QMBM0610 @ABE 2010 H/500/3699

Q
M
B
M
0
6
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The Association of Business Executives
Diploma
1.14 QMBM
Quantitative Methods for
Business and Management
Afternoon 8 June 2010
1 Time allowed: 3 hours.
2 Answer any FOUR questions.
3 All questions carry 25 marks. Marks for subdivisions of questions are shown in brackets.
4 No books, dictionaries, notes or any other written materials are allowed in this
examination.
5 Calculators, including scientic calculators, are allowed providing they are not
programmable and cannot store or recall information. Electronic dictionaries and
personal organisers are NOT allowed. All workings should be shown.
6 Candidates who break ABE regulations, or commit any misconduct, will be disqualied
from the examinations.
7 A Formulae sheet and tables for the Normal and Chi-Squared distributions are provided
on pages 10-14.
8 Question papers must not be removed from the Examination Hall.
Q
QMBM0610 2
Answer any FOUR questions
Q1 (a) A life insurance salesperson succeeds in selling 1 new policy for every 5 potential
customers contacted. During a particular week, 4 new potential customers are
contacted. Use the binomial distribution to nd the probability that the salesperson will
succeed in selling:
(i) 1 or 2 new policies during the week;
(5 marks)
(ii) At least 2 new policies during the week.
(5 marks)
(b) (i) Find the area under the standard normal curve between z
1
= 1.5 and z
2
= 1.5.
(3 marks)
(ii) If the area under the standard normal curve to the left of z
3
is 0.0749, nd the
value of z
3
.
(3 marks)
(c) The life of an engine component is normally distributed with a mean running time of
1,500 hours and a standard deviation of 200 hours. Find the probability that a randomly
selected component will run for:
(i) More than 1,800 hours;
(3 marks)
(ii) Fewer than 1,400 hours;
(3 marks)
(iii) Between 1,450 and 1,750 hours.
(3 marks)
(Total 25 marks)
QMBM0610 3 [Turn over
Q2 (a) Consider the following set of measurements which represent the unemployment rates
(%) of 12 countries:
7 9 11 5 3 5 10 12 5 6 7 4
(i) Find the mean, median and mode of these 12 unemployment rates.
(5 marks)
(ii) Find the range and standard deviation of the 12 unemployment rates.
(5 marks)
(b) The following set of data represents a frequency distribution of the unemployment
rates (%) of 50 countries:
Unemployment rate
Frequency
(%)
0 but under 2 5
2 but under 4 10
4 but under 6 15
6 but under 8 10
8 but under 10 6
10 but under 12 4
(i) Calculate the mean and median of the distribution of the unemployment rates
above.
(5 marks)
(ii) Demonstrate that the sample standard deviation is equal to 2.8.
(5 marks)
(iii) Find the coefcient of skewness and comment on the result.
(5 marks)
(Total 25 marks)
QMBM0610 4
Q3 In the following set of data, INF represents a countrys rate of ination (%) and UN
represents the countrys unemployment rate (%) over a period of 10 years:
UN
(%) (%)
5 8
5 9
4 10
4 11
2 12
2 8
6 7
9 5
12 3
12 3
(a) Find the means and standard deviations of INF and UN.
(5 marks)
(b) Find the equation of the least-squares regression line, assuming that INF is the
dependent variable (y) and that UN is the independent variable (x).
(5 marks)
(c) Calculate the correlation coefcient and comment on the strength of the relationship
between INF and UN.
(5 marks)
(d) Use your result in (b) to predict the rate of ination in a year when the rate of
unemployment is 15%. Comment on the likely accuracy of your prediction.
(5 marks)
(e) Use your result in (b) to determine what the rate of unemployment would have to be for
the rate of ination to be:
(i) 1.5%
(3 marks)
(ii) 0%
(2 marks)
(Total 25 marks)
QMBM0610 5 [Turn over
Q4 (a) Distinguish between the additive model and the multiplicative model in time-series
analysis.
(5 marks)
(b) The following set of data represents a mining companys quarterly production levels
( y), in thousands of tonnes, over 3 years:

