression model with house size
(House) as the dependent variable and education (School) as the independent variable, he
obtained an r2 value of 23.0%. What additional percentage of the total variation in house size has
been explained by including family size and income in the multiple regression?
a) 2.8%
b) 51.8%
c) 72.6%
d) 74.8%

ANSWER:
b
4. Referring to Table 14-4, which of the following values for the level of significance is the smallest
for which every explanatory variable is significant individually?
a) 0.01
b) 0.025
c) 0.05
d) 0.15

ANSWER:
d
5. Referring to Table 14-4, which of the following values for the level of significance is the smallest
for which at least two explanatory variables are significant individually?
a) 0.01
b) 0.025
c) 0.05
d) 0.15

ANSWER:
a

6. Referring to Table 14-4, which of the following values for the level of significance is the smallest
for which the regression model as a whole is significant?
a) 0.0005
b) 0.001
c) 0.01
d) 0.05

ANSWER:
a
KEYWORDS: p-value, interpretation

7. Referring to Table 14-4, what is the predicted house size (in hundreds of square feet) for an
individual earning an annual income of $40,000, having a family size of 4, and going to school a
total of 13 years?
a) 11.43
b) 15.15
c) 24.88
d) 53.87

ANSWER:
c