ASSIGNMENTS

MB 0024
(3 credits)
Set 1
Marks 60
STATISTICS FOR MANAGEMENT
ANSWER ALL QUESTIONS
Case 1
ABC Branch of XYZ Bank has decided to give 10 Lakh of loan each on long term basis to only
two of their customers (accountholders), who are businessmen of the locality. About 20
businessmen had applied for loan in order to develop their business further. In order to reject
some of the applications (as the fund was limited), the Bank decided that accountholder who had
maintained a minimum balance of 50000 INR would only be considered for the loan. As a result,
10 applications were automatically rejected as they were not satisfying the requirement of
minimum balance. Now, the 10 applications remained and it was found that monthly minimum
balance in all the cases were more than 50000 INR for the last 12 months. Their account details
of monthly minimum balance are given below.
Month
s

Jan,
2008
Feb,
2008
Mar,
2008
Apr,
2008
May,
2008
Jun,
2008
Jul,
2008
Aug,
2008
Sept,

Monthly Minimum Balance in INR

A/C
Holde
r1
60000
70000
55000
90000
56000
80000
82000
79000
51000

A/C
Holde
r2
5600
0
7600
0
11000
0
8900
0
8800
0
5200
0
5800
0
9500
0
8600

A/C
Holder
3
66000

A/C
Holder
4
86000

74000

96000

112000
90000

19000
0
98000

84000

84000

57000

57000

96000

66000

55000

93000

76000

74000

A/C
Holde
r5
5600
0
7600
0
11000
0
8900
0
8800
0
5200
0
5800
0
9500
0
8600

A/C
Holde
r6
59000

A/C
Holde
r7
59000

A/C
Holde
r8
52000

A/C
Holde
r9
53000

A/C
Holder
10
56000

96000 78000

73000

98000

76000

12000 11500
0
0
97000 87000

11200
0
93000

11300
0
66000

12000
0
89000

98000 90000

89000

87000

86000

57000 55000

54000

59000

72000

56000 86000

55000

98000

98000

98000 99000

96000

59000

95000

88000 89000

97000

87000

84000

2008
Oct,
2008
Nov,
2008
Dec,
2008

95000
82000
83000

0
9000
0
8200
0
5500
0

95000

99000

87000

84000

56000

57000

0
9000
0
8200
0
5500
0

99000 95000

99000

95000

90000

88000 87000

88000

86000

82000

59000 59000

59000

52000

53000

You as an Assistant Branch Manager of the Bank are entrusted the task of selecting two account
holders for sanctioning the loans. How you will select the two individuals among the 10
applicants to give the loan using appropriate statistical techniques? Give proper justification for
your selection.
Answer:Mont Monthly Minimum Balance in INR
hs
A/C

