A young entrepreneur has just raised $30,000 from investors, and she would like to invest it while she continues her fund-raising in hopes of starting her company one year from now. She wants to do due diligence and understand the risk of each of her investment options. After speaking with her colleagues in finance, she believes that she has three choices: (1) she can purchase a $30,000 certificate of deposit (CD); (2) she can invest in a mutual fund with a balanced portfolio; or (3) she can invest in a growth stock that has a greater potential payback but also has greater volatility. Each of her options will yield a different payback on her $30,000, depending on the state of the economy. During the next year, she knows that the CD yields a constant annual percentage rate, regardless of the state of the economy. If she invests in a balanced mutual fund, she estimates that she will earn as much as 12% if the economy remains strong, but could possibly lose as much as 4% if the economy takes a downturn. Finally, if she invests all $30,000 in a growth stock, experienced investors tell her that she can earn as much as 40% in a strong economy, but may lose as much as 40% in a poor economy. Estimating these returns, along with the likelihood of a strong economy, is challenging. Therefore, a “sensitivity analysis” is often conducted, where figures are computed using a range of values for each of the uncertain parameters in the problem. Following this advice, this investor decides to compute measures for a range of interest rates for CDs, a range of returns for the mutual fund, and a range of returns for the growth stock. In addition, the likelihood of a strong economy is unknown, so she will vary these probabilities as well. Assume that the probability of a strong economy over the next year is 0.3, 0.5, or 0.7. To help this investor make an informed decision, evaluate the expected value and volatility of each of her investments using the following ranges of rates of growth: CD: Look up the current annual rate for the return on a 3-year CD and use this value {0.5%. mutual fund: Use values of 8%, 10%, and 12% for a strong economy and values of 0%, -2%, and -4% for a weak economy. growth stock: Use values of 10%, 25%, and 40% in a strong economy and values of -10%, -25%, and -40% in a weak economy. Discuss the expected returns and uncertainty of each of the alternative investment options for this investor in each of the scenarios you analyzed. Be sure to compare the volatility of each of her options.
> A small maker of video games designs a pricing experiment. They know that some teens self-identify as “gamers,” while others do not. They market a new video game to gamers and non-gamers, and they send half of each gro
> Recently, a group of adults who swim regularly for exercise were evaluated for depression. It turned out that these swimmers were less likely to be depressed than the general population. The researchers said the difference was statistically significant.
> A Danish study published in the Archives of Internal Medicine casts significant doubt on suggestions that adults who drink wine have higher levels of “good” cholesterol and fewer heart attacks. These researchers followed a group of individuals born at a
> Contrast bath treatments use the immersion of an injured limb alternately in water of two contrasting temperatures. Those who use the method claim that it can reduce swelling. Researchers compared three treatments: (1) contrast baths and exercise, (2)
> An option to buy a stock is priced at $200. If the stock closes above 30 on May 15, the option will be worth $1000. If it closes below 20, the option will be worth nothing, and if it closes between 20 and 30 (inclusively), the option will be worth $200.
> An experiment showed that subjects fed the DASH diet were able to lower their blood pressure by an average of 6.7 points compared to a group fed a “control diet.” All meals were prepared by dietitians. a) Why were the subjects randomly assigned to the d
> The analyst who designed the experiment in Exercise 28 obtained the data, which is plotted are in the graph below. a) Is there an interaction effect that is large enough to be worrisome? b) The regional manager of the chain is having trouble interpreti
> A supermarket wants to see the effects of coupons on spending. They believe that male and female heads of households will respond differently to the coupons. The supermarket chooses 200 males and 200 females, and sends half of each group the coupon, whil
> A humor piece published in the British Medical Journal (“Parachute Use to Prevent Death and Major Trauma Related to Gravitational Challenge: Systematic Review of Randomized Control Trials,” Gordon, Smith, and Pell, BMJ, 2003:327) notes that we can’t tell