Year Quarter
Production
( y)
2007 1 2
2 5
3 4
4 10
2008 1 4
2 12
3 15
4 25
2009 1 10
2 22
3 28
4 45
(i) Calculate a centred four-point moving average trend.
(5 marks)
(ii) Using the multiplicative model and the trend estimated in (i), estimate the
seasonal factors in each quarter (to 3 decimal places).
(5 marks)
(iii) Use the trend estimated in (i) and the seasonal factors estimated in (ii) to forecast
the companys production in all 4 quarters of 2010 (to the nearest whole
numbers).
(5 marks)
(iv) Comment on the likely accuracy of your forecasts in (iii).
(5 marks)
(Total 25 marks)
QMBM0610 6
Q5 (a) In a random sample of 1,400 members of a countrys voting population, 644 say that
they will support Party A at the next general election. The leader of Party A claims that
the party has more than 50% support from the voting population. You are asked to test
the party leaders claim.
(i) State the null and alternative hypotheses and determine the critical values of z
for a test at the 5% level of signicance.
(5 marks)
(ii) Calculate the test statistic and draw an appropriate conclusion.
(5 marks)
(b) Researchers are interested in testing whether there is a signicant difference between
the level of support for Party A in the western and eastern regions of the country. A
random sample of 500 voters is taken in the western region and 250 show support for
Party A. A random sample of 900 voters is taken in the eastern region and 394 show
support for the party.
(i) State appropriate null and alternative hypotheses and determine the critical value
of z for a test at the 1% level of signicance.
(5 marks)
(ii) Calculate the test statistic and draw an appropriate conclusion.
(10 marks)
(Total 25 marks)
QMBM0610 7 [Turn over
Q6 (a) Change the base of the following index from year 2003 to year 2005:
Year Index
2003 100
2004 116
2005 120
2006 130
2007 145
(5 marks)
(b) A factory produces 3 types of agricultural equipment: tractors, ploughs and balers. The
following table shows the prices of the 3 items and the quantities produced for the 2
years, 2008 and 2009:
Year 2008 2009
Items
Price per unit
(000)
Quantity
Price per unit
(000)
Quantity
Tractor 45 300 55 250
Plough 7 500 6 600
Baler 3 200 2 250
(i) Calculate an unweighted aggregate price index for the factorys agricultural
equipment for 2009, using 2008 as the base year.
(5 marks)
(ii) Calculate an unweighted geometric mean of price relatives for 2009, using 2008
as the base year.
(5 marks)
(iii) Construct a Laspeyres price index for 2009, using 2008 as the base year.
(5 marks)
(iv) Construct a Paasche price index for 2009, using 2008 as the base year.
(5 marks)
(Total 25 marks)
QMBM0610 8
Q7 (a) A rm that produces a single product has xed costs of 140,000 per month and a
variable cost of 120 per unit. It sells its product at a price of 190 per unit, regardless
of the number of units sold.
(i) Find the break-even level of monthly output.
(5 marks)
(ii) Calculate the monthly output at which the rm would make a monthly prot of
70,000.
(5 marks)
(iii) If xed costs increase to 160,000 per month, but variable cost falls to 100 per
unit, calculate the unit price for the rm to make a monthly prot of 50,000 when
2,000 units per month are produced.
(5 marks)
(b) Two alternative business strategies, Strategy A and Strategy B, have the following
probability distributions of net prots:
Strategy A
Net Prot Probability
20m 0.5
0 0.3
-10m 0.2
Strategy B
Net Prot Probability
8m 0.3
5m 0.7

(i) Find the expected monetary value (EMV) for each of the two strategies and state
which strategy you would recommend the business to pursue.
(5 marks)
(ii) Outline the limitations of EMV analysis when deciding between Strategies A and
B.
(5 marks)
(Total 25 marks)

QMBM0610 9 [Turn over
Q8 (a) Distinguish between simple random sampling and stratied sampling.
(5 marks)
(b) To investigate the average amount spent each year on home insurance by pensioners
(people aged 65 or more), a random sample of 800 pensioners is selected. The
following results are calculated from the sample data (denoted by x):
x = 124,000
x
2
= 20,800,000
(i) Find the sample mean and the sample standard deviation of x.
(5 marks)
(ii) Calculate 90% and 95% condence intervals for the population mean.
(5 marks)
(iii) Find the sample size that would be required to estimate the population mean to
within 5 with a 95% condence interval.
(5 marks)
(iv) A home insurance company claims that pensioners spend an average of 162 on
home insurance each year. Test this hypothesis, using a 5% level of signicance.

