Question 01:

Given that,
n = 15
a) The mean for the number of cars per household is,
xi
Mean =
n
=

(1+3+0+2+ 0+2+2+0+2+2+3+2+1+1+2)
15

= 1.533
The mean for the household disposable income is,
Mean =

xi
n

=
(1 00+100+30+50+30+30+ 100+ 30+100+50+100+50+50+ 30+ 50)
15
= $ 60000
For find out the median arrange the data into highest to lowest order then we find
Car: 0,0,0,1,1,1,2,2,2,2,2,2,2,3,3.
House Income: 30,30,30,30,30,50,50,50,50,50,100,100,100,100,100
The median for the number of car is 2
The median for the house hold disposable income is 50000
The mode for the number of car is 2 which is owned by the 7 house hold so it is the highest value
in the data series.
But the mode for the house hold disposable income can be 30000, 50000 or 100000 because
every data is in the number of 5.
After analysis the data series we find mean, median and mode. I think the median represent the
best job for describing the central tendency for each variable. Because in median the result shows

the best central data and there is a tendency shows here that maximum of the data in the data
series are very close to the result.
b) Range:
For calculating the range I have to find out the highest value and the lowest value, here for
number of car the highest and lowest values are 3 and 0. For household income the highest and
lowest values are 100000 and 30000. So the range can be
Car = ( 0 3 )
Household = ( 30000 100000 )
Variance and standard deviation :
Here for number of car

= 1.533

Now,
Number of cars
xi

(xi-x )

(xi-x ) ^2

1.533
1.533
1.533
1.533
1.533
1.533
1.533
1.533
1.533
1.533
1.533
1.533
1.533
1.533
1.533

-0.533

0.284089

1.467

2.152089

-1.533

2.350089

0.467

0.218089

-1.533

2.350089

0.467

0.218089

0.467

0.218089

-1.533

2.350089

0.467

0.218089

0.467

0.218089

1.467

2.152089

0.467

0.218089

-0.533

0.284089

-0.533

0.284089

0.467
0.005

0.218089
13.73334

3
0
2
0
2
2
0
2
2
3
2
1
1
2
23

22.995
2

Variance,

s2

( xix )
n1

13.733
151

13.733
14

= 0.9809
Standard deviation, s =
=

s2
0.9809

= 0.990
Here for household income

x = $ 60000.

Now,
Household Income
xi

(xi-x )

(xi-x ) ^2

100

60
60
60
60
60
60
60
60
60
60
60
60
60
60
60

40

1600

40

1600

-30

900

-10

100

-30

900

-30

900

40

1600

-30

900

40

1600

-10

100

40

1600

-10

100

-10

100

-30

900

-10
0

100
13000

100
30
50
30
30
100
30
100
50
100
50
50
30
50
900

900

Variance,

( xix )
n1

13000
151

13000
14

= 928.42
Standard deviation, s =
=

s2
928.42

= $ 30.47 ( Thousand)
Here the sample size is very small so it is better to find out the 95% confidence interval by
examining with t- test.
Now,
df

= 15 1
= 14

For 95% confidence interval the population mean of number of car,

=

x t (
2

=1.533

t 0.05
2

0.99

15

= 1.533 2.145 * 0.2556169 [ from t table find the value of t ]

= 2.081 ( upper bound) or 0.985 ( lower bound)
Again,

For 95% confidence interval the population mean of household income,

=

x t (
2

= 60

30.47

( 15

t 0.05
2

= 60 2.145 * 7.867320171 [ from t table find the value of t ]

= 76.88 ( upper bound) or 43.13 ( lower bound )

Broader study:
Given that,
Mean for disposable income is $ 60000
Sample size, n = 196
Population mean, = 42500
Standard deviation,

= $ 3000

Here the population standard deviation is given so I can use z statistics to find out the confidence
interval. Here z statistics can also used to test the hypothesis that the mean level of income in
Denver suburb of Geness, Colorado is same as the population
=

= $ 60000

z
2

( n
z 0.05
2

$ 3000

196

= $ 60000 1.96 * 214.2857 [ from z table find the z value ]

= 60420 ( upper bound ) or 59580 ( lower bound )

The hypothesis to be tested is that the mean income for Denver area equals to the overall
population, Ho = = 42500, when, = $ 3000

Now,

Z=

n
$ 60000$ 42500
3000
196

= 81.67
So the null hypothesis can be rejected.

