Allama Iqbal Open

University
Prime College (Lahore)

Level : Col. MBA Executive

Course : QUANTITATIVE
TECHINQUES (5564)

Semester : Spring 2010

Assignment # 1

Name : Agha Musa Kazim.

Father Name : Agha Dilber
Hussain.
Roll No. : AH524636
Submitted to : SAGHEER
AHMAD
Date : _______________

Question#1. Distinguish between statistics plural and statistics singular. Also discuss, with
what type of decision is statistical decision analysis concerned?

Statistics:

Statistics is the formal science of making effective use of numerical data relating to groups of individuals
or experiments. It deals with all aspects of this, including not only the collection, analysis and
interpretation of such data, but also the planning of the collection of data, in terms of the design
of surveys and experiments.[1]

Meanings of Statistics
The word statistics has two different meanings (sense) which are discussed below:
(1) Plural Sense (2) Singular Sense

1) Plural Sense (Statistical data):

In plural sense, the word statistics refer to numerical facts and figures collected in a systematic manner with a
definite purpose in any field of study. In this sense, statistics are also aggregates of facts which are expressed in
numerical form. For example, Statistics on industrial production, statistics or population growth of a country in
different years etc.

Data Characteristics :
The key characteristics of the data that is stored by a directory service correspond to size and latency. Active Directory
should store objects that are not so large that they hamper replication and not so unstable that they change before an
update replicates to all replicas in the forest. Therefore, large, unstructured data sets and data values that change
frequently are not appropriate for storage in Active Directory.
In general, Active Directory is appropriate for the storage of data that has the following characteristics:
• The data is globally useful information in the domain that needs to be replicated to each Active Directory
domain controller.
• The data has well-defined object attributes and semantics.
• The data has a useful life that is at least two times the maximum replication latency for the forest (to include
replication of data that is marked to replicate to the global catalog). In general, if data can become outdated
before the completion of a replication cycle or shortly thereafter, it should not be stored in Active Directory.
Clients should be able to tolerate the inability to update data for at least as long as it takes for the data to be
 replicated throughout the domain.
• The data-per-attribute value is not so large that it affects performance. An attribute value is replicated as a
single block of data; therefore, an attribute that is x megabyte in size requires an equivalent amount of buffer
space in the sending and in the receiving domain controllers. If the amount of required buffer space is large,
the performance of the domain controller can be adversely affected.

(2) Singular Sense (statistical method)

In singular sense, it refers to the science comprising methods which are used in collection, analysis,
interpretation and presentation of numerical data. These methods are used to draw conclusion about the
population parameter.

For Example: If we want to have a study about the distribution of weights of students in a certain
college. First of all, we will collect the information on the weights which may be obtained from the
records of the college or we may collect from the students directly. The large number of weight figures
will confuse the mind. In this situation we may arrange the weights in groups such as: “50 Kg to 60 Kg”
“60 Kg to 70 Kg” and so on and find the number of students fall in each group. This step is called a
presentation of data. We may still go further and compute the averages and some other measures which
may give us complete description of the original data.

Scope and decisions taking in stats:-

Statistics is considered by some to be a mathematical science pertaining to the collection, analysis,

interpretation or explanation, and presentation of data,[4] while others consider it a branch
of mathematics[5] concerned with collecting and interpreting data.[6] Because of its empirical roots and its
focus on applications, statistics is usually considered to be a distinct mathematical science rather than a
branch of mathematics.[7] [8]

Statisticians improve the quality of data with the design of experiments and survey sampling. Statistics
also provides tools for prediction and forecasting using data and statistical models. Statistics is applicable
to a wide variety of academic disciplines, including natural and social sciences, government, and
business.

Statistical methods can be used to summarize or describe a collection of data; this is called descriptive
statistics. This is useful in research, when communicating the results of experiments. In addition, patterns
in the data may be modeled in a way that accounts for randomness and uncertainty in the observations,
and are then used to draw inferences about the process or population being studied; this is
called inferential statistics. Inference is a vital element of scientific advance, since it provides a prediction
(based in data) for where a theory logically leads. To further prove the guiding theory, these predictions
are tested as well, as part of the scientific method. If the inference holds true, then the descriptive
statistics of the new data increase the soundness of that hypothesis. Descriptive statistics and inferential
statistics (a.k.a., predictive statistics) together comprise applied statistics.[9]

Question #1(b). Discuss in detail what are the various statistical techniques used in decision
making.

