1.

How to make a histogram from Frequency Distribution table:

a) Sort Data in ascending order.
b) Find Range.
c) Find number of classes by using 2K rules.
d) Compute the width or how long each bin is.
e) Determine boundaries.
f) Count observations and assign to classes or bins.

2. Stems and Leaf Diagram.

a) Draw out the numbers on the stem (1-10 or whatever)
b) Add the leaves.

3. Box plot Graph.

a) First find the Median. Use formula N+1/2
b) Use the median as the line going across the boxplot.
c) Find the first Quartile (median of first section) N+1/4 = Yk
d) Find the third Quartile (median of second section) N+1/4 = Y3K
e) Use the first and second quartile to draw the lines of your box.
f) Find IQR = Q3-Q1
g) Find UIF = Q3 + 1.5IQR
h) Find LIF = Q1 -1.5IQR
i) Draw whiskers to min and max that are not outliers.

4. Variance Formula:
a) S2 = Sum (Sample numbers – Mean)/n-1
example:

S2 = (11-16)2 + (13-16)2 + (17-16)2 / 3

On calculator S(X) is standard deviation and X bar is the mean.

5. Standard deviation. The square root of the formula described

above.

6. Empirical Rule
Y+- 68% of measuremes
Y+- 95% of measurements
Y+- 99.97% of all measurements.

7. Probability.
P (A or B) = P(A) + P(B)
P(A and B) = P(A)P(B)
A
P(A) = 1 – P( )

P(B|A) = P (A and B)/ P(A)

8. Random Variables:

Expected Value of X : Σ of all (X) * P(X) = µ

Variance of X: Σ of all (y (theprobabilitypart) - µ y)2 * P(X)

To find the deviation find the root square of variance.

Covariance: Σ multiply all joint probabilities on table by using triangle

alex method.
Once you have that subtract against the multiplication of the expected
value of X and Y.

Co-efficient:

The Co-efficient of a variation is used to measure variation relative to

mean.

CV = (σ/µ ) *100 = SD/Mean * 100.

Correlation.

The correlation between the returns of 2 variables:

Correlation = Cov (X, Y)/σx σy = Cov (X,Y)/(SDx)(SDy)

(Example would say find the correlation between the returns security 1
and 2)

Expected Value of two variables.

E (X,Y) = EX + EY

Example supposed .40 is invested in security 1 and .60 in security 2.

EX = 10%
EY = 13.5%

E(X,Y) = .40(10%) + .60(13.5%) = 12.1%

This value falls in the middle of the two.

Variance of two variables.

V (X, Y) = B2V(X) + C2V(Y) + 2 bc * Cov (X,Y)

Example

What is the Standard deviation of the percentage return on the

portfolio? How does this compare to the risks of the individual
securities?

V (X, Y) = B2V(X) + C2V(Y) + 2 bc * Cov (X,Y)

V(.4X +.6Y) = (.4)2 100 + (.6)2 142.75 + 2 (.4)(.6) (25)
V = 79.39
SD of portfolio = 8.91.

SD of X = 10%
SD of Y = 11.95%

9. Binomial Distribution

Formula: (n!)/ y! (n – y)! * (1 – π) n -y

Example:

Studies indicate that 10% of all homebuyers will do some remodeling

within the first year of home ownership. If this is true, determine the
probability that in a random sample of 10:
Four homeowners will remodel their home.
Π = .10
N = 10
Y=4
P (Y = 4) = (10!)/4!6! * (.1)4 (1-.1)10-4

Formula for expected value of binomial

Expected value = n * π = 10*.1 = 1

Formula for Variance = n * π(1- π)

Note that you can also use tables to find binomial distribution.
Poisson Distribution: (POOISONN)

For a unit of TIME, area, or volume!!!!!

Most of the time probability will be found by using table.

This is the formula:

µ
Py(Y) = (e- µ y)/y!

The trick is really find the µ remember to divide number by figure of

time. For example:

At a bank customers are thought to arrive at the teller section on

average of 16 customers per hour. The manager of the bank is
interested in the probability that one or more customers will have to
wait for service during the first 15 minutes. The bank has only one
teller section.

µ = 16/4 (we divide by 4 because is 16 customers per hour and we

want to find per 15 minutes)

Then use formula or table.

10. Normal Distribution.

Seems a bit tricky but it is not. Look for normal distribution on word
problems.

For example….

The daily demand for coke cans in a cafeteria is approximately

NORMALLY DISTRIBUTED with mean 1500 and standard deviation 20.
Let Y be the demand. Find :

1. P(Y <= 200)

Formula

Z = (y-µ )/σ
Z = (200 – 150)/20
Z = 2.5
 1. P(Y <=2.5)

Make a drawing to illustrate!

How to check normality.

1) Is histogram mound shaped?

2) Normal probability plot?
3) Box plot (no extreme outliers)

11. Random Sampling (this is a bit more complicated but still easy)

These questions always talk about the sample size in a sample

distribution. Only difference from random distribution is that you will
use the standard of error!!!! In fact the formula calls that the z value
for a SAMPLE distribution (not a normal distribution) is

Z = (y-µ )/(σ/√ n)

By the way though this may not come out because it is always given to
find the standard deviation of a sample:

Square root of Σ (yi - µ )2/N

N = sample means (or observations, remember square that teacher

did)

Sampling distributions for means and sums.

This one will always ask you for a mean RANGE. When this happens
use the standard error of the sample mean, not the population
standard deviation. Everytime you are asked about the mean even if
you get a normal approximation it seams you muse used the standard
of error.

10. Sample distribution of a proportion.

This was barely covered. The gist is the following:

1)
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3)

11. Point and interval estimation. The T TABLE!!!

Typical levels of confidence are .95, .99 or .90

Formula for interval estimation of a mean with known standard

deviation.
Notice that this case differs because you are given a confidence level
and also standard deviation IS KNOWN. Also use 1-a here when doing
manually.
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Z value for .99 = 2.577

Z value for .95 = 1.96
Z value for .90 = 1.645

11. T –table is used when standard deviation is not known:

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Same reasoning however you have to remember to that the t table

works a little bit different.
First degrees of freedom is n-1.
The confidence interval is 1-a so for example for 95% you would use .
05/2 =.025.

Remember to use n-1 when looking at a table.

12. Confidence interval for a proportion

a) First find whether the condition for a proportion is available.

nπ = > 5
n (1-π) = > 5
(both π are proportion and have the triangle above).

Two scenarios:
1) Find N to estimate MEAN
A research project for an insurance company wishes to
investigate the mean value of the personal property held by
urban apartment renters. A previous study suggested that the
population standard deviation should be $10,000. A 95%
confidence interval with a width of $1000 is desired. How large a
sample must be taken to obtain such a confidence interval?

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B) Find n to estimate proportion (or π)

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