(5 marks)
(Total 25 marks)
End of Question Paper
QMBM0610 10
Geometric mean of ungrouped data:
(where represents the product of)
GM x
n
0
FORMULAE FOR QUANTITATIVE METHODS
Mean of ungrouped data:

x
x
n

Mean of grouped data:
Median of grouped data:
(where L is the lower boundary of the median class, F is the cumulative frequency
up to the median class, f is the frequency of the median class and i is the width of
the median class)
Mode of grouped data:
(where L is the lower boundary of the modal class, f
m
is the frequency of the modal
class, f
m1
is the frequency of the pre-modal class, f
m+1
is the frequency of the post-
modal class and i is the width of the modal class)
Standard deviation of ungrouped data:
Standard deviation of grouped data:
x
fx
n

f x x
f
fx
f
x
( )

2 2
2
o

( )

x x
n
x
n
x
2 2
2
Median L
n
F
f
i
j
(
,
\
,
(

2

Mode L
f f
f f f
i
m m
m m m

j
(
,
\
,
(

+

1
1 1
2
QMBM0610 11 [Turn over
Regression:
Pearson correlation:
Spearmans rank correlation:
Binomial distribution:
Poisson distribution:
Standard normal distribution:
Confidence interval for a mean:
,

y a bx
b
n xy x y
n x x
a y bx

2 2
R
n xy x y
n x x n y y
R b
x
y

2 2 2
2

Laspeyres price index

p q
p q
price index Paasche
p q
p q

1 0
0 0
1 1
0 1
100
100
z
x

x z
n
R
d
n n



1
6
1
2
2

P x C p q
n x
x n x
( )

P x
e
x
x
( )
!

Coefficient of skewness:
Sk
x x
s
x s
3(

)

(where is the median and is the standard deviation)

QMBM0610 12
Confidence interval for a proportion:
Test statistic for a single mean:
Test statistic for a difference between means:
Test statistic for a single proportion:
Test statistic for a difference between proportions:
Chi-squared test statistic:
r p z
pq
n
z
x
n