Measure of central tendency :

One of the most common quantities used to summarize a set of data is its center. The center is a single
value, chosen in such a way that it gives a reasonable approximation of normality. There are many ways
to approximate the center of a set of data. One of the most familiar and useful measures of center is the
mean, however, using only the mean to approximate normality can often be misleading. To obtain a better
understanding of what is considered normal, other measures of central tendency such as the median, the
trimmed mean, and the tri mean may be utilized in addition to the mean.

Mean:

• Defined as the arithmetic average of the set.

• Calculated by summing all values, then dividing by the number of values.
• One of the simplest measures of center to calculate.
• May provide an incomplete description of the central tendency if not accompanied by other
measures.
• Greatly affected by extreme values.

Mean is denoted by =

For ungrouped data.

For grouped data

Median:
• A commonly used robust and resistant measure of central tendency.
• Defined as the middle value when observations are ordered from smallest to largest.
 • Divides the dataset into two parts of equal size, with 50% of the values below the median and
50% of the values above the median.
• Also known as the 50th percentile.
• Insensitive to extreme values.

Trimmed Mean:
• Discards a percentage of the outlying values before calculating the arithmetic average.
• A measure that incorporates characteristics of the mean and the median.
• Less affected by outliers than the untrimmed average.
• A x% trimmed mean will eliminate the largest x% and the smallest x% of the sample before
calculated the mean.
• Typical range for x% is 5% to 25%.

Trimean:
• Weighted average of the median and the quartiles.
• Mean receives twice as much weight as the quartiles.
• More representative of the magnitude of the data values than the median.

Interpreting Measures of Central Tendency

• If the population is non-symmetrical, it is said to be skewed.

• Negatively skewed distributions:
1. Tail to the left.
2. Median always greater than mean.
• Positively skewed distributions:
1. Tail to the right.
2. Mean always greater than median.

Range:

• Defined as the difference between the largest and smallest sample values.
• One of the simplest measures of variability to calculate.
• Depends only on extreme values and provides no information about how the remaining data is
distributed.

Standard Deviation:
• The standard deviation is the square root of the sample variance.
• Defined so that it can be used to make inferences about the population variance.
Interquartile Range (IQR)
• Calculated by taking the difference between the upper and lower quartiles (the 25th percentile
subtracted from the 75th percentile).
• A good indicator of the spread in the center region of the data.
• Relatively easy to compute.
• More resistant to extreme values than the range.

Median Absolute Deviation (MAD)

• A more comprehensive alternative to the IQR by incorporating all of the data in the sample.
• MAD = median |Xi – q.5| where Xi represents each value and q.5 represents the median.

Correlation
Correlation is a statistical technique that can show whether and how strongly pairs of variables are
related. For example, height and weight are related; taller people tend to be heavier than shorter people.
The relationship isn't perfect. People of the same height vary in weight, and you can easily think of two
people you know where the shorter one is heavier than the taller one. Nonetheless, the average weight of
people 5'5'' is less than the average weight of people 5'6'', and their average weight is less than that of
people 5'7'', etc. Correlation can tell you just how much of the variation in peoples' weights is related to
their heights.

Regression

The two basic types of regression are linear regression and multiple regressions. Linear regression uses
one independent variable to explain and/or predict the outcome of Y, while multiple regressions use two
or more independent variables to predict the outcome. The general form of each type of regression is:

Linear Regression: Y = a + bX + u
Multiple Regression: Y = a + b1X1 + b2X2 + B3X3 + ... + BtXt + u
Where:
Y= the variable that we are trying to predict
X= the variable that we are using to predict Y
a= the intercept
b= the slope
u= the regression residual.
Regression is often used to determine how many specific factors such as the price of a commodity,
interest rates, particular industries or sectors influence the price movement of an asset.