> A swimsuit manufacturer wants to test the speed of its newly designed suit. The company designs an experiment by having 6 randomly selected Olympic swimmers swim as fast as they can with their old swimsuit first and then swim the same event again with th
> A running-shoe manufacturer wants to test the effect of its new sprinting shoe on 100-meter dash times. The company sponsors 5 athletes who are running the 100-meter dash in the 2012 Summer Olympic games. To test the shoe, it has all 5 runners run the 10
> The boxplots display case prices (in dollars) of wine produced by wineries along three of the Finger Lakes in upstate New York. a) Is this an experiment? Explain. b) Does there seem to be evidence that prices may differ by location? Explain. 150 1
> These boxplots show the relationship between the number of cylinders in a car’s engine and its fuel economy from a study conducted by a major car manufacturer. a) Is this an experiment? Explain. b) Do the boxplots indicate that cars w
> An industrial machine requires an emergency shutoff switch that must be designed so that it can be easily operated with either hand. Design an experiment to find out whether workers will be able to deactivate the machine as quickly with their left hands
> Can special study courses actually help raise SAT scores? One organization says that the 30 students they tutored achieved an average gain of 60 points when they retook the test. a) Explain why this does not necessarily prove that the special course cau
> Mary is deciding whether to book the cheaper f light home college after her final exams, but she’s unsure when her last exam will be. She thinks there is only a 20% chance that the exam will be scheduled after the last day she can get a seat on the cheap
> A Danish study published in the Archives of Internal Medicine casts significant doubt on suggestions that adults who drink wine have higher levels of “good” cholesterol and fewer heart attacks. These researchers followed a group of individuals born at a
> The makers of Frumpies, “the breakfast of rug rats,” want to improve their marketing, so they consult you. a) They first want to know what fraction of children, ages 10 to 13, like their celery-flavored cereal. What kind of study should they perform? b
> An advertisement selling specially designed CDs of Mozart’s music specifically because they will “strengthen your mind, heal your body, and unlock your creative spirit” claims that “in Japan, a brewery actually reported that their best sake is made when
> Will listening to a Mozart piano sonata make you smarter? In a published study, Rauscher, Shaw, and Ky reported that when students were given a spatial reasoning section of a standard IQ test, those who listened to Mozart for 10 minutes improved their sc
> A swimsuit manufacturer wants to test the speed of its newly designed $550 suit. They design an experiment by having 6 randomly selected Olympic swimmers swim as fast as they can with their old swimsuit first and then swim the same event again with the n
> One member of the consumer group in Exercise 13 is concerned that the experiment will take too long and makes some suggestions to shorten it. Comment brief ly on each idea. a) Cut the runs to 8 by testing only the new detergent. Compare the results to r
> An outdoor products company wants to test a new website design where customers can get information about their favorite outdoor activity. They randomly send half of the customers coming to the website to the new design. They want to see whether the Web v
> A consumer group wants to test the efficacy of a new laundry detergent. They take 16 pieces of white cloth and stain each with the same amount of grease. They decide to try it using both hot and cold water settings and at both short and long washing time
> For each description of data in Exercises 7 to 26, identify the W’s, name the variables, specify for each variable whether its use indicates it should be treated as categorical or quantitative, and for any quantitative variable identify the units in whic
> For each description of data in Exercises 7 to 26, identify the W’s, name the variables, specify for each variable whether its use indicates it should be treated as categorical or quantitative, and for any quantitative variable identify the units in whic
> A farmer has 100 lb of apples and 50 lb of potatoes for sale. The market price for apples (per pound) each day is a random variable with a mean of 0.5 dollar and a standard deviation of 0.2 dollar. Similarly, for a pound of potatoes, the mean price is 0.