o
0
z
x x
n n

+
1 2
1
2
1
2
2
2

z
p
n

( )
r

0
0 0
1

2
2

O E
E

z
p p
pq
n n
where p
n p n p
n n
and q p
+
j
(
,
\
,
(

+
+

1 2
1 2
1 1 2 2
1 2
1 1
1

,
QMBM0610 13 [Turn over
Areas in the right-hand tail of the Normal distribution
z .00 .01 . 02 .03 . 04 .05 . 06 .07 . 08 .09
0. 0 . 5000 .4960 .4920 .4880 .4840 .4801 .4761 .4721 .4681 .4641
0. 1 . 4602 .4562 .4522 .4483 .4443 .4404 .4364 .4325 .4286 .4247
0. 2 . 4207 .4168 .4129 .4090 .4052 .4013 .3974 .3936 .3897 .3859
0. 3 . 3821 .3783 .3745 .3707 .3669 .3632 .3594 .3557 .3520 .3483
0. 4 . 3446 .3409 .3372 .3336 .3300 .3264 .3228 .3192 .3156 .3121
0. 5 . 3085 .3050 .3015 .2981 .2946 .2912 .2877 .2843 .2810 .2776
0. 6 . 2743 .2709 .2676 .2643 .2611 .2578 .2546 .2514 .2483 .2451
0. 7 . 2420 .2389 .2358 .2327 .2296 .2266 .2236 .2206 .2177 .2148
0. 8 . 2119 .2090 .2061 .2033 .2005 .1977 .1949 .1922 .1894 .1867
0. 9 . 1841 .1814 .1788 .1762 .1736 .1711 .1685 .1660 .1635 .1611
1. 0 . 1587 .1562 .1539 .1515 .1492 .1496 .1446 .1423 .1401 .1379
1. 1 . 1357 .1335 .1314 .1292 .1271 .1251 .1230 .1210 .1190 .1170
1. 2 . 1151 .1132 .1112 .1093 .1075 .1056 .1038 .1020 .1003 .0985
1. 3 . 0968 .0951 .0934 .0918 .0901 .0885 .0869 .0853 .0838 .0823
1. 4 . 0808 .0793 .0778 .0764 .0749 .0735 .0721 .0708 .0694 .0681
1. 5 . 0668 .0655 .0643 .0630 .0618 .0606 .0594 .0582 .0571 .0559
1. 6 . 0548 .0537 .0526 .0516 .0505 .0495 .0485 .0475 .0465 .0455
1. 7 . 0446 .0436 .0427 .0418 .0409 .0401 .0392 .0384 .0375 .0367
1. 8 . 0359 .0351 .0344 .0336 .0329 .0322 .0314 .0307 .0301 .0294
1. 9 . 0287 .0281 .0274 .0268 .0262 .0256 .0250 .0244 .0239 .0233
2.0 .02275 .02222 .02169 .02118 .02068 .02018 .01970 .01923 .01876 .01831
2.1 .01786 .01743 .01700 .01659 .01618 .01578 .01539 .01500 .01463 .01426
2.2 .01390 .01355 .01321 .01287 .01255 .01222 .01191 .01160 .01130 .01101
2.3 .01072 .01044 .01017 .00990 .00964 .00939 .00914 .00889 .00866 .00842
2.4 .00820 .00798 .00776 .00755 .00734 .00714 .00695 .00676 .00657 .00639
2.5 .00621 .00604 .00587 .00570 .00554 .00539 .00523 .00508 .00494 .00480
2.6 .00466 .00453 .00440 .00427 .00415 .00402 .00391 .00379 .00368 .00357
2.7 .00347 .00336 .00326 .00317 .00307 .00298 .00289 .00280 .00272 .00264
2.8 .00256 .00248 .00240 .00233 .00226 .00219 .00212 .00205 .00199 .00193
2.9 .00187 .00181 .00175 .00169 .00164 .00159 .00154 .00149 .00144 .00139
3.0 .00135
3.1 .00097
3.2 .00069
3.3 .00048
3.4 .00034
3.5 .00023
3.6 .00016
3.7 .00011
3.8 .00007
3.9 .00005
4.0 .00003
O Z
Area in the table
z
QMBM0610 14 2914-114-1
Chi-Squared Critical Values
p value
df 0.25 0.20 0.15 0.10 0.05 0.025 0.02 0.01 0.005 0.0025 0.001 0.0005
1
1.32 1.64 2.07 2.71 3.84 5.02 5.41 6.63 7.88 9.14 10.83 12.12
2
2.77 3.22 3.79 4.61 5.99 7.38 7.82 9.21 10.60 11.98 13.82 15.20
3
4.11 4.64 5.32 6.25 7.81 9.35 9.84 11.34 12.84 14.32 16.27 17.73
4
5.39 5.59 6.74 7.78 9.49 11.14 11.67 13.23 14.86 16.42 18.47 20.00
5
6.63 7.29 8.12 9.24 11.07 12.83 13.33 15.09 16.75 18.39 20.51 22.11
6
7.84 8.56 9.45 10.64 12.53 14.45 15.03 16.81 13.55 20.25 22.46 24.10
7
9.04 9.80 10.75 12.02 14.07 16.01 16.62 18.48 20.28 22.04 24.32 26.02
8
10.22 11.03 12.03 13.36 15.51 17.53 18.17 20.09 21.95 23.77 26.12 27.87
9
11.39 12.24 13.29 14.68 16.92 19.02 19.63 21.67 23.59 25.46 27.83 29.67
10
12.55 13.44 14.53 15.99 18.31 20.48 21.16 23.21 25.19 27.11 29.59 31.42
11
13.70 14.63 15.77 17.29 19.68 21.92 22.62 24.72 26.76 28.73 31.26 33.14
12
14.85 15.81 16.99 18.55 21.03 23.34 24.05 26.22 28.30 30.32 32.91 34.82
13
15.93 16.98 18.90 19.81 22.36 24.74 25.47 27.69 29.82 31.88 34.53 36.48
14
17.12 18.15 19.40 21.06 23.68 26.12 26.87 29.14 31.32 33.43 36.12 38.11
15
18.25 19.31 20.60 22.31 25.00 27.49 28.26 30.58 32.80 34.95 37.70 39.72
16
19.37 20.47 21.79 23.54 26.30 28.85 29.63 32.00 34.27 36.46 39.25 41.31
17
20.49 21.61 22.98 24.77 27.59 30.19 31.00 33.41 35.72 37.95 40.79 42.88
18
21.60 22.76 24.16 25.99 28.87 31.53 32.35 34.81 37.16 39.42 42.31 44.43
19
22.72 23.90 25.33 27.20 30.14 32.85 33.69 36.19 38.58 40.88 43.82 45.97
20
23.83 25.04 26.50 28.41 31.41 34.17 35.02 37.57 40.00 42.34 45.31 47.50
21
24.93 26.17 27.66 29.62 32.67 35.48 36.34 38.93 41.40 43.78 46.80 49.01
22
26.04 27.30 28.82 30.81 33.92 36.78 37.66 40.29 42.80 45.20 48.27 50.51
23
27.14 28.43 29.98 32.01 35.17 38.08 38.97 41.64 44.18 46.62 49.73 52.00
24
28.24 29.55 31.13 33.20 36.42 39.36 40.27 42.98 45.56 48.03 51.18 53.48
25
29.34 30.68 32.28 34.38 37.65 40.65 41.57 44.31 46.93 49.44 52.62 54.95
26
30.43 31.79 33.43 35.56 38.89 41.92 42.86 45.64 48.29 50.83 54.05 56.41
27
31.53 32.91 34.57 36.74 40.11 43.19 44.14 46.96 49.64 52.22 55.48 57.86
28
32.62 34.03 35.71 37.92 41.34 44.46 45.42 48.28 50.99 53.59 56.89 59.30
29
33.71 35.14 36.85 39.09 42.56 45.72 46.69 49.59 52.34 54.97 58.30 60.73
30
34.80 36.25 37.99 40.26 43.77 46.98 47.96 50.89 53.67 56.33 59.70 62.16
40
45.62 47.27 49.24 51.81 55.76 59.34 60.44 63.69 66.77 69.70 73.40 76.09
50
56.33 53.16 60.35 63.17 67.50 71.42 72.61 76.15 79.49 82.66 86.66 89.56
60
66.98 68.97 71.34 74.40 79.08 83.30 84.58 88.38 91.95 95.34 99.61 102.7
80
88.13 90.41 93.11 96.58 101.9 106.6 108.1 112.3 116.3 120.1 124.8 128.3
100
109.1 111.7 114.7 118.5 124.3 129.6 131.1 135.8 140.2 144.3 149.4 153.2
QMBM0610 15 [Turn over
Diploma
Quantitative Methods for Business and Management
Examiners Suggested Answers
Q1 (a) (i) p = 0.2
q = 0.8
n = 4
P(1) = 4C1 (0.2) (0.8)
3
= 0.4096
P(2) = 4C2 (0.2)
2
(0.8)
2
= 0.1536
P(1 or 2) = P(1) + P(2) = 0.4096 + 0.1536 = 0.5632
(ii) P(0) = 0.8
4
= 0.4096
P(at least 2) = 1 - (0.4096 + 0.4096) = 0.1808
(b) (i) Area between z1 = -1.5 and z2 = 1.5 is:
2 0.4332 = 0.8664
(ii) 0.0749 is the area to the right of z = 1.44.
So if the area to the left of z3 = 0.0749, z3
must equal -1.44.
(c) (i) z = (1800 - 1500)/200 = 1.5
P(more than 1800) = 0.0668
(ii) z = (1400 - 1500)/200 = -0.5
P(fewer than 1400) = 0.3085
(iii) z1 = (1450 1500)/200 = -0.25
z2 = (1750 1500)/200 = 1.25
P(between 1450 and 1750)
= 1 (0.4013 + 0.1057) = 0.493
Q2 (a) (i) Mean = 84 / 12 = 7
Median = 6.5
Mode = 5
(ii) Range = 12 3 = 9
92
Standard deviation (n) =
12
= 2.77
[Standard deviation (n 1) = 2.89 is also acceptable]
(b) (i) x f fx fx
2
1 5 5 5
3 10 30 90
5 15 75 375
7 10 70 490
9 6 54 486
11 4 44 484
50 278 1930
Mean = 278/50 = 5.56
25 5
Median = 4+
15
x2 = 5.33
(ii) SD =
as required.
3(5.56 5.333)
(iii) Skewness =
2.8
= 0.243
There is a small degree of positive skew i.e. the distribution has a tail to
the right.
QMBM0610 16
80 . 2 56 . 5
50
1930
49
50
1
2 2
2
= =

