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IGNOU MBA MS - 08 Solved Assignments July 2011

Course Code : MS - 8 Course Title : Quantitative Analysis for Managerial Applications Assignment Code : MS-8/SEM - II /2011 Coverage : All Blocks Note: Answer all the questions and submit this assignment on or before 31st October 2011, to the coordinator of your study center.

1. Statistics can prove anything Figures cannot lie Comment on the above two statements, indicating reasons for the existence of such divergent views regarding the nature and functions of statistics.
Answer: Statistics can prove anything is the statement of distrust: Brief Note on Distrust on Statistics

It is a general belief that statistics can prove anything. This statement is partly true & false. It is false because more statistics should not be taken for granted without proper verification. It is true because statistics is often used by unscrupulous people to achieve their personal ends. This results in loss of faith or confidence on statistics or in causing distrust of statistics. Distrust of statistics literally means lack of trust in statistical data, statistical analysis and the conclusion derived from it. We often hear statements like. i) Statistics is an unreliable science. ii) Statistics are lies of the first order. iii) There are three types of lies-lies, demand lies & statistics. iv) Figures do not lie, liars figures These are expressions of distrust in statistics these views of statistics from the misuse of statistics by interested parties. Publicity, advertisers of various products, Governments and other organizations are trying to promote their sectional interest using statistics and statistical methods. This causes distrust of statistics. Some of the important reasons of distrust in statistics are the following: a) Facts based in figures are more convincing. But these figures can be manipulated according to ones wishes. This misguides public causing distrust in statistics. b) Sometimes statistical analyses are misinterpreted causing distrust in statistics. Supposing the mortality rates of patients are more in Indian hospitals. From this one may wrongly conclude that it is safer to treat the patients at home. This type of misinterpretation also causes distrust in statistics. c) Statistics are useful tools. One uses them according to his knowledge and experience. Use of statistics makes a statement more convincing. But its misuse causes distrust. So it is necessary that people should be adequately prepared to know the reality or to shift the truth from untruth, good statistics from bad statistics. WI. King has rightly observed statistics are likely clay of which you can make a God or a Devil as you please.

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Another form of evidence is that Statistics are a favorite evidence of many writers and speakers. They provide actual numbers in support of ideas and conclusions. If you can show that 75% of high schools seniors cannot find Washington State on a map of North America, then it is strong evidence for your contention that high school seniors are not being taught the geography of the United States. Such evidence is not only difficult to refute, it's often accepted as the final word in what's true or not true. Statistics are a prime source of proof that what you say is true. Statistics are based on studies: a search for possible connections between disparate facts that nonetheless have a connection. If you remember your math classes, you will recall the concept of sets and subsets. Statistics are, in large measure, concerned with that concept. They are basically telling you the proportion a subset represents in a set. To clarify this idea, look at political polls. Candidate A receives 46% approval, Candidate B receives 43% approval. Thus, the subset "responses favoring Candidate A" is 46% of the whole set, "People asked about Candidates A and B." Another example, from real life. William Chadwick, with his assistant William Farr, during the great cholera plague in London in 1831, drew together factors on who was getting the disease and where they were getting it in London. They were looking for some common factor that would lead to what was the source of the disease. Their statistics led them to the conclusion that the polluted waters of the Thames River was the source, and there was a particular pump that supplied the water to certain neighborhoods that was a prime source of infection. With these data they were able to make recommendations which did much to reduce the incidence of cholera in London. Statistics also use samples to obtain results, rather than doing actual "head counts". Neilson ratings on how many of what kind of people watch a particular TV program is not determined by the Neilson company asking all 300 million people in the United States what they are watching every few minutes. What they use is a sample of the population (called the Neilson families) that, demographically, represent the 300 million people. Neilson selects these families very carefully since each one represents the viewing habits and desires of some 60,000 people. Nonetheless the statistics generated by the Neilson measurements are used to make programming decisions and set advertising rates and budgets, things that represent billions of dollars. Thus the selection of the sample, whether Neilson's or incidence of AIDS in the US population, is of paramount importance in the validity of the statistics thus generated. The above is, of course, a simplistic view of an extremely complicated discipline. It is, nonetheless, the essence of statistics. Statistics are invaluable as evidence in support of conclusions. If you can either find or generate statistics that show the truth of your conclusions, there are few that would refute your ideas. There are, of course, problems with using statistics as evidence. Let me remind you of a famous saying: "There are three ways to not tell the truth: lies, damned lies, and statistics." What you must do is ask yourself some questions: who did the study that came up with the statistics, what exactly are the statistics measuring, who was asked, how were they asked, and compared with what? If one believes in the truth of statistics (and there are many such), then how does one explain that the same Presidential candidate can be 20 points ahead and 5 points behind his opponent in the polls at the same time? After all, both polls are "statistics". What you must be examine, if you wish to use statistics as evidence, are the above questions.