> The Lackawax River Group is interested in applying for state funds to continue their restoration and conservation of the Lackawax River, a river that has been polluted from years of industry and agricultural discharge. While they have managed to gain sig
> Green River Army Depot’s main business is the repair and refurbishment of electronics, mainly satellite and communication systems, in partnership with the Department of Defense (DOD). Recently, DOD has put a great deal of effort into continuous quality i
> Kurt Williams was about to open a new SEP IRA account and was interested in exploring various investment options. Although he had some ideas about how to invest his money, Kurt thought it best to seek the advice of a professional, so he made an appointme
> Fabrizio Rivetti is an entrepreneur who has recently started a wine importing business. While he currently has an exclusive relationship with only one premier winery in Tuscany, he is hoping to expand his importing business to include other wineries as w
> Rebekkah Greene, owner of Up with Life Café and Marketplace, is a true believer in the health and healing benefits of food. She offers her customers pure, wholesome, and locally sourced products. Recently, she decided to add a line of hearty “made to ord
> Beth Tully owns Zenna’s Café, an independent coffee shop located in a small Midwestern city. Since opening Zenna’s in 2002, she has been steadily growing her business and now distributes her custom coffee blends to a number of regional restaurants and ma
> Mount Ashland Promotions Inc. is organizing one of its most popular events, the ZenNaturals Annual Trade Fest. At this trade show, producers, manufacturers, and distributors in the natural foods market display the latest trends in organic foods, herbal s
> Sarah Potterman, a doctoral student in educational psychology, is researching the effectiveness of various interventions recommended to help children with learning disabilities improve their reading skills. One particularly intriguing approach is an inte
> Jim Hopler is operations manager for a local office of a top-ranked full-service brokerage firm. With increasing competition from both discount and online brokers, Jim’s firm has redirected attention to attaining exceptional customer service through its
> A large U.S. multinational that provides field services to energy companies worldwide operates in approximately 50 countries and employs nearly 85,000 people. While very profitable, this company has had its share of controversies. The most publicized inv
> A bicycle shop plans to offer 2 specially priced children’s models at a sidewalk sale. The basic model will return a profit of $120 and the deluxe model $150. Past experience indicates that sales of the basic model will have a mean of 5.4 bikes with a st
> For each description of data in Exercises 7 to 26, identify the W’s, name the variables, specify for each variable whether its use indicates it should be treated as categorical or quantitative, and for any quantitative variable identify the units in whic
> For each description of data in Exercises 7 to 26, identify the W’s, name the variables, specify for each variable whether its use indicates it should be treated as categorical or quantitative, and for any quantitative variable identify the units in whic
> Philanthropic organizations often rely on contributions from individuals to finance the work that they do, and a national veterans’ organization is no exception. The Paralyzed Veterans of America (PVA) was founded as a congressionally chartered veterans’
> A global survey firm reports data from surveys taken in several countries. The data file Global holds data for 800 respondents in each of five countries. The variables provide demographic information (sex, age, education, marital status) and responses to
> Both drivers and auto companies are motivated to raise the fuel efficiency of cars. Recent information posted by the U.S. government proposes some simple ways to increase fuel efficiency (see www.fueleconomy.gov): avoid rapid acceleration, avoid driving
> In Chapter 1, you identified the W’s for the data in the file Credit card bank. For the categorical variables in the data set, create frequency tables, bar charts, and pie charts using your software. What might the bank want to know about these variables
> Like all credit and charge card companies, this company makes money on each of its cardholders’ transactions. Thus, its profitability is directly linked to card usage. To increase customer spending on its cards, the company sends many different offers to
> The S&P/Case-Shiller Home Price Indices track changes in the value of residential real estate nationally and in 20 metropolitan regions. (Some of these indices are actually traded on the Chicago Mercantile Exchange.) The data set Case-Shiller by City giv
> According to the U.S. Securities and Exchange Commission (SEC), a mutual fund is a professionally managed collection of investments for a group of investors in stocks, bonds, and other securities. The fund manager manages the investment portfolio and tra
> GfK Roper Consulting conducts market research for multinational companies who want to understand attitudes in different countries so they can market and advertise more effectively to different cultures. Every year they conduct a poll worldwide, which ask
> At a casino, people play the slot machines in hopes of hitting the jackpot, but most of the time, they lose their money. A certain machine pays out an average of $0.92 (for every dollar played), with a standard deviation of $120. a) Why is the standard
> Design, carry out, and analyze your own multifactor experiment. The experiment doesn’t have to involve human subjects. In fact, an experiment designed to find the best settings for microwave popcorn, the best paper airplane design, or the optimal weight
> You are part of a marketing team that needs to research the potential of a new product. Your team decides to e-mail an interactive survey to a random sample of consumers. Write a short questionnaire that will generate the information you need about the n
> The Numbeo website (www.numbeo.com) provides access to a variety of data. One table lists prices of certain items in selected cities around the world. They also report an overall cost-of-living index for each city compared to the costs of hundreds of ite
> The CAPE10 index is based on the Price/Earnings (P/E) ratios of stocks. We can examine the P/E ratios without applying the smoothing techniques used to find the CAPE10. The file CAPE10 2017 holds the data, giving dates, various economic variables, CAPE10
> Between quarterly audits, a company likes to check on its accounting procedures to address any problems before they become serious. The accounting staff processes payments on about 120 orders each day. The next day, the supervisor rechecks 10 of the tran
> Occasionally, when I fill my car with gas, I figure out how many miles per gallon my car got. I wrote down those results after six fill-ups in the past few months. Overall, it appears my car gets 28.8 miles per gallon. a) What statistic have I calculate
> How much change do you have on you right now? Go ahead, count it. a) How much change do you have? b) Suppose you check on your change every day for a week as you head for lunch and average the results. What parameter would this average estimate? c) Su
> What about drawing a random sample only from cell phone exchanges? Discuss the advantages and disadvantages of such a sampling method compared with surveying randomly generated telephone numbers from non–cell phone exchanges. Do you think these advantage
> Anytime we conduct a survey, we must take care to avoid undercoverage. Suppose we plan to select 500 names from the city phone book, call their homes between noon and 4 p.m., and interview whoever answers, anticipating contacts with at least 200 people.