x
n
fx
n
n
Q3 y x x2 xy y2
5 8 64 40 25
5 9 81 45 25
4 10 100 40 16
4 11 121 44 16
2 12 144 24 4
2 8 64 16 4
6 7 49 42 36
9 5 25 45 81
12 3 9 36 144
12 3 9 36 144
61 76 66 368 495
(a) Mean of x = 76/10 = 7.6
SD of x =
Mean of y = 61/10 = 6.1
SD of y =
(b)
(10x368) (76x61)
b =
(10x666) 76
2
= 1.08
a = 6.1 (1.08x7.6) = 14.32
So the required regression equation is:
y = 14.321.08x
2.973
(c) R = 1.08x
3.506
= -0.92
This represents a strong degree of negative linear correlation.
(d) y = 14.32(1.08x15) = 1.88%
So we predict y equal to -1.88% (deflation) when x = 15%. The correlation coefficient is
high, but the sample size is small. Therefore the prediction is not likely to be very
accurate. Also, x = 15 is outside the range of the data, so extrapolation is required to
make the prediction. The prediction might be improved by the inclusion of other factors
that are likely to influence inflation.
(e) (i) For the rate of inflation to be 1.5%, we require:
1.5 = 14.32 1.08x x = 11.9%
(ii) For the rate of inflation to be 0%, we require:
0 = 14.32 1.08x x = 13.3%
QMBM0610 17 [Turn over
368 , 61 , 666 , 76 , 10
2
= = = = =