A/C

A/C

Holder Holde Holde Holde

Holde

Holde

Holder

4
86000

r5
5600

r6
r7
59000 59000

r8
52000

r9
53000

10
56000

96000

0
7600

96000 78000

73000

98000

76000

55000

0
11000 112000

19000

0
11000 12000 11500

11200

11300

12000

2008
Apr,

90000

0
8900

90000

0
98000

0
8900

0
0
97000 87000

0
93000

0
66000

0
89000

2008
May,

56000

0
8800

84000

84000

0
8800

98000 90000

89000

87000

86000

80000

0
5200

57000

0
5200

57000 55000

54000

59000

72000

82000

0
5800

66000

0
5800

56000 86000

55000

98000

98000

2008
Aug,

79000

0
9500

55000

93000

0
9500

98000 99000

96000

59000

95000

2008
Sept,

51000

0
8600

76000

74000

0
8600

88000 89000

97000

87000

84000

95000

0
9000

99000

0
9000

99000 95000

99000

95000

90000

Jan,
2008
Feb,
2008
Mar,

2008
Jun,
2008
Jul,

2008
Oct,

A/C

A/C

A/C

Holde

Holde Holder

r1
60000

r2
5600

70000

0
7600

3
66000
74000

57000
96000

95000

A/C A/C

A/C

A/C

2008
Nov,
2008
Dec,

82000

0
8200

83000

0
5500

2008
Average 73.56

87000
56000

84000

0
8200

88000 87000

88000

86000

82000

57000

0
5500

59000 59000

59000

52000

53000

80.56

79.97

83.47

0
78.06

79

90.33

78.06

84.56

83.25

As an Assistant Branch Manager of the Bank, I will give 10 lakh loans to each. Give the
minimum before of 50,000 would only be considered for one and all the A/C holders have more
than 50,000 as minimum balance. While looking at the statement, it has been observed that only
two A/C holders A/C holder no. 4 and A/C holder no. 6 have maximum average balance in their
A./C, that should eligible for the loan for Rs. 10 lakh

ASSIGNMENTS
MB 0024
(3 credits)
Set 2

Marks 60
STATISTICS FOR MANAGEMENT
ANSWER ALL QUESTIONS
1. What do you mean by sample survey? What are the different sampling methods?
Briefly describe them.
Sample is a finite subset of a population drawn from it to estimate the characteristics of the
population. Sampling is a tool which enables us to draw conclusions about the characteristics of
the population.
Survey sampling describes the process of selecting a sample of elements from a target
population in order to conduct a survey.
A survey may refer to many different types or techniques of observation, but in the context of
survey sampling it most often refers to a questionnaire used to measure the characteristics and/or
attitudes of people. The purpose of sampling is to reduce the cost and/or the amount of work that
it would take to survey the entire target population. A survey that measures the entire target
population is called a census.
Sample survey can also be described as the technique used to study about a population with the
help of a sample. Population is the totality all objects about which the study is proposed. Sample
is only a portion of this population, which is selected using certain statistical principles called
sampling designs (this is for guaranteeing that a representative sample is obtained for the study).
Once the sample decided information will be collected from this sample, which process is called
sample survey.
It is incumbent on the researcher to clearly define the target population. There are no strict rules
to follow, and the researcher must rely on logic and judgment. The population is defined in
keeping with the objectives of the study.
Sometimes, the entire population will be sufficiently small, and the researcher can include the
entire population in the study. This type of research is called a census study because data is
gathered on every member of the population.
Usually, the population is too large for the researcher to attempt to survey all of its members. A
small, but carefully chosen sample can be used to represent the population. The sample reflects
the characteristics of the population from which it is drawn.
Sampling methods are classified as either probability or non-probability. In probability samples,
each member of the population has a known non-zero probability of being selected. Probability
methods include random sampling, systematic sampling, and stratified sampling. In nonprobability sampling, members are selected from the population in some non-random manner.
These include convenience sampling, judgment sampling, quota sampling, and snowball
sampling. The advantage of probability sampling is that sampling error can be calculated.
Sampling error is the degree to which a sample might differ from the population. When inferring

to the population, results are reported plus or minus the sampling error. In non-probability
sampling, the degree to which the sample differs from the population remains unknown.
Probability Sampling Methods
1.

2.

3.

Random sampling is the purest form of probability sampling. Each member of the
population has an equal and known chance of being selected. When there are very large
populations, it is often difficult or impossible to identify every member of the population,
so the pool of available subjects becomes biased.
Systematic sampling is often used instead of random sampling. It is also called an N th
name selection technique. After the required sample size has been calculated, every Nth
record is selected from a list of population members. As long as the list does not contain
any hidden order, this sampling method is as good as the random sampling method. Its only
advantage over the random sampling technique is simplicity. Systematic sampling is
frequently used to select a specified number of records from a computer file.
Stratified sampling is commonly used probability method that is superior to random
sampling because it reduces sampling error. A stratum is a subset of the population that
share at least one common characteristic. Examples of stratums might be males and
females, or managers and non-managers. The researcher first identifies the relevant
stratums and their actual representation in the population. Random sampling is then used to
select a sufficient number of subjects from each stratum. "Sufficient" refers to a sample size
large enough for us to be reasonably confident that the stratum represents the population.

Stratified sampling is often used when one or more of the stratums in the population have a low
incidence relative to the other stratums.
Non Probability Methods
1.