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Figures Dont Lie, but Liars Do Figure this is the famous quote of statistics. We will prove it with the help of two real life example from history
1) I take First example from the reference of The National Library of New Zealand. Figures cant Lie A BOUT A DIVIDEND PLEASANT SURPRISE FOR INVESTORS; CHRISTCHURCH, Jan. 31 (with reference of newspaper correspondent) A good deal of curiosity was expressed, when Mr.J.Mc Dougall, who has charge of the totalisator at the trotting meetings in Canterbury, invited the investors on piecework, who won the sportsmans handicap at the New Zealand Metropolitan. Trotting Clubs meeting on Saturday, paying a substantial dividend, to meet him at his office. They were a mere handful, but they came in from the highways and hedges and at his request signed their names to a statement that they had backed the horse & indicated the windows at which their tickets had been purchased. The mystery was not fathomed for them at the moment and the popular opinion was that the totalisator had paid out too much money & was anxious to come into own again. The totalisator is of course, generally supposed to be the mechanical embodiment of that well-loved supposition that figures cannot lie; but it lied very badly on that Saturday says news, through an accident that was quite unforeseeable and that cannot in any way reflect upon its integrity. The blocks of totalisator tickets are numbered from the figure 0 in sequence, with the result that when the totalisator clerk has sold 0,1,2,3 & 4, his block shows that 5, which is the next ticket, is the number of tickets that has been disposed of. Unfortunately, in the case of piecework, the block of tickets had come from the printer in a faulty condition. The numbers from 5 to 14 inclusive were missing and when the club officials came to check the figures the block showed 15 as its top number, indicating that 15 tickets had been sold instead of 5. The dividend was worked out on this basis, and it was only when the totalisator proprietors discovered that their cash was 237over that the mistake was discovered. Fortunately the investors were singularly few, and could be easily identified by the clerks who had paid out the abort dividend and Mr. Mc Dougall has now accounted for the whole investors, who are to be paid the additional money tomorrow, after signing the necessary declarations. The mistake was first traced by the fact that the holder of the block of tickets short in his cash and in accordance with rules of the totalisator had to pay in 5 from his own pocket to make his cash balance. It is intended in future to have the blocks more systematically checked, in order that there may be no repetition of nay incident that was quite unforeseen and that was not blamable to the totalisator officials. The dividend, which was very substantial as it originally stood, has now been increased by over 50 per cent. 2) I took the 2nd example from newspaper The New York Times published on 9 th March 1988 as titled A FEW STATISTICS. FIGURES< WHICH CANNOT LIE, PRESENT SOME ASTONISHING RESULTS. From Christen Advocate.

A recent speaker says that the Negroes in this country have multiplied eight times in a century. As they have 7,000,000 now, in 1980 they will amount to 192,000,000. if they maintain the same relative rate of increase they will. The whites in 10years by birth and immigration have increased 30 percent. At this rate there will be 800,000,000 whites and over 200,000,000 negroes- in all 1,000,000,000- in the United States in 1988. Who believes either of these statements? By that method one can prove that the Methodist Episcopal Church will soon have more communicants that the world will contain people. Last year it gained 5 percent net. This rate wills double its membership every 14 years. Hence, in 1902 it will have 4,000,000; in 1916, 8,000,000;in 1930, 16,000,000;in 1944, 32,000,000;in 1958, 64,000,000;in 1972, 128,000,000 and so doubling every 14 years, in the year 2084, less than 200 years from the present date, there will be 32,768,000,000 of members of the Methodist Episcopal church in the United Sates alone. Toll on, then brethren, Do not let the fact that, according to the figures of the speaker quoted above, there will be only 6,400,000,000 negroes and 13,200,000,000 whites- in all 19,600,000,000- of people in the united States at that time disturb you. Who cares for a little deficit of 3,168,000,000? Great is Statistics! Of Course, other denominations are deluding themselves. They think they are increasing; but as we are going to include the whole population, and several thousand millions more, they must cease to exist! The only trouble is that if some of them continue to grow as at present, the multiplication table will wipe us out in the same way. From above example in favour of the initial statement we proved that figures cannot lie.

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The reason of divergent from statistics is that, anyone can change figures as per his wishes. So its not reliable at all.