Index numbers

Index numbers are designed to measure the magnitude of economic changes over time. Because they
work in a similar way to percentages they make such changes easier to compare. Briefly, this works in the
following way.
Suppose that a cup of coffee in a particular café cost 75p in 1995. In 2002, an identical cup of coffee cost
99p. How has the price changed between 1995 and 2002?
The particular time period of 1995 which we've chosen to compare against, is called the base period.
The variable for that period, in this case the 75p, is then given a value of 100, corresponding to 100%.
The index can then be calculated for the later period of 2002 as a proportionate change as follows:

The index number shows us that there has been a price increase of 32% since the base period. An index
number for a single price change like this is called a price relative.

http://www.netcomuk.co.uk/~jenolive/sindexes.html

http://www.investopedia.com/terms/r/regression.asp

http://www.surveysystem.com/correlation.htm

http://iridl.ldeo.columbia.edu/dochelp/StatTutorial/MCT/

http://technet.microsoft.com/en-us/library/cc961778.aspx

http://en.wikipedia.org/wiki/Statistics
http://www.emathzone.com/tutorials/basic-statistics/meanings-of-statistics.html

Question#2(a). For the function f(x) = 7x2 + 2x, find

i. f(0) ii. f(-3) iii. f(4)

Solution :

f(x) = 7x2 + 2x

i. f(0) = 7(0)2 + 2 (0)

=0

ii. f(-3) = 7(-3)2 + 2 (-3)

= 7(9) – 6
= 63 – 6
= 57

iii. f(4) = 7(4)2 + 2 (4)

= 7(16) + 8
= 112 + 8
= 120

Questions #2(b). Explain the different types of functions particularly useful in calculus.

Function in Calculus:
A function is usually written as f, g, or something similar - although it doesn't have to be. A function is
always defined as "of a variable" which tells us what to replace in the formula for the function.

For example, tells us:

• The function f is a function of x.

• To evaluate the function at a certain number, replace the x with that number.
• Replacing x with that number in the right side of the function will produce the function's output
for that certain input.
• The definition of is interpreted, "Given a number, f will return two more than the triple of that
number."

Thus, if we want to know the value (or output) of the function at 3:

 We evaluate the function at x = 3.
The value of at 3 is 11.

Note that means the value of the dependent variable when takes on the value of 3. So we see that
the number 11 is the output of the function when we give the number 3 as the input. We refer to the input
as the argument of the function (or the independent variable), and to the output as the value of the
function at the given argument (or the dependent variable). A good way to think of it is the dependent
variable 'depends' on the value of the independent variable . This is read as "the value of f at three
is eleven", or simply "f of three equals eleven".

Modern understanding of functions :

The formal definition of a function states that a function is actually a rule that associates elements of one
set called the domain of the function, with the elements of another set called the range of the function. For
each value we select from the domain of the function, there exists exactly one corresponding element in
the range of the function.

To make it simple, for the function f(x), all of the possible x values constitute the domain, and all of the
values f(x) (y on the x-y plane) constitute the range.

Functions in Calculus :

i. Constant
function
It disregards the input and always outputs the constant c, and is a polynomial
of the zero degree where f(x) = cx0= c(1) = c. Its graph is a horizontal line.

ii. Linear function

Takes an input, multiplies by m and adds c. It is a polynomial of the first
degree. Its graph is a line (slanted, except m = 0).
iii. Identity function

Takes an input and outputs it unchanged. A polynomial of the first degree,

f(x) = x1 = x. Special case of a linear function.
iv. Quadratic
function
A polynomial of the second degree. Its graph is a parabola, unless a = 0.
(Don't worry if you don't know what this is.)
v. Polynomial
function
The number n is called the degree.
 vi. Signum function

Question # 3(a): Discuss in detail the methods of representing large quantities of data in
matrix form.

Data can be represented in matrix form;

Transportation Problem:

• The unit cost of transportation of an item from each of the two factories to each of the three
warehouses can be represented in matrix form as given below;

Similarly, time matrix can be

constructed [t0], where [t0] =time of
transportation of an item from factory I to
warehouse j.The time of transportation is independent of the amount shipped.

Distance matrix:

Distance matrix (in kms) between given numbers of cities can be represented as matrix as below;

Diet matrix:

The vitamin contents of two types of foods and two types of vitamins can be represented in matrix form
as;
Assignment matrix

The time required to perform three jobs

by three workers can be represented in matrix
form;

By this matrix we present large quantities of data in matrix form.

Pay-off matrix

Suppose two players A and B play a coin tossing game. If outcome (A, A) or (B, B) occurs, then player B
loses rupees 10 to player A, otherwise gains as shown below;

The minus sign with the pay-off means that player a pays to B.

Brand switching matrix

The proportion of users in the population surveyed switching to brand j of an item in a period, given that
they were using brand I can be represented as a matrix;

Here the sum of elements of each row is 1 because theses are proportions.
Questions # 3(b). Describe the concept of Maxima and Minima with managerial applications.