Convenience sampling is used in exploratory research where the researcher is interested in

getting an inexpensive approximation of the truth. As the name implies, the sample is
selected because they are convenient. This non-probability method is often used during
preliminary research efforts to get a gross estimate of the results, without incurring the cost
or time required to select a random sample.

2.

Judgment sampling is a common non-probability method. The researcher selects the

sample based on judgment. This is usually extension of convenience sampling. For
example, a researcher may decide to draw the entire sample from one "representative" city,
even though the population includes all cities. When using this method, the researcher must
be confident that the chosen sample is truly representative of the entire population.

3.

Quota sampling is the non-probability equivalent of stratified sampling. Like stratified

sampling, the researcher first identifies the stratums and their proportions as they are
represented in the population. Then convenience or judgment sampling is used to select the
required number of subjects from each stratum. This differs from stratified sampling, where
the stratums are filled by random sampling.

4.

Snowball sampling is a special non-probability method used when the desired sample
characteristic is rare. It may be extremely difficult or cost prohibitive to locate respondents
in these situations. Snowball sampling relies on referrals from initial subjects to generate
additional subjects. While this technique can dramatically lower search costs, it comes at
the expense of introducing bias because the technique itself reduces the likelihood that the
sample will represent a good cross section from the population.

2. What is the different between correlation and regression? What do you understand by
Rank Correlation? When we use rank correlation and when we use Pearsonian
Correlation Coefficient? Fit a linear regression line in the following data
X 12
Y 123

15
150

18
158

20
27
170 180

34
184

28
176

48
130

Correlation
When two or more variables move in sympathy with other, then they are said to be correlated. If
both variables move in the same direction then they are said to be positively correlated. If the
variables move in opposite direction then they are said to be negatively correlated. If they move
haphazardly then there is no correlation between them.
Correlation analysis deals with
1) Measuring the relationship between variables.
2) Testing the relationship for its significance.
3) Giving confidence interval for population correlation measure.
Regression
Regression is defined as, the measure of the average relationship between two or more variables
in terms of the original units of the data. Correlation analysis attempts to study the relationship
between the two variables x and y. Regression analysis attempts to predict the average x for a
given y. In Regression it is attempted to quantify the dependence of one variable on the other.
The dependence is expressed in the form of the equations.
Different between correlation and regression
Correlation and linear regression are not the same. Consider these differences:
Correlation quantifies the degree to which two variables are related. Correlation does not
find a best-fit line (that is regression). You simply are computing a correlation coefficient (r)
that tells you how much one variable tends to change when the other one does.

With correlation you don't have to think about cause and effect. You simply quantify how
well two variables relate to each other. With regression, you do have to think about cause
and effect as the regression line is determined as the best way to predict Y from X.

With correlation, it doesn't matter which of the two variables you call "X" and which you

call "Y". You'll get the same correlation coefficient if you swap the two. With linear
regression, the decision of which variable you call "X" and which you call "Y" matters a lot,
as you'll get a different best-fit line if you swap the two. The line that best predicts Y from X
is not the same as the line that predicts X from Y.

Correlation is almost always used when you measure both variables. It rarely is appropriate
when one variable is something you experimentally manipulate. With linear regression, the
X variable is often something you experimental manipulate (time, concentration...) and the
Y variable is something you measure.

The correlation answers the STRENGTH of linear association between paired variables, say
X and Y. On the other hand, the regression tells us the FORM of linear association that best
predicts Y from the values of X.
(2a) Correlation is calculated whenever:
-

Both X and Y is measured in each subject and quantifies how much they are linearly
associated.
In particular the Pearson's product moment correlation coefficient is used when the
assumption of both X and Y are sampled from normally-distributed populations are
satisfied
Or the Spearman's moment order correlation coefficient is used if the assumption of
normality is not satisfied.
Correlation is not used when the variables are manipulated, for example, in experiments.

(2b) linear regression is used whenever:

-

At least one of the independent variables (Xi's) is to predict the dependent variable Y.
Note: Some of the Xi's are dummy variables, i.e. Xi = 0 or 1, which are used to code
some nominal variables.
If one manipulates the X variable, e.g. in an experiment.