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2. From the following data compute quartile deviation and the coefficient of skewness: Size 5 7 8 10 11 13 14 16 17 19 Frequency 14 24 38 20 4
Answer:: 2.From the following data compute quartile deviation and the coefficient of skewness: Size Frequency Solution: K.P. Coefficient of Sk= 0-Z A=12, C=3, dx=(x-A)/C X 5-7 8-10 11-13 14-16 17-19 F 14 24 38 20 4 100 Z= L1+ f1 - f4 (L2 L1) 2f1-f0-f2 20 38 (16-14) 2X20 38 - 4 Mid X 6 9 12 15 18 dx -2 -1 0 1 2 fdx -28 -24 0 20 08 -24 Fdx 52 24 0 20 16 112 57 14 8 10 24 11 13 38 14 16 20 17 19 4

= 14 +

= 14+ (-18)2 -2 = 14+18=32 0= A+ fdx X C N = 12+ (-24) X 3 100 = 12 -72/100 = 12- 0.72 = 11.28

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Now, K.P. Coefficient of Sk= 0-Z Sk= 11.28 -32 7.993 = -20.72/7.993 = -2.592 _________________ Now S.D= fdx/N - (fdx/N) X C _________________ = 112/100 (-24/100) X 3 __________ = 1.12 0.0576 X 3 ______ = 1.0624 X 3 = 1.0307 X 3 = 3.0921 ================================================================================== ==================================================================================

3. A bank has a test designed to establish the credit rating of a loan applicant. Of the persons, who default (D), 90% fail the test (F). Of the persons, who will repay the bank (ND), 5% fail the test. Furthermore, it is given that 4% of the population is not worthy of credit; i.e., P(D) = .04. Given that someone failed the test, what is the probability that he actually will default (When given a loan)? Answer: Not found

==================================================================== ==================================================================== 4. Strength tests carried out on samples of two yarns spun to the same count gave the following results: Number in sample 4 9 Sample Mean 50 42 Sample variance 42 56

Yarn A Yarn B

The strengths are expressed in pounds. Does the difference in mean strengths indicate a real difference in the mean strengths of the yarn? Answer: Not found

For more Solved Assignments visit: IGNOU4U.BLOGSPOT.COM =============================================================== =============================================================== 5. Write short notes on a) One-tail & two-tail tests b) Standard normal distribution c) Bayes Theorem Answer: a) One-tail & two-tail tests : Suppose we have a null hypothesis H0 and an alternative hypothesis H1. We consider the distribution given by the null hypothesis and perform a test to determine whether or not the null hypothesis should be rejected in favour of the alternative hypothesis. There are two different types of tests that can be performed. A one-tailed test looks for an increase or decrease in the parameter whereas a two-tailed test looks for any change in the parameter (which can be any change- increase or decrease). We can perform the test at any level (usually 1%, 5% or 10%). For example, performing the test at a 5% level means that there is a 5% chance of wrongly rejecting H 0. If we perform the test at the 5% level and decide to reject the null hypothesis, we say "there is significant evidence at the 5% level to suggest the hypothesis is false".

One-Tailed Test
We choose a critical region. In a one-tailed test, the critical region will have just one part (the red area below). If our sample value lies in this region, we reject the null hypothesis in favour of the alternative. Suppose we are looking for a definite decrease. Then the critical region will be to the left. Note, however, that in the one-tailed test the value of the parameter can be as high as you like.

Example
Suppose we are given that X has a Poisson distribution and we want to carry out a hypothesis test on the mean,

For more Solved Assignments visit: IGNOU4U.BLOGSPOT.COM Suppose the hypotheses are: H0: H1: We want to test if it is "reasonable" for the observed value of 3 to have come from a Poisson distribution with parameter 9. So what is the probability that a value as low as 3 has come from a Po(9)? P(X 3) = 0.0212 (this has come from a Poisson table) The probability is less than 0.05, so there is less than a 5% chance that the value has come from a Poisson(3) distribution. We therefore reject the null hypothesis in favour of the alternative at the 5% level. However, the probability is greater than 0.01, so we would not reject the null hypothesis in favour of the alternative at the 1% level.

Two-Tailed Test
In a two-tailed test, we are looking for either an increase or a decrease. So, for example, H 0 might be that the mean is equal to 9 (as before). This time, however, H 1 would be that the mean is not equal to 9. In this case, therefore, the critical region has two parts:

Example
Lets test the parameter p of a Binomial distribution at the 10% level. Suppose a coin is tossed 10 times and we get 7 heads. We want to test whether or not the coin is fair. If the coin is fair, p = 0.5 . Put this as the null hypothesis: H0: p = 0.5 H1: p 0.5 Now, because the test is 2-tailed, the critical region has two parts. Half of the critical region is to the right and half is to the left. So the critical region contains both the top 5% of the distribution and the bottom 5% of the distribution (since we are testing at the 10% level). If H0 is true, X ~ Bin(10, 0.5).