> Suppose that the appliance shop in Exercise 23 plans an 8-hour day. a) Find the mean and standard deviation of the number of repair calls they should expect in a day. b) What assumption did you make about the repair calls? c) Use the mean and standard
> Examine each of the following questions for possible bias. If you think the question is biased, indicate how and propose a better question. a) Do you think that price or quality is more important in selecting a tablet computer? b) Given humanity’s grea
> Examine each of the following questions for possible bias. If you think the question is biased, indicate how and propose a better question. a) Should companies that pollute the environment be compelled to pay the costs of cleanup? b) Should a company e
> The survey described in Exercise 38 asked, Many people believe this playground is too small and in need of repair. Do you think the playground should be repaired and expanded even if that means imposing an entrance fee to the park? Describe two ways this
> The survey of patrons waiting in line for the roller coaster in Exercise 37 asks whether they think it is worthwhile to wait a long time for the ride and whether they’d like the amusement park to install still more roller coasters. What biases might caus
> Some people have been complaining that the children’s playground at a municipal park is too small and is in need of repair. Managers of the park decide to survey city residents to see if they believe the playground should be rebuilt. They hand out questi
> An amusement park has opened a new roller coaster. It is so popular that people are waiting for up to three hours for a two-minute ride. Concerned about how patrons (who paid a large amount to enter the park and ride on the rides) feel about this, they s
> Four new sampling strategies have been proposed to help PTV determine whether enough cable subscribers are likely to purchase highspeed Internet service. For each, indicate what kind of sampling strategy is involved and what (if any) biases might result.
> A local cable TV company, Pacific TV (PTV), with customers in 15 towns is considering offering high-speed Internet service on its cable lines. Before launching the new service they want to find out whether customers would pay the $75 per month that they
> Prior to the mayoral election discussed in Exercise 33, the newspaper also conducted a poll. The paper surveyed a random sample of registered voters stratified by political party, age, sex, and area of residence. This poll predicted that Amabo would win
> A local TV station conducted an “Instant Poll” to predict the winner in the upcoming mayoral election. Evening news viewers were invited to phone in their votes, with the results to be announced on the late-night news. Based on the phone calls, the stati
> For warranty purposes, analysts want to model the number of defects on a screen of the new tablet they are manufacturing. Let X = the number of defective pixels per screen. If X can be modeled by: a) What is the expected number of defective pixels
> For the following reports about statistical studies, identify the following items (if possible). If you can’t tell, then say so—this often happens when we read about a survey. a) The population b) The population parameter of interest c) The sampling fram
> For the following reports about statistical studies, identify the following items (if possible). If you can’t tell, then say so—this often happens when we read about a survey. a) The population b) The population parameter of interest c) The sampling fram
> For the following reports about statistical studies, identify the following items (if possible). If you can’t tell, then say so—this often happens when we read about a survey. a) The population b) The population parameter of interest c) The sampling fram
> For the following reports about statistical studies, identify the following items (if possible). If you can’t tell, then say so—this often happens when we read about a survey. a) The population b) The population parameter of interest c) The sampling fram
> For the following reports about statistical studies, identify the following items (if possible). If you can’t tell, then say so—this often happens when we read about a survey. a) The population b) The population parameter of interest c) The sampling fram
> For the following reports about statistical studies, identify the following items (if possible). If you can’t tell, then say so—this often happens when we read about a survey. a) The population b) The population parameter of interest c) The sampling fram
> For the following reports about statistical studies, identify the following items (if possible). If you can’t tell, then say so—this often happens when we read about a survey. a) The population b) The population parameter of interest c) The sampling fram
> For the following reports about statistical studies, identify the following items (if possible). If you can’t tell, then say so—this often happens when we read about a survey. a) The population b) The population parameter of interest c) The sampling fram
> At its website (www.gallup.com) the Gallup World Poll reports results of surveys conducted in various places around the world. At the end of one of these reports about the reliability of electric power in Africa, they describe their methods, including ex
