Diablo Valley College Spring 2008
Business 240 Exam #1 (practice test)
Chapters 1-3: Organizing samples of data visually and numerically.
Maximum points: 15. Exam points: 16.
Your name: ______
1) Suppose you have two investment opportunities: A and B. Also, suppose that the correlation coefficient between A and B is +0.70. Assume that the returns on each of the investments have the same, positive mean (say 10%) and standard deviations (say 2%).
a) (2 points) What would your gain or loss be if you invested 50% of your resources on A and 50% of your resources on B? More than 10%? Less than 10%? Or exactly 10%? Explain.
b) (1 point) How does your answer to part (a) change if the correlation were +1.00?
2) Using the enclosed graph, and paying special attention to the four dates in the graph, perform the following activities:
a) (1 point) Describe the Dow Jones Industrial Average’s path over the past 70 years.
b) (1 points) Since mid 1998, the DJIA has scored an arithmetic mean of 10,004.28, and a geometric mean of 9,961.46. Which mean best describes the “middle value” of the index? Explain
c) (1 points) Why is the geometric mean smaller than the arithmetic mean? Will this always be the case?
3) Suppose a company’s stock has a mean price over its history of $37/share. Also suppose that this stock has a historical standard deviation of $15/share. Furthermore, the stock’s price distribution is symmetric in shape. Answer the following questions about the stock’s price and disposition.
a) (2 points) Use the empirical rule to explain why it would make sense to sell this stock if it is priced at $67/share or higher.
b) (1 points) Use the empirical rule to estimate how often the price of the stock will fall below $22/share.
4) (1 points) Every spring semester, the School of Business coordinates a luncheon with local business leaders for graduating seniors, their families, and their friends. Corporate sponsorship pays for the lunches of each of the seniors, but students have to purchase tickets to cover the cost of lunches served to guests they bring with them. The following histogram represents the attendance at the senior luncheon, where X is the number of guests each student invited to the luncheon and f is the number of students in each category. How many graduating seniors attended the luncheon?
5) (1 point) A professor of economics at a small Texas university wanted to determine the year in school that students enrolled in his tough economics course. Shown below is a pie chart of the results. What percentage of the class took the course prior to reaching their senior year?
6) The table below contains the opinions of a sample of 200 people broken down by gender about the latest congressional plan to eliminate anti-trust exemptions for professional baseball.
For / Neutral / Against
Gender / Male / 38 / 54 / 12 / 104
Female / 12 / 36 / 48 / 96
Column Totals / 50 / 90 / 60 / 200
a) (1 point) How do you construct a table of total percentages? [hint: do not construct a table of total percentages, describe how you build one.]
b) (1 point) Of those with “neutral” opinion in the above sample, what percent were males?
c) (1 point) What percent of the 200 were females who were either neutral or against the plan?
d) (1 point) What percent of males were not against the plan?