HELLENIC OPEN UNIVERSITY

SCHOOL OF SOCIAL SCIENCES

MASTER’S DEGREE PROGRAMME IN BUSINESS ADMINISTRATION

Module: ADVANCED QUANTITATIVE METHODS FOR MANAGERS (MBA60)

Academic Year: 2014-15
Summer 2015 Examination

Question 1 (4 Marks)

Twenty multiple-choice questions follow. For each question circle the correct answer

1.1 Which of the following is a discrete quantitative variable?

a. The Consumer Price Index
b. The volume of water you consumed last month
c. Your weight
d. The number of volumes in a University library

1.2 Physicians take a sample of smokers and non-smokers and record the time it takes them to fall asleep on 7
consecutive nights. What is the sampling unit?

a. The physicians.
b. The average time it takes to fall asleep on the seven nights.
c. The smokers and non-smokers.
d. The amount of time it takes to fall asleep each night.
e. None of the above.

1.3 Consider the Box and Whisker plot (or boxplot) for the length of Bur Oak leaves to the right. Indicate the five-
number summary the plot refers to:

a. 7.2, 10.8, 11.8, 12.6, 13.7

b. 7.2, 8.5, 10.8, 12.6, 13.7
c. 8.5, 10.8, 11.8, 12.6, 13.7
d. 7.2, 7.6, 10.8, 11.8, 12.6
e. None of the above

1.4 When we say “most of the female students spend €30 per month for cosmetics” we are referring to the
following measure of central tendency:
a. The Arithmetic Mean
b. The Mode
c. The Median
d. The Geometric Mean

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 HELLENIC OPEN UNIVERSITY
SCHOOL OF SOCIAL SCIENCES
MASTER’S DEGREE PROGRAMME IN BUSINESS ADMINISTRATION

1.5 The boxplots (or Box and Whisker plots) shown below summarize two data sets, I and II. Based on the
boxplots, which of the following statements about these two data sets CANNOT be justified?

a. The range of data set I is equal to the range of data set II.
b. The interquartile range of data set I is equal to the interquartile range of data set II.
c. Data set I and data set II have the same number of data points.
d. About 75% of the values in data set II are greater than or equal to about 50% of the values in data set I.

1.6 Consider the histogram for the midterm 2 grades for 125 students. The percentage of students with a grade
above 50 is about:

a. There is not enough information.

b. 80%.
c. 60%.
d. 40%.
e. None of the above.

1.7 Suppose I throw a basketball towards a hoop, and let X represent my total number of throws until my first
success (i.e. my total number of attempts before I successfully toss the basketball trough the hoop). Which
of the following statements is “True”?

a. X is a discrete random variable and follows the binomial distribution.

b. X is a discrete random variable and does not follow the binomial distribution.
c. X is a continuous random variable and follows the normal distribution.
d. X is a continuous random variable and does not follow the normal distribution.
e. X is not a random variable.

1.8 Future parents are wondering how many boys they might get if they have three children. A probability model
is developed with _____ possible outcomes.

a. 2. b. 3. c. 6. d. 8. e. None of the above.

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 HELLENIC OPEN UNIVERSITY
SCHOOL OF SOCIAL SCIENCES
MASTER’S DEGREE PROGRAMME IN BUSINESS ADMINISTRATION

1.9 Let X1,..,X16 be a random sample from a Normal distribution with mean 5 and variance 48. What is the
distribution of the sample mean X ?

a. It is exactly Normal with mean 5 and variance 48

b. It is exactly Normal with mean 5 and variance 3
c. It is approximately Normal with mean 5 and variance 48
d. It is approximately Normal with mean 5 and variance 3
e. None of the above

1.10 Which of the following statements is false?

a. Standard deviation is measure of variability that can be computed only for interval or ratio scaled data
b. The numbers 5, 5, 5 have a standard deviation of zero
c. The numbers 6, 7, 8 have smaller standard deviation than the numbers 106, 107, 108
d. The standard deviation is the square root of the variance

1.11 In order to examine the effectiveness of a 30 hours seminar in environmental education, two groups of
students were selected and examined in a project preparation concerning environmental pollution. Details
are shown in the table below.