Linear regression are not symmetric in terms of X and Y. That is interchanging X and Y will
give a different regression model (i.e. X in terms of Y) against the original Y in terms of X.
On the other hand, if you interchange variables X and Y in the calculation of correlation
coefficient you will get the same value of this correlation coefficient.

The "best" linear regression model is obtained by selecting the variables (X's) with at least
strong correlation to Y, i.e. >= 0.80 or <= -0.80

The same underlying distribution is assumed for all variables in linear regression. Thus,
linear regression will underestimate the correlation of the independent and dependent when
they (X's and Y) come from different underlying distributions.

Spearman's rank correlation coefficient or Spearman's rho, named after Charles Spearman

and often denoted by the Greek letter (rho) or as rs, is a nonparametric measure of correlation
that is, it assesses how well an arbitrary monotonic function could describe the relationship
between two variables, without making any other assumptions about the particular nature of the
relationship between the variables. Certain other measures of correlation are parametric in the
sense of being based on possible relationships of a parameterized form, such as a linear
relationship.
In principle, is simply a special case of the Pearson product-moment coefficient in which two
sets of data Xi and Yi are converted to rankings xi and yi before calculating the coefficient. In
practice, however, a simpler procedure is normally used to calculate . The raw scores are
converted to ranks, and the differences di, between the ranks of each observation on the two
variables are calculated.
If there are no tied ranks, then is given by:

Where:
di = xi yi = the difference between the ranks of corresponding values Xi and Yi, and
n = the number of values in each data set (same for both sets).
If tied ranks exist, classic Pearson's correlation coefficient between ranks has to be used instead
of this formula.

One has to assign the same rank to each of the equal values. It is an average of their positions in
the ascending order of the values.
Conditions under which P.E can be used:
1. Samples should be drawn from a normal population.
2. The value of r must be determined from sample values.
3. Samples must have been selected at random.

3. What do you mean by business forecasting? What are the different methods of business
forecasting? Describe the effectiveness of time-series analysis as a mode of business
forecasting. Describe the method of moving averages.
Business forecasting refers to the analysis of past and present economic conditions with the
object of drawing inferences about probable future business conditions. To forecast the future,
various data, information and facts concerning to economic condition of business for past and
present are analyzed. The process of forecasting includes the use of statistical and mathematical
methods for long term, short term, medium term or any specific term.
Following are the main methods of business forecasting:1. Business Barometers
Business indices are constructed to study and analyze the business activities on the basis of
which future conditions are predetermined. As business indices are the indicators of future
conditions, so they are also known as Business Barometers or Economic Barometers. With
the help of these business barometers the trend of fluctuations in business conditions are made
known and by forecasting a decision can be taken relating to the problem. The construction of
business barometer consists of gross national product, wholesale prices, consumer prices,
industrial production, stock prices, bank deposits etc. These quantities may be converted into
relatives on a certain base. The relatives so obtained may be weighted and their average be
computed. The index thus arrived at in the business barometer.

The business barometers are of three types:

i.

ii.

iii.

2.

Barometers relating to general business activities: it is also known as general index of

business activity which refers to weighted or composite indices of individual index
business activities. With the help of general index of business activity long term trend and
cyclical fluctuations in the economic activities of a country are measured but in some
specific cases the long term trends can be different from general trends. These types of
index help in formation of country economic policies.
Business barometers for specific business or industry: These barometers are used as the
supplement of general index of business activity and these are constructed to measure the
future variations in a specific business or industry.
Business barometers concerning to individual business firm : This type of barometer is
constructed to measure the expected variations in a specific individual firm of an
industry.
Time Series Analysis is also used for the purpose of making business forecasting. The
forecasting through time series analysis is possible only when the business data of various
years are available which reflects a definite trend and seasonal variation.