xy y x x n
973 . 2 6 . 7
10
666
2
=
506 . 3 1 . 6
10
495
2
=
Q4 (a) In the additive model, a time-series variable is assumed to be equal to the sum of its
components (the trend, and the seasonal, cyclical and random variations). In the
multiplicative model, a time-series variable is assumed to be equal to the product of its
components. The additive model is generally preferred if the regular variations remain
relatively constant over time, while the multiplicative model is preferred if the regular
variations tend to increase (or decrease) proportionally with the trend.
(b) (i) The moving average trend is given by:
5.5, 6.625, 8.875, 12.125, 14.75, 16.75, 19.625, 23.75
(ii) Years Q1 Q2 Q3 Q4
1 0.72727 1.50943
3 4
2 0.45070 0.98969 1.01694 1.49253
4 1 9 7
3 0.50955 0.92631
4 6
Averages 0.48012 0.95800 0.87211 1.50098 (Sum =
9 3 1 6 3.811229)
Adjusted to sum 0.50391 1.00545 0.91530 1.57533
to 4 3 7
To three decimal places, the seasonal factors are:
Q1 0.504
Q2 1.005
Q3 0.915
Q4 1.575
(iii) The average increase in the trend is:
(23.75 5.5)/7 = 2.607
The forecasts for 2010 are:
Q1:[23.75 + (3 (2.607))] 0.504 = 15.91 (16)
Q2:[23.75 + (4 (2.607))] 1.005 = 34.35 (34)
Q3:[23.75 + (5 (2.607))] 0.915 = 33.66 (34)
Q4:[23.75 + (6 (2.607))] 1.575 = 62.04 (62)
(iv) The forecasts look reasonable compared with the previous years data, and the
multiplicative model is appropriate since the seasonal variations get bigger over
the three years. However, the forecasts are not likely to be very accurate because
the sample size is small (only three years) and other factors that may influence the
companys production levels are ignored. These might include wage costs, the
price of the product and changes in demand.
QMBM0610 18
Q5 (a) (i) H0: 0.5
H1: 0.5
[The hypotheses may also be expressed in percentages]
This is a one-tailed test, so the critical value at the 5% level is -1.645.
(ii) p = 644/1400 = 0.46
And therefore:
[The formula may also be expressed using percentages]
We can reject the null hypothesis at the 5% level. The evidence does not support
the leaders claim.
(b) (i) H0:
This is a two-tailed test so the critical value at the 1% level is 2.576
(ii)
z =
We cannot reject the null hypothesis at the 1% level. The evidence suggests that
the level of support for the socialist party is not significantly different in the two
regions.
Q6 (a) 83.33, 96.67, 100, 108.33, 120.83
(b) (i) A simple aggregate index (SAI) for 2009, using 2008 as the base year, is given by:
63
SAI =
55
x100 = 114.54
QMBM0610 19 [Turn over