Group A Group B
Sample Size 15 15
Sample Mean 6.8 min 9.3 min
Sample deviation of Group A sA
= 0.43
Sample deviationof GroupB sB

Choose the correct answer.

a. Group A is less variable than Group B because Group A’s sample mean is smaller
b. Group A is less variable than Group B because Group A’s standard deviation is larger
c. Group A is relatively less variable than Group B because Coefficient of Variation (CV) of Group A is smaller
than CV of Group B
d. Group A is relatively less variable than Group B because Group A’s standard deviation is smaller

1.12 When drawing a sample of size 400 from a population with variance 40,000, the probability is 0.90 that the
absolute value of the difference between the sample mean and the population mean will be smaller than:
a. 19.6 b. 16.4 c. 10.0 d. 12.4

1.13 A manufacturer of balloons claims that p, the proportion of its balloons that burst when inflated to a diameter
of up to 12 inches, is no more than 0.05. Some customers have complained that the balloons are bursting
more frequently. If the customers want to conduct an experiment to test the manufacturer's claim, which of
the following hypotheses would be appropriate?:
a. H0: p > 0.05, H1: p = 0.05
b. H0: p = 0.05, H1: p > 0.05
c. H0: p = 0.05, H1: p ≠ 0.05
d. H0: p < 0.05, H1: p = 0.05

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 HELLENIC OPEN UNIVERSITY
SCHOOL OF SOCIAL SCIENCES
MASTER’S DEGREE PROGRAMME IN BUSINESS ADMINISTRATION

1.14 If we perform a hypothesis test and set the Type I error rate to 5%, this means

a. The probability that the null hypothesis is true is 5%

b. The probability that we reject a false null hypothesis is 5%
c. The probability that we fail to reject a true null hypothesis is 5%
d. The probability that we reject a true null hypothesis is 5%
e. None of the above

1.15 In hypothesis testing, the Type II error rate is the probability of

a. Failing to reject a true null hypothesis

b. Rejecting a true null hypothesis
c. Failing to reject a false null hypothesis
d. Rejecting a false null hypothesis
e. None of the above

1.16 A placement office at a large university claims that approximately 70% of the school’s accounting graduates
will obtain jobs in their field upon graduation. The accounting department feels that the percentage is
greater than 70%. From a random sample of 100 recently graduated accounting majors, it was found that
72 had obtained jobs in their field. The relevant hypotheses are:
a. H0: p = 0.70, H1: p ≠ 0.70
b. H0: p = 0.70, H1: p < 0.70
c. H0: p < 0.70, H1: p ≥ 0.70
d. H0: p = 0.70, H1: p > 0.70

1.17 In an Analysis of Variance table, the F criterion is used to test the null hypothesis (Ho) of the equality of
population means. The statistical software calculates the F criterion and its "p-value" (or "significance").
What is the interpretation of “p-value”?
a. p-value is the probability that the null hypothesis is not true.
b. p-value is the probability that, if the null hypothesis is not true,
the specific value of Χ2 criterion or a greater value will come up.
c. p-value is the probability that the null hypothesis is true.
d. p-value is the probability that, if the null hypothesis is true,
the specific value of F criterion or a greater value will come up.

1.18 Medical researchers at a large city hospital investigating the impact of prenatal care on newborn health,
collected data from 882 births during 1998-2000. They kept track of the mother’s age, the number of
previous pregnancies for this mother, the number of weeks the pregnancies lasted, the type of birth
(cesarean, induced, natural), the level of prenatal care (none, minimal, adequate), the birth weight and the
sex of the baby, and whether the baby exhibited health problems (none, minor, major). A scatter diagram
could be constructed to show a relationship between the:

a. Level of prenatal care and birth weight of the child.

b. Mother’s age and type of birth.
c. Number of weeks the pregnancy lasted and health problems.
d. Number of weeks the pregnancy lasted and type of birth.
e. A scatter diagram could not be used for any of the above.