3. Extrapolation is the simplest method of business forecasting. By extrapolation, a

businessman finds out the possible trend of demand of his goods and about their future price
trends also. The accuracy of extrapolation depends on two factors:
i) Knowledge about the fluctuations of the figures,
ii) Knowledge about the course of events relating to the problem under consideration.
4. Regression Analysis
The regression approach offers many valuable contributions to the solution of the forecasting
problem. It is the means by which we select from among the many possible relationships
between variables in a complex economy those which will be useful for forecasting. Regression
relationship may involve one predicted or dependent and one independent variables simple
regression, or it may involve relationships between the variable to be forecast and several
independent variables under multiple regressions. Statistical techniques to estimate the
regression equations are often fairly complex and time-consuming but there are many computer
programs now available that estimate simple and multiple regressions quickly.
5. Modern Econometric Methods
Econometric techniques, which originated in the eighteenth century, have recently gained in
popularity for forecasting. The term econometrics refers to the application of mathematical
economic theory and statistical procedures to economic data in order to verify economic
theorems. Models take the form of a set of simultaneous equations. The value of the constants in
such equations is supplied by a study of statistical time series.
6. Exponential Smoothing Method
This method is regarded as the best method of business forecasting as compared to other

methods. Exponential smoothing is a special kind of weighted average and is found extremely
useful in short-term forecasting of inventories and sales.
7. Choice of a Method of Forecasting
The selection of an appropriate method depends on many factors the context of the forecast,
the relevance and availability of historical data, the degree of accuracy desired, the time period
for which forecasts are required, the cost benefit of the forecast to the company, and the time
available for making the analysis.
Effectiveness of Time Series Analysis:
Time series analysis is also used for the purpose of making business forecasting. The forecasting
through time series analysis is possible only when the business data of various years are
available which reflects a definite trend and seasonal variation. By time series analysis the long
term trend, secular trend, seasonal and cyclical variations are ascertained, analyzed and separated
from the data of various years.
Merits:
i) It is an easy method of forecasting.
ii) By this method a comparative study of variations can be made.
iii) Reliable results of forecasting are obtained as this method is based on mathematical model.
Method of Moving Averages
One of the most simple and popular technical analysis indicators is the moving averages method.
This method is known for its flexibility and user-friendliness. This method calculates the average
price of the currency or stock over a period of time.
The term moving average means that the average moves or follows a certain trend. The aim of
this tool is to indicate to the trader if there is a beginning of any new trend or if there is a signal
of end to the old trend. Traders use this method, as it is relatively easy to understand the direction
of the trends with the help of moving averages.
Moving average method is supposed to be the simplest one, as it helps to understand the chart
patterns in an easier way. Since the currencys average price is considered, the prices volatile
movements are evened. This method rules out the daily fluctuation in the prices and helps the
trader to go with the right trend, thus ensuring that the trader trades in his own good.
We come across different types of moving averages, which are based on the way these averages
are computed. Still, the basis of interpretation of averages is similar across all the types. The
computation of each type set itself different from other in terms of weightage it lays on the prices
of the currencies. Current price trend is always given a higher weightage. The three basic types
of moving averages are viz. simple, linear and exponential.
A simple moving average is the simplest way to calculate the moving price averages. The

historical closing prices over certain time period are added. This sum is divided by the number of
instances used in summation. For example, if the moving average is calculated for 15 days, the
past 15 historical closing prices are summed up and then divided by 15. This method is effective
when the number of prices considered is more, thus enabling the trader to understand the trend
and its future direction more effectively.
A linear moving average is the less used one out of all. But it solves the problem of equal
weightage. The difference between simple average and linear average method is the weightage
that is provided to the position of the prices in the latter. Lets consider the above example. In
linear average method, the closing price on the
15th day is multiplied by 15, the 14th day closing price by 14 and so on till the 1 st day closing
price by 1. These results are totalled and then divided by 15.
The exponential moving average method shares some similarity with the linear moving average
method. This method lays emphasis on the smoothing factor, there by weighing recent data with
higher points than the previous data. This method is more receptive to any market news than the
simple average method. Hence this makes exponential method more popular among traders.
Moving averages methods help to identify the correct trends and their respective levels of
resistance.
4. What is definition of Statistics? What are the different characteristics of statistics?
What are the different functions of Statistics? What are the limitations of Statistics?
According to Croxton and Cowden, Statistics is the science of collection, presentation, analysis
and interpretation of numerical data. Thus, Statistics contains the tools and techniques required
for the collection, presentation, analysis and interpretation of data. This definition is precise and
comprehensive.
Characteristic of Statistics
a. Statistics Deals with aggregate of facts: Single figure cannot be analyzed.
b. Statistics are affected to a marked extent by multiplicity of causes: The statistics of yield of
paddy is the result of factors such as fertility of soil, amount of rainfall, quality of seed used,
quality and quantity of fertilizer used, etc.
c. Statistics are numerically expressed: Only numerical facts can be statistically analyzed.
Therefore, facts as price decreases with increasing production cannot be called statistics.
d. Statistics are enumerated or estimated according to reasonable standards of accuracy: The
facts should be enumerated (collected from the field) or estimated (computed) with required
degree of accuracy. The degree of accuracy differs from purpose to purpose. In measuring the
length of screws, an accuracy upto a millimetre may be required, whereas, while measuring the
heights of students in a class, accuracy upto a centimetre is enough.
e. Statistics are collected in a systematic manner: The facts should be collected according to
planned and scientific methods. Otherwise, they are likely to be wrong and misleading.
f. Statistics are collected for a pre-determined purpose: There must be a definite purpose for