Maxima and Minima :

Maxima and Minima, known collectively as extrema, are the largest value (maximum) or smallest value
(minimum), that a function takes in a point either within a given neighborhood (local extremum) or on the
function domain in its entirety.

Here point A is Local maxima and point B is Local minima .At each of these points ,the tangent of the
curve is parallel to the x-axis .So the derivative of the function is zero. Both of these points are stationary
points of the function. The term local is used thus these points are the maximum and minimum in this
particular region .There may be others outside this region.

Further on the gradients to the curve are :

# to the left of A ,the gradients are positive (+)

# between A and B the gradients are negative (-)

# to the right of B , the gradients are positive (+)

About the local maximum point A, the gradient changes from positive to Zero to negative . The gradient is
therefore decreasing.

Question #4(a). Primary data is collected through different sources. Please identify and
briefly explain these sources.

Primary data :
Primary data is a data collected from primary sources.

Primary source is a term used in a number of disciplines to describe source material that is closest to the
person, information, period, or idea being studied. Primary data collection is necessary when a researcher
cannot find the data needed in secondary sources. Market researchers are interested in primary data about
demographic/socioeconomic characteristics, attitudes/opinions/interests, awareness/knowledge,
intentions, motivation, and behavior.

Three basic means of obtaining primary data are:

1. observation
2. surveys
3. experiments

The choice will be influenced by the nature of the problem and by the availability of time and money.
Examples include surveys, interviews, observations, and ethnographic research. A good researcher knows
how to use both primary and secondary sources in her writing and to integrate them in a cohesive fashion.
Conducting primary research is a useful skill to acquire as it can greatly supplement research in secondary
sources, such as journals, magazines, or books. Primary research is an excellent skill to learn as it can be
useful in a variety of settings including business, personal, and academic

Advantages:

Answer specific questions

Current
Known Source
Secrecy can be maintained

Disadvantages:

Time Consuming
Expensive
Applications Of Primary Data:
• When you are working on a local problem that may not have been addressed before and little
research is there to back it up.
• When you are working on writing about a specific group of people or a specific person.
• When you are working on a topic that is relatively new or original & few publications exist on the
subject.
• You can also use primary research to confirm or dispute national results with local trends
Types of Primary Research:

Interviews:
Interviews are one-on-one or small group question and answer
Sessions. Interviews will provide a lot of information from a small number of people and are useful when
you want to get an expert or knowledgeable opinion on a subject
Surveys:
Surveys are a form of questioning that is more rigid than Interviews and that involve larger groups of
people. Surveys will provide limited amount of information from a large group of people and are useful
when you want to learn what a larger population thinks.
Observations:
Observations involve taking organized notes about occurrences in the world. Observations provide you
insight about specific people, events, or locales and are useful when you want to learn more about an
event without the biased viewpoint of an interview.

Analysis:

Analysis involves collecting data and organizing it in some fashion based on criteria you develop. They
are useful when you want to find some trend or pattern. A type of analysis would be to record
commercials on three major television networks and analyze gender roles.
Question #4(b). What important point to be kept under consideration while designing a
questionnaire? How would you check reliability and validity of the developed questionnaire?
Explain.

Questionnaire:

Questionnaires are a popular means of collecting data, but are difficult to design and often require many
rewrites before an acceptable questionnaire is produced.

Advantages:

• Can be used as a method in its own right or as a basis for interviewing or a telephone survey.

• Can be posted, e-mailed or faxed.

• Can cover a large number of people or organizations.

• Wide geographic coverage.

• Relatively cheap.

• No prior arrangements are needed.

• Avoids embarrassment on the part of the respondent.

• Respondent can consider responses.

• Possible anonymity of respondent.

• No interviewer bias.

Disadvantages:

• Design problems.

• Questions have to be relatively simple.

• Historically low response rate (although inducements may help).

• Time delay whilst waiting for responses to be returned.

• Require a return deadline.

 • Several reminders may be required.

• Assumes no literacy problems.

• No control over who completes it.

• Not possible to give assistance if required.

• Problems with incomplete questionnaires.

• Replies not spontaneous and independent of each other.

• Respondent can read all questions beforehand and then decide whether to complete or not. For
example, perhaps because it is too long, too complex, uninteresting, or too personal.