0 =
E W

H
1
: 0
E W

53 . 2
1000
5 . 0 5 . 0
5 . 0 46 . 0
=

= z
24 . 2
900
1
500
1
54 . 0 46 . 0
4378 . 0 5 . 0
=

54 . 0
46 . 0
1400
644

4378 . 0
900
394
5 . 0
500
250
=
= =
= =
= =
q
p
p
p
E
W
(ii) The geometric mean of price relatives (GMPR) for 2009, using 2008 as the base
year, is given by:
(ii) A Laspeyres index (LI) for 2009, using 2008 as the base year, is given by:
(iii) A Paasche index (PI) for 2009, using 2008 as the base year, is given by:
Q7 (a) (i) TR = 190Q
TC = 140,000 + 120Q
For break-even, 190Q - 120Q - 140000 = 0
Q = 2000 units
(ii) To find the required output (Q), solve:
190Q - 120Q 140000 = 70000
70Q = 210000
Q = 3000 units
(iii) To find the required price (P), solve:
2000P- 200000 - 160000 = 50000
2000P = 410000
P = 205
(b) (i) EMVA = (0.5 20) + 0 + (0.2 -10) = 8m
EMVB = (0.3 8) + (0.7 5) = 5.9m
On the EMV criterion, strategy A is recommended.
(ii) Although strategy A has the higher EMV, it carries the chance of a 10m loss,
which could be very serious for the company. A risk-averse firm may select a
strategy that minimises the chance of making a large loss, which in this case
would be strategy B, while a risk-taker may select the strategy which gives the
highest chance of a large profit, in this case A. There may also be non-pecuniary
factors, such as the preferred location of the new activity and the level of
employment that may be created by each strategy. The environmental effects
(externalities) of the two strategies could also be important.
QMBM0610 20
72 . 88 100
3
2
7
6
45
55
3
= = GMPR
07 . 113 100
17600
19900
100
2008 2008
2008 2009
= = =

q p
q p
LI
19 . 110 100
16200
17850
100
2009 2008
2009 2009
= = =

q p
q p
PI
Q8 (a) A simple random sample gives every member of the population an equal chance of
selection. However, when there are distinct groups or strata in the population, it is
useful to ensure that members from each stratum are represented in the sample.
The sampling frame is divided into the known strata and random samples are then
taken from each stratum in the same proportions as in the population. This is known as
a stratified sample,
124000
(i) Mean =
800
x100 = 155
SD =
(ii) 90% confidence interval:
155 (1.645 ) = 155 2.59
95% confidence interval:
155 (1.96 ) = 155 3.08
(iii) To find the required sample size, n, solve:
n = 304
(iv) H0:
This is a two-tailed test, so the critical value atthe 5% level is 1.96.
The null hypothesis can be rejected. The evidence does not support the
insurance companys claim.
QMBM0610 21
800
47 . 44
800
47 . 44
162 =
H
1
: 162
45 . 4
800
47 . 44
162 155
=

= z
5
47 . 44
96 . 1 =
n
47 . 44 155
800
20800000
799
800
2
=