collecting facts.
Eg. Movement of wholesale price of a commodity
g. Statistics are placed in relation to each other: The facts must be placed in such a way that a
comparative and analytical study becomes possible.
Thus, only related facts which are arranged in logical order can be called statistics.
Functions of Statistics
1. It simplifies mass data
2. It makes comparison easier
3. It brings out trends and tendencies in the data
4. It brings out hidden relations between variables.
5. Decision making process becomes easier.
Major limitations of Statistics are:
1. Statistics does not deal with qualitative data. It deals only with quantitative data.
2. Statistics does not deal with individual fact: Statistical methods can be applied only to
aggregate to facts.
3. Statistical inferences (conclusions) are not exact: Statistical inferences are true only on an
average. They are probabilistic statements.
4. Statistics can be misused and misinterpreted: Increasing misuse of Statistics has led to
increasing distrust in statistics.
5. Common men cannot handle Statistics properly: Only statisticians can handle statistics
properly.

5. What are the different stages of planning a statistical survey? Describe

methods for collecting data in a statistical survey.
The planning stage consists of the following sequence of activities.

the various

1. Nature of the problem to be investigated should be clearly defined in an un- ambiguous

manner.
2. Objectives of investigation should be stated at the outset. Objectives could be to obtain
certain estimates or to establish a theory or to verify a existing statement to find relationship
between characteristics etc.
3. The scope of investigation has to be made clear. It refers to area to be covered, identification
of units to be studied, nature of characteristics to be observed, accuracy of measurements,
analytical methods, time, cost and other resources required.
4. Whether to use data collected from primary or secondary source should be determined in
advance.
5. The organization of investigation is the final step in the process. It encompasses the
determination of number of investigators required, their training, supervision work needed,
funds required etc.
Collection of primary data can be done by anyone of the following methods.

 Direct personal observation

Indirect oral interview
Information through agencies
Information through mailed questionnaires
Information through schedule filled by investigators
6. What are the functions of classification? What are the requisites of a good
classification? What is Table and describe the usefulness of a table in mode of
presentation of data?
The functions of classification are:
a.
b.
c.
d.

It reduce the bulk data

It simplifies the data and makes the data more comprehensible
It facilitates comparison of characteristics
It renders the data ready for any statistical analysis

Requisites of good classification are:

i.
ii.
iii.
iv.
v.
vi.
vii.
viii.

Unambiguous: It should not lead to any confusion

Exhaustive: every unit should be allotted to one and only one class
Mutually exclusive: There should not be any overlapping.
Flexibility: It should be capable of being adjusted to changing situation.
Suitability: It should be suitable to objectives of survey.
Stability: It should remain stable throughout the investigation
Homogeneity: Similar units are placed in the same class.
Revealing: Should bring out essential features of the collected data.

Table is nothing but logical listing of related data in rows and columns.
Objectives of tabulation are:

To simplify complex data

To highlight important characteristics
To present data in minimum space
To facilitate comparison
To bring out trends and tendencies
To facilitate further analysis