> Pew Research Center publishes polls on issues important in the news and about American life at its website, www.pewinternet.org. At the end of a report about a survey you can find a paragraph such as this one: These readings come from a national survey c
> A commuter finds that she waits an average of 14.8 seconds at each of five stoplights, with a standard deviation of 9.2 seconds. Find the mean and the standard deviation of the total amount of time she waits at all five lights. What, if anything, did you
> Major League Baseball, responding to concerns about their “brand,” tests players to see whether they are using performance-enhancing drugs. Officials select a team at random, and a drug-testing crew shows up unannounced to test all 40 players on the team
> The website www.gamefaqs.com asked, as their question of the day to which visitors to the site were invited to respond, “Do you ever read the end-user license agreements when installing software or games?” Of the 98,574 respondents, 63.47% said they neve
> An investment newsletter makes general predictions about the economy to help their clients make sound investment decisions. a) Recently they said that because the stock market had been up for the past three months in a row that it was “due for a correct
> Even though commercial airlines have excellent safety records, in the weeks following a crash, airlines often report a drop in the number of passengers, probably because people are afraid to risk flying. a) A travel agent suggests that since the law of
> Respond to the following questions: a) After an unusually dry autumn, a radio announcer is heard to say, “Watch out! We’ll pay for these sunny days later on this winter.” Explain what he’s trying to say, and comment on the validity of his reasoning. b)
> Respond to the following questions: a) A casino claims that its roulette wheel is truly random. What should that claim mean? b) A reporter on Market Place says that there is a 50% chance that the NASDAQ will hit a new high in the next month. What is th
> Corporations are also very interested in the value of their brand. The following chart displays the value of the top 6 carbonated soft drink brands in 2015 as collected by Millward Brown (www.millwardbrown .com/brandz/top-global-brands/2015/brand-categor
> Multinational corporations face stiff competition in the carbonated drink category (also known as soda or pop, depending on where you live). Data were collected on the 2015 U.S. market share of leading sellers of carbonated soft drinks, summarized in the
> For each description of data in Exercises 7 to 26, identify the W’s, name the variables, specify for each variable whether its use indicates it should be treated as categorical or quantitative, and for any quantitative variable identify the units in whic
> For each description of data in Exercises 7 to 26, identify the W’s, name the variables, specify for each variable whether its use indicates it should be treated as categorical or quantitative, and for any quantitative variable identify the units in whic
> A grocery supplier believes that the mean number of broken eggs per dozen is 0.6, with a standard deviation of 0.5. You buy 3 dozen eggs without checking them. a) How many broken eggs do you expect to get? b) What’s the standard deviation? c) Is it ne
> For the cookie recipe experiment of Exercise 1, identify how Control, Randomization, and Replication were used. Exercise 1: For the following experiment, identify the experimental units, the treatments, the response, and the random assignment. A commer
> The American Veterinary Association claims that the annual cost of medical care for dogs averages $100, with a standard deviation of $30, and for cats averages $120, with a standard deviation of $35. a) What’s the expected difference in the cost of medi
> The amount of cereal that can be poured into a small bowl varies with a mean of 1.5 ounces and a standard deviation of 0.3 ounce. A large bowl holds a mean of 2.5 ounces with a standard deviation of 0.4 ounce. You open a new box of cereal and pour one la
> A newsletter for investors recently reported that the average stock price for a blue chip stock over the past 12 months was $72. No standard deviation was given. Is the standard deviation more likely to be $6, $16, or $60? Explain.
> A business publication recently released a study on the total number of years of experience in industry among CEOs. The mean is provided in the article, but not the standard deviation. Is the standard deviation most likely to be 6 months, 6 years, or 16
> The police department of a major city needs to update its budget. For this purpose, they need to understand the variation in their fines collected from motorists for speeding. As a sample, they recorded the speeds of cars driving past a location with a 2
> Two companies make batteries for cell phone manufacturers. One company claims a mean life span of 2 years, while the other company claims a mean life span of 2.5 years (assuming average use of minutes/month for the cell phone). a) Explain why you would
> A tire manufacturer believes that the tread life of its snow tires can be described by a Normal model with a mean of 32,000 miles and a standard deviation of 2500 miles. a) If you buy a set of these tires, would it be reasonable for you to hope that the
