Assignment #2

Presented To: Prof Brand

Presented By: Megan O`Brien (3744256)

Course Code: ADM 2303B

Date Submitted: Monday, November-09-09

Statement of Academic Integrity:

This work conforms to the rules on academic integrity of the University of Ottawa:

Signature: ___¨Megan O`Brien¨

Question 1

Plan a. Draw time series graphs of this export data and identify any major
differences between the “Customs” and “Balance of Payments”
series.
b. Explain which basis of calculation, “Customs” or “Balance of
Payments”, would be appropriate (together with other information)
for (i) projecting Canada’s foreign exchange earnings and (ii)
planning capacity in Canadian ports?
c. Are there any exceptional periods during which exports of wheat,
zinc, fertilizer or industrial machinery have differed from overall
trends?
d. Calculate the 4x4 correlation matrix of exports of wheat, zinc,
fertilizer and industrial machinery on a “Customs” basis for the time
period covered by the data set. Why are some elements of this
matrix equal to 1? Between which pair of products is the correlation
strongest? What does this correlation mean?

Do a. The time series graphs of this export data (Appendix A and

B) may be used as reference for analyzing results for both
customs and balance of payments.
b. (i) The Balance of Payments (BOP) data is most appropriate
for projecting Canada’s foreign exchange earnings as is
related to currency exchange for payment for goods and
services exported and are not subject of only customs data.
(ii)The Customs Basis data is related to the physical
movement of goods out of Canada there as well as the
stock of material, therefore would be best for planning of
Canadian ports.
c. Pertaining to the Customs Basis and Balance of Payments
data Industrial Machinery on average is increasing from
1999-01 to 2009-05 however around from 1999-01 until
2003-09 the smooth trace is on a slight increase. Around
2004-01 there is a dip in Exports, then after 2004-01 the
smooth trace for Machinery increases more steadily until
2008-09, then falling again until 2009-05. When speaking
of the smooth trace line for Wheat, exports remain steady
from 1999-01 until 2006-01. Wheat increases until 2008-03
however there is a sharp increase from the beginning of
2008 until the 5th period, this is followed by a sharp
decrease until 2008-05. Fertilizer is much the same;
exports remain relatively constant until 2007-07. Then we
 see a sharp increase from 2008-01 until 2008-09. This is
followed by a sharp decrease until 2009-05. Customs Basis
Exports and Balance of Payments data for Zinc remains
relatively constant from 1999-01 until 2009-05.
d. The 4x4 correlation matrix (Appendix C) the elements of
this matrix will be discussed in the next section.

Report Some elements of the matrix are equal to 1 because the correlation measures
the strength of the linear association between two quantitative variables. If
you notice the 1`s are present when measuring the correlation of an export
with itself (wheat and wheat) therefore there is a complete correlation.
Correlation is the strongest, excluding exports measured against themselves,
is between Fertilizer and Industrial Machinery at 0.732. The correlation is a
means of standardizing variables, turning the coordinates of each point into
a pair of z-scores. These scores are used to summarize the direction and
strength of the association for all the points. If most of the points are in the
quadrants where the z-scores have the same signs, the sum will be positive
as is the case for the exports. However on the other hand if most are in the
quadrants where the z-scores have opposite signs, it will be negative. For
the purposes of calculating the correlation coefficient it is helpful to have
the sum, mean and standard deviation for each data set.

3.36E+
Sum 4.14E+10 09 3.89E+10 1.68E+11
269152 31113440
Mean 330935200 00 0 1345173600
129499094. 249665 13916072
St Dev 7 33 7.5 170941386.9
With this information it is much easier to calculate the ratio.
R= (sum(x - st dev(x))(y – st dev(y))) / (n - 1)sxsy

There is also a high correlation between wheat and fertilizer

followed by a correlation between wheat and industrial
machinery.
Appendix A

Appendix B

Appendix C

Industrial
Wheat Zinc Fertilizer Machinery
Wheat 1
0.03561233
Zinc 4 1
-
Fertiliz 0.66376259 0.046
er 3 05 1
Industri
al -
Machin 0.53165124 0.024 0.7327859
ery 1 11 43 1