Question 02:
A) Given that,
Sales = $20.065 + $6.062 R&D
R2 = 99.8%
SEE= 233.75
F= 8460.40
From the regression model with the sales revenue as a dependent variable (Y), and R&D
expenditure as an independent variable (X) yield, which is sales= $20.065 + $6.062 R&D.
If there is 0 expenditure for R&D then the sales will $ 20.065. Here for R&D expenditure the
estimated coefficient is $6.062 and for every $1 change of R&D expenditure the total sales will
increase in $6.062.

Now, R

= 99.8% which represent the co relation of determination. It also represent that R&D

explain 99.8% of the variation of dependent variables Y (Sale revenue).

The

R2

= 99.8% indicates the share of sales variation that can be explained by the variation

in R&D expenditures. Note that F=8460.40 implying the variation in R&D spending explains a
significant share of the total variation in firm sales. This suggest that R&D expenditures are a
key determinant of sales in the computer software industry as one might expect.
The standard error of Y estimates or SEE = $ 233.75 and is the average amount of error
considered in estimating the level of sales for any given level of R&D expenditure. If the error
are normally distributed about the regression equation as would be true when large samples are
analyzed. There are 95% probability that observation of the dependent variables will lie within
the range from Yi (1.96* SEE) to Yi + (1.96* SEE) or within the two standard errors of the
estimate. The probability is 99% that the dependent variables will lie within the range from Yi
(2.576*SEE) to Yi + (2.576* SEE) or within the three standard errors of the estimate.
From the equation, considering the t statistics at the 95% confidence of interval the t value is
2.160 and at the 99% confidence of interval the t value is 3.012 where the df = 15-2= 13. That
means, the actual sales Yt can be expected in the range from Yi (2.160* 233.75) to Yi +
(2.160* 233.75) or from Yi 504.90 to Yi + 504.90 with the 95% confidence interval. Again for
99% confidence interval the range is from Yi (3.012* 233.75) to Yi + (3.012* 233.75) or from
Yi 704.055 to Yi + 704.055.
B) Given that,
Profits = $210.31 + $2.538 R&D
R

= 99.3%

SEE= 201.30
F= 1999.90
From the regression model with the profits as a dependent variable (Y), and R&D expenditure as
an independent variable (X) yield, which is Profits = $210.31 + $2.538 R&D.
If there is 0 expenditure for R&D then the net income will $ 201.31. Here for R&D expenditure
the estimated coefficient is $2.538 and for every $1 change of R&D expenditure the net income
will increase in $ 2.538.

Now, R

= 99.3% which represent the co relation of determination. It also represent that R&D

explain 99.3% of the variation of dependent variables Y (Profits).

The

R2

= 99.3% indicates the share of sales variation that can be explained by the variation

in R&D expenditures. Note that F=1999.90 implying the variation in R&D spending explains a
significant share of the total variation in firm net income. This suggests, that R&D expenditures
are a key determinant of net income in the computer software industry as one might expect.
The standard error of Y estimates or SEE = $ 201.30 and is the average amount of error
considered in estimating the level of net income for any given level of R&D expenditure. If the
error are normally distributed about the regression equation as would be true when large samples
are analyzed. There are 95% probability that observation of the dependent variables will lie
within the range from Yi (1.96* SEE) to Yi + (1.96* SEE) or within the two standard errors of
the estimate. The probability is 99% that the dependent variables will lie within the range from
Yi (2.576*SEE) to Yi + (2.576* SEE) or within the three standard errors of the estimate.
From the equation, considering the t statistics at the 95% confidence of interval the t value is
2.160 and at the 99% confidence of interval the t value is 3.012 where the df = 15-2= 13. That
means, the actual sales Yt can be expected in the range from Yi (2.160* 201.30) to Yi +
(2.160* 201.30) or from Yi 434.808 to Yi + 434.808 with the 95% confidence interval. Again
for 99% confidence interval the range is from Yi (3.012* 201.30) to Yi + (3.012* 201.30) or
from Yi 606.3156 to Yi + 606.3156.
C)
The regression analysis shows that, there is a strong relationship with sales revenue and R&D
expenditure and net profit and R&D expenditure. There is very insignificant change or difference
in the variance in sales revenue and R&D expenditure and net profit and R&D expenditure. But
here the co relation

shows that there is little bit strong relation in sales revenue and R&D

expenditure than net profit and R&D expenditure.