For more Solved Assignments visit: IGNOU4U.BLOGSPOT.COM If the null hypothesis is true, what is the probability that X is 7 or above? P(X 7) = 1 - P(X < 7) = 1 - P(X 6) = 1 - 0.8281 = 0.1719 Is this in the critical region? No- because the probability that X is at least 7 is not less than 0.05 (5%), which is what we need it to be. So there is not significant evidence at the 10% level to reject the null hypothesis. ______________________________________________________________________________

b). Standard normal distribution:

The Standard normal distribution is a normal distribution with a mean of 0 and a standard deviation of 1. Normal distribution can be transformed to standard normal distribution by formula:

Z= (X - )/
Where X is a score from the original normal distribution, is the mean of the original normal distribution, and is the standard deviation of original normal distribution. The standard normal distribution is sometimes call the Z distribution. A Z score always reflects the number of standard deviation above or below the mean a particular score is. For instance, if a person scored a 70 on a test with a mean of 50 and a standard deviation of 10, then they scored 2 standard deviations avobe the mean. Converting the test scores to z scores, an X of 70 would be: Z= (70-50)/10 = 2 So, a Z score of 2 means the original score was 2 standard deviations above the mean. Note that the z distribution will only be a normal distribution if the original distribution (X) is normal.

Applying the formula

Z= (X - )/
Will always produce a transformed distribution with a mean of zero and a standard deviation of one. However, the shape of the distribution will not be affected by the transformation. If X is not normal then the transformed distribution will not be normal either. One important use of the standard normal distribution is for converting between scores from a normal distribution and percentile ranks. Areas under portions of the standard normal distribution are shown below. About 0.68 (0.34+0.34) of the distribution is between -1 & 1 while about 0.96 of the distribution is between -2 & 2.

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For more Solved Assignments visit: IGNOU4U.BLOGSPOT.COM C) Bayes' Theorem

Bayes' theorem (also known as Bayes' rule) is a useful tool for calculating conditional probabilities.

Bayes' Theorem is a theorem of probability theory originally stated by the Reverend Thomas Bayes. It can be seen as a way of understanding how the probability that a theory is true is affected by a new piece of evidence. It has been used in a wide variety of contexts, ranging from marine biology to the development of "Bayesian" spam blockers for email systems. In the philosophy of science, it has been used to try to clarify the relationship between theory and evidence. Many insights in the philosophy of science involving confirmation, falsification, the relation between science and pseudosience, and other topics can be made more precise, and sometimes extended or corrected, by using Bayes' Theorem. These pages will introduce the theorem and its use in the philosophy of science. Begin by having a look at the theorem, displayed below. Then we'll look at the notation and terminology involved.

In this formula, T stands for a theory or hypothesis that we are interested in testing, and E represents a new piece of evidence that seems to confirm or disconfirm the theory. For any proposition S, we will use P(S) to stand for our degree of belief, or "subjective probability," that S is true. In particular, P(T) represents our best estimate of the probability of the theory we are considering, prior to consideration of the new piece of evidence. It is known as the prior probability of T. What we want to discover is the probability that T is true supposing that our new piece of evidence is true. This is a conditional probability, the probability that one proposition is true provided that another proposition is true. For instance, suppose you draw a card from a deck of 52, without showing it to me. Assuming the deck has been well shuffled, I should believe that the probability that the card is a jack, P(J), is 4/52, or 1/13, since there are four jacks in the deck. But now suppose you tell me that the card is a face card. The probability that the card is a jack, given that it is a face card, is 4/12, or 1/3, since there are 12 face cards in the deck. We represent this conditional probability as P(J|F), meaning the probability that the card is a jack given that it is a face card. (We don't need to take conditional probability as a primitive notion; we can define it in terms of absolute probabilities: P(A|B) = P(A and B) / P(B), that is, the probability that A and B are both true divided by the probability that B is true.)

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Using this idea of conditional probability to express what we want to use Bayes' Theorem to discover, we say that P(T|E), the probability that T is true given that E is true, is the posterior probability of T. The idea is that P(T|E) represents the probability assigned to T after taking into account the new piece of evidence, E. To calculate this we need, in addition to the prior probability P(T), two further conditional probabilities indicating how probable our piece of evidence is depending on whether our theory is or is not true. We can represent these as P(E|T) and P(E|~T), where ~T is the negation of T, i.e. the proposition that T is false.

When to Apply Bayes' Theorem:

Part of the challenge in applying Bayes' theorem involves recognizing the types of problems that warrant its use. You should consider Bayes' theorem when the following conditions exist. The sample space is partitioned into a set of mutually exclusive events { A1, A2, . . . , An }. Within the sample space, there exists an event B, for which P(B) > 0. The analytical goal is to compute a conditional probability of the form: P( A k | B ). You know at least one of the two sets of probabilities described below. P( Ak B ) for each Ak P( Ak ) and P( B | Ak ) for each Ak

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