The Hong Kong University of Science and Technology
Department of ISOM
ISOM2500 Business Statistics
(L1, 2022 Fall)
Assignment 1, due on October 2nd at 11:59 p.m.
• Full mark of this assignment is 100.
• Please show your calculation steps clearly.
• Numerical answers should be either exact or corrected to at least 4 significant figures.
• Please print out the graphs that are required to be plotted in excel and paste them to your
assignment in pdf or word for submission.
• This is a group assignment; each group only requires submitting ONE set of assignment.
• Each groupmate should work on at least TWO questions. In each question, you need to mark
down who did it unless you do the assignment individually.
• It is optional to upload the scanned hand-written or typed version assignment before
submission. The format should be either pdf or word.
For questions 2-4, please use HW1.xlsx and excel to answer. For the remaining questions, please do
them in handwritten form and upload the scan version on Canvas before the deadline.
1. A biology researcher is interested in the distribution of the blood types of Hong Kong citizens. He
then randomly selected 1,000 citizens and conducted phone interviews with them asking for their
blood types. The result is presented in the following bar chart:
The distribution o the blood types of these 1,000
citizens
45
40
35
30
25
20
15
10
5
0
O A B AB
a. What is the sample in this study?
b. Which kind of variable is the blood type belongs to, numerical, ordinal or nominal?
c. What is the mode and median of the blood types of these 1,000 citizens? If the statistic is
not applicable to use, explain the reason briefly.
[10 marks]
2. For ‘ApplicantIncome’,
a. Plot a histogram with 30 bins.
b. Plot a boxplot.
c. Find the mean, median and sample standard deviation.
d. Briefly describe the shape of the distribution (mode and skewness).
e. Are there any potential outliers? Explain your answer briefly.
[15 marks]
3. For ‘ApplicantIncome’ and ‘LoanAmount’,
a. Plot a scatter plot of ‘LoanAmount’ against ‘ApplicantIncome’ with a linear trend line.
b. Find the sample covariance and correlation coefficient between two variables.
c. Find the coefficients of variation of the two variables and compare the dispersion of the
two variables.
d. Briefly describe the association between the two variables (direction, curvature, variation
and outliers).
[15 marks]
4. For ‘Education’ and ‘Loan_Status’,
a. Construct a two-way contingency table for ‘Education’ and ‘Loan_Status’, where
‘Education’ represents the columns and ‘Loan_Status’ represents the rows.
b. Find the probability that an applicant successfully applies a loan given that he is a
graduate.
c. Plot a vertical stacked bar chart between ‘Education’ and ‘Loan_Status’ with a legend,
where ‘Loan Status’ is the x-axis.
d. Compute the Crammer’s V between ‘Education’ and ‘Loan_Status’.
e. How strong is the association between ‘Education’ and ‘Loan_Status’? Briefly explain
your answer.
[15 marks]
5. A company conducted a survey of its employees to determine their attitude toward a buyout of the
company’s stock. Each of the company’s 1040 employees was asked whether they favored the
buyout and whether they planned to retire within the next 15 years. The number of employees
falling in the four buyout-retirement categories are shown in the following table:
Suppose an employee is selected at random from the company.
a. What is the probability that the employee does not favor a buyout?
b. What is the probability that the employee will not retire within the next 15 years?
c. What is the probability that the employee does not favor the buyout given that he or she
plans to retire within the next 15 years?
[15 marks]
6. A student had a quiz that contained 4 true-false questions with 2 options ‘True’ and ‘False’ for
each question. Assume the outcome of each question is independent to each other.
a. Write down the sample space of the quiz.
b. Find the probabilities that the student only answered one question correctly.
c. Find the probabilities that the student answered either the third or the fourth question
correctly.
d. Are the two events in (b), (c) statistically independent to each other? Please explain your
answer.
[15 marks]
7. The return of a stock is a random variable, 𝑋. The distribution of 𝑋 is describe as below:
𝑋 -3% 0% 5%
𝑝(𝑋) 0.3 0.1 𝑎
Suppose 𝑋 only has three outcomes: 𝑋 = −0.03, 𝑋 = 0 and 𝑋 = 0.05.
a. What is the value of 𝑎?
b. What is the expected value of 𝑋?
c. What is the standard deviation of 𝑋?
d. Given that another stock is also a random variable, 𝑌, with mean 𝜇! = 1% and standard
deviation 𝜎! = 1.5% . Suppose the risk-free rate is 0.5%. Which stock should we prefer
more for investment, 𝑋 or 𝑌? Explain your answer briefly.
(Hint: use the concept presented in lectures)
[15 marks]