Questionnaire Design:
Theme and covering letter :

The general theme of the questionnaire should be made explicit in a covering letter. You should state who
you are; why the data is required; give, if necessary, an assurance of confidentiality and/or anonymity;
and contact number and address or telephone number. This ensures that the respondents know what they
are committing themselves to, and also that they understand the context of their replies. If possible, you
should offer an estimate of the completion time. Instructions for return should be included with the return
date made obvious. For example: ‘It would be appreciated if you could return the completed
questionnaire by... if at all possible’.

Instructions for completion :

You need to provide clear and unambiguous instructions for completion. Within most questionnaires
these are general instructions and specific instructions for particular question structures. It is usually best
to separate these, supplying the general instructions as a preamble to the questionnaire, but leaving the
specific instructions until the questions to which they apply. The response method should be indicated
(circle, tick, cross, etc.). Wherever possible, and certainly if a slightly unfamiliar response system is
employed, you should give an example.

Appearance :

Appearance is usually the first feature of the questionnaire to which the recipient reacts. A neat and
professional look will encourage further consideration of your request, increasing your response rate. In
addition, careful thought to layout should help your analysis. There are a number of simple rules to help
improve questionnaire appearance:

• Liberal spacing makes the reading easier.

• Photo-reduction can produce more space without reducing content.

• Consistent positioning of response boxes, usually to the right, speeds up completion and also
avoids inadvertent omission of responses.
 • Choose the font style to maximize legibility.

• Differentiate between instructions and questions. Either lower case and capitals can be used, or
responses can be boxed.

Length :

There may be a strong temptation to include any vaguely interesting questions, but you should resist this
at all costs. Excessive size can only reduce response rates. If a long questionnaire is necessary, then you
must give even more thought to appearance. It is best to leave pages unnumbered; for respondents to flick
to the end and see ‘page 27’ can be very disconcerting!

Order :

Probably the most crucial stage in questionnaire response is the beginning. Once the respondents have
started to complete the questions they will normally finish the task, unless it is very long or difficult.
Consequently, you need to select the opening questions with care. Usually the best approach is to ask for
biographical details first, as the respondents should know all the answers without much thought. Another
benefit is that an easy start provides practice in answering questions.

Once the introduction has been achieved the subsequent order will depend on many considerations. You
should be aware of the varying importance of different questions. Essential information should appear
early, just in case the questionnaire is not completed. For the same reasons, relatively unimportant
questions can be placed towards the end. If questions are likely to provoke the respondent and remain
unanswered, these too are best left until the end, in the hope of obtaining answers to everything else.

Open questions :

An open question such as ‘What are the essential skills a manager should possess?’ should be used as an
adjunct to the main theme of the questionnaire and could allow the respondent to elaborate upon an earlier
more specific question. Open questions inserted at the end of major sections, or at the end of the
questionnaire, can act as safety valves, and possibly offer additional information. However, they should
not be used to introduce a section since there is a high risk of influencing later responses. The main
problem of open questions is that many different answers have to be summarized and possibly coded.
Question# 5: The average starting salary of an MBA degree holder from a certain university is Rs.
10,000/-per month with a standard deviation of Rs 1000/-. Assuming the starting salaries follow a normal
distribution:

a. What is the probability that the starting salary will be more than Rs. 12000/-.

b. Out of 200 Degree holders, how many are expected to get salaries less than Rs. 9000/-.

SOLUTION:

We Are Given In This Equation

Average Salary=

Standard Deviation=

As We Know That

Z=X- /

Here x=12,000

So Z=12,000-10,000/1000

Or Z= 2000/1000

Or Z=2

For Z=2 Area=0.4772

Required area=Area Of Right Side-Area From Z

= o to Z 2

Now

= 0.5-0.4772

= 0.0228
So probability is 0.0228 of getting salary Rs 12000

(b)

Now Here

X=9,000

SO as we know that

Z=X- /

Z=9,000-10,000/1000

Z= -1000/1000

Z= -1

Now for Z=-1 Are

Area= .3413

Required area=Area Of Left Side-Area From Z

= -1 to Z

= .5-.3413

= .1587

Out Of 200 Degree Holders The Expected Numbers Of Students Which Are Getting Salary Less Than
9000 Are

= 200 .1587

= 31.74 Number Of Students

Approximately 32 Students Out Of 200 Degree Holders Which Are Getting Less Than 9000 Salary