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 HELLENIC OPEN UNIVERSITY
SCHOOL OF SOCIAL SCIENCES
MASTER’S DEGREE PROGRAMME IN BUSINESS ADMINISTRATION

1.19 In a linear regression model, which describes the relationship between family monthly consumption (Y: in €),
family monthly net income (X: in €) and a dummy variable for house parking facilities (D: 1 = household has
parking, 0 = household has no parking) the estimated equation is:
Y = 600 + 0.8 X + 328 D
What is the interpretation of the regression coefficient 328 (of the dummy variable)?
a. For every extra parking place in the house, consumption increases by 328 €
b. On average, families with parking consume 328 € more than families without parking regardless their
income
c. Families with parking consume, on average, 328 € more than families without parking but having the same
income
d. Families are erratic in spending and in case they have parking the stochastic term is increased by 328 €
compared to families without parking.

1.20 You have estimated the model Y=1.8*X^(-1.35). If X changes by 10% which of the following statements is
true?
a. Y changes by 1.35%
b. Y changes by -13.5%
c. Y changes by +13.5%
d. Y changes by -1.35%

Question 2 (2 Marks)

The leader of a small political party which participates in the elections wonders if his party will win more than 3%
of votes, which is the minimum to win seats in parliament. The last poll based on a sample size of 2,500 voters,
gave an estimation of 3.2%. The leader of the party wonders if this percentage is significantly higher than 3%.

2.1 State the null hypothesis (H0) and the alternative hypothesis (H1)
2.2 Test the hypothesis at α = 5%.
2.3 Set up a 95% confidence interval of the party’s percentage.
2.4 Given that the total number of voters is 9,000,000 and one third does not participate in elections, set up a
95% confidence interval of the number of voter’s who are expected to vote for the party.
2.5 What will be your recommendation to the party leader?

p  (1  p )
Note: sp = = 0.0035, Ζ = (p – πο)/sp = +0,571, Z 0.10 / 2 ≈ 1,65, Z 0.05 / 2 ≈ 2,00
n

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 HELLENIC OPEN UNIVERSITY
SCHOOL OF SOCIAL SCIENCES
MASTER’S DEGREE PROGRAMME IN BUSINESS ADMINISTRATION

Question 3 (4 Marks)
Athena Supermarket SA, based in Athens, operates a chain of 30 small size supermarkets in the largest cities of
the country. During recent years, the company became increasingly concerned with the long-run implications of
competition from large supermarkets, so-called Superstore.
To measure the effects of Superstore competition on current profitability, Athena Supermarket SA asked you as
Management Consultant, to conduct a statistical analysis of the company's profitability on various markets.
The variables collected from the 30 Athena supermarkets are the following:
Profit Margin: Earnings before interest and taxes divided by sales (%)
Market Share: Athena Share in local market (%)
Concentration Ratio: Combined market share of the four largest companies in local market (%)
Capital Intensity: Ratio of book value of assets to sales (%)
Advertising Intensity: Advertising to sales ratio (%)
Growth: Geometric mean rate of change in total disposable income in each market (%)
Superstore: Dummy variable = 1 if Superstore is present in local market, 0 = otherwise
Data analysis using appropriate Statistical software produced the following results:

Dependent variable: Profit Margin

Variable Regression Standard error t Statistic p - value

coefficient (significance)
(Constant) 6.155 3.712 1.658 0.111
Market Share 0.189 0.037 5.065 0.000
Concentration -0.156 0.041 -3.767 0.001
Capital Intensity 0.337 0.147 2.298 0.031
Advertising Intensity 0.619 0.276 2.240 0.035
Growth 0.854 0.178 4.808 0.000
Superstore -2.460 1.010 -2.436 0.023

R2 = 0.777, se = 2.20
3.1 State the estimated regression equation.
3.2 Comment on the significance of the regression coefficients.
3.3 Provide an economic / business interpretation of the regression coefficients.
3.4 Define the coefficient of determination and explain its meaning in the context of this research.
3.5 Using the above model estimate the predicted profit-margin for a new Athena store in a city with growth of
6%, no Superstore present and estimated concentration of 60%. Additionally, Athena managers believe that
the new store will gain the 10% of the local market, advertising intensity will be around 12%, and capital
intensity around 8%.
3.6 Set up a 95% confidence interval estimate of your prediction (use the standard error of the regression
equation as a proxy of prediction standard error and t value ≈ 2).
3.7 Do you trust the above prediction? Explain.
3.8 As a Management Consultant, prepare a short report for Athena board of directors that explains how profit
margin is determined.