Question 2

a. The mean is 32,000 and the standard deviation is 2,500 miles. The 68-95-
99.7 rule tells us roughly how the values are distributed using a normal
model. About 68% of the values fall within one standard deviation of the
mean, about 95% of the values fall within two standard deviations of the
mean, and about 99.7 of the values fall within three standard deviations of
the mean. Therefore, three standard deviations from the mean would be
39,500miles. Therefore it is unlikely that the tires will last until 40,000 miles.
b. The fraction of tires that can be expected to last less than 30,000 miles can be calculated
by (30,000 – 32,000)/2500 = -0.8 This means that 30,000 is -0.8 away from the mean.
c. Since we have already calculated the z fraction for 30,000 miles however in order to
calculated the Z score for 35,000 miles. Z = (35,000 – 32,000)/2500 = 1.2. Therefore
using the 68-95-99.7 rule we can expect approximately 68% as the answer is
-0.8<=z<=1.2.
d. Estimate the Inter Quartile Range for these data, specifically Q1 and Q3. I have estimated
Q1 as 29,500 while Q3 is 34,500 miles.
e. Since the dealer only wants to refund 1 of every 25 customers. Therefore 1/25 is 4%
since this is less than -3 standard deviations from the mean. This means that the dealer
cannot guarantee refunds for more over 24,500 miles.
Question 3

a. I have decided to use the Uniform Model as it shares the principle that all
events should be equally likely, but with a continuous model, we can`t talk
about the probability of a particular value because each value has probability
zero. Instead, for a continuous random variable X, we say that the probability
that X lies in any interval depends only on the length of that interval.
b. P(x) = (d - c)/(b - a), (24-0)/(24-0) therefore the probability is 1 that the next faulty phone
will happen in 1 day or less
c. E(x)=(a+b)/2, a=0 and b=24 therefore E(x)=(0+24)/2 = 12hrs Where as Var(x)=(b-a)2/12,
SD(x)= (sq rt((b-a)2))/12 = 2 hours.
d. The expected time till the next faulty phone is 12 hours. Then the 12 hours becomes zero
and the process starts over counting to 24hours.
e. The expected time until the next faulty phone is discovered is approximately within the
next 9hrs.
 f. P(x)=(7-0)/(24-0), the probability of finding a faulty phone during the next 7 hours is
29%
Question 4
a. The relationship between Total Mortgages in millions of dollars and interest rates is that
of a negative relationship as Total Mortgages decrease, interest rates increase.
b. If we standardized both variables, the correlation coefficient between the standardized
variables would be -0.84 as stated in the question.
c. If we were to measure total mortgages in thousands of dollars instead of millions of
dollars the correlation coefficient would not change because in the end we are still
standardizing the total amount for each variable within the mortgage range.
d. Including that year with these data would case the correlation coefficient to decrease
therefore stating a lesser degree of association between the two variables.

e. Not this underestimate will not have ramifications on previous calculations of the
correlation because each year`s mortgages will be increased by the same amount. Having
said this the correlation coefficient will remain the same.

f. If interest rates are lower people are not deterred away as much from taking out more
mortgages much like they may be if interest rates were very high however we cannot say
that direct proof is given that if mortgage rates are lowered, people will take out more
mortgages. Although the two, mortgages and interest rates, are related this is because of a
number of different factors. For example when people are taking out more mortgages
banks can more readily decrease interest rates.
Question 5
a. The percentage of respondents that are alumni are 56/1415 = 0.039 or 4%.
b. The percent of respondents that are very likely to buy the calendar are 481/1415= 0.3399
or 33.99%.
c. Of just the alumni, 18/56=0.3214 or 32.14% are very likely to buy the calendar.
d. The marginal distribution of the campus groups in % is: Students make up 63.95%,
Faculty/staff makes up 23.88%, the alumni is 3.9%, and finally the town residents make
up 8.19%
e. The conditional distribution in % of the campus among those very likely to buy the
calendar: Student is 66.52%, Faculty/staff makes up 20.37%, the alumni is 3.74%, and
the town residents make up 9.35%.
f. This study suggests that the company should focus on selling to the students as they make
up the largest percentage of those that are very likely to purchase the calendar.
Question 6
The mean number of calls that the small engine shop would receive would receive during an 8
hour day is 1.7 x 8 which equals 13.6. The Standard deviation therefore would be sq rt(13.6) =
3.68 calls. In order to make these calculations it was important to assume that the calls happen
independently of each other and that the mean number of occurrences stays constant.