BEA140 Quantitative Methods Assignment

Semester 2, 2015
(Marks in total 260)
Due Date: 4:00pm Friday 25 September 2015
Contribution to Unit Assessment: 30%
Students should ensure that they have read and understood the guidelines for major assignment (attached)
Questions marked (*) are more difficult and are designed as a challenge for stronger students. No help is available on these questions.

Question 1 (30 marks)

You have $1000 and you wish to purchase a television from a store offering in-store flat rate finance. The price of the
television is $5000. Under the terms of the arrangement you will pay a 20% deposit at the time of purchase, with the
remainder of the amount owing being subject to a 12.5% finance charge. To retire the debt, you will be required to
make 18 equal monthly payments, with the first one being one month after the date of purchase.
[Be careful in this problem the financing charge is applied after the deposit is paid. This is different to the example
in the lecture notes.]
a) Determine the monthly payment size, and then present the repayment scheme as a fully labelled time line
diagram.
[2+3 = 5 marks]
b) Present the equation of equivalence for repayment scheme, and the use iterative techniques to find the
equivalent per period interest rate (i) for the repayment scheme. [Find i with an error of no more than +/0.001%]
[2 + 10 = 12 marks]
c) Find the effective annual interest rate, j1, implied by the repayment scheme.
[5 marks]
d) *An alternative approach to buying the television would be to borrow the money from a bank and pay cash
for the television. If the bank changes interest at a rate of j12 = 18.00% p.a. and you are able to negotiate a
cash discount with the vendor, determine how large this discount would need to be for you to be indifferent
between the two approaches. [Be careful to explain you logic.]
[8 marks]
Question 2 (30 marks)
You have just retired and intend to cover your living expenses by drawing down on two investments:
Withdrawing $9,000 per month from an account which pays monthly interest at a rate of j12 = 4.2% p.a.
Withdrawing $12,000 per quarter from an account which pays quarterly interest at a rate of j4 = 8.0 % p.a.
The current balances are $1,000,000 and $400,000, and the next withdrawals are due in one month and three
months respectively. You intend to continue withdrawing until they both run out of funds.
a) Illustrate each of these drawn down regimes as a fully labelled time line diagram.
[2+2 = 4 marks]
b) Determine which of the accounts will run out first, and when.
[4+4+1 = 9 marks]

c) Determine the size of the very last withdrawal to be made from the fund that lasts longest. Describe and
perform a sanity check on your answer.
[5+1+1 = 7 marks]
d) Present the last three withdrawals (i.e two full and one partial withdrawal) from the fund that lasts
longest as an amortization table.
[8 marks]
e) Suggest why the two funds might have such different interest rates, and why one may choose to use two
funds with such different returns.
[2 marks]
Question 3 (30 marks)
You wish to save $75,000 to buy into a syndicate. You intend to make weekly deposits of $800 into a savings account
at the ABC Bank, starting in a weeks time. To encourage saving, the ABC bank offers a stepped interest rate. In
particular:
If your account is less than $25,000 you will earn interest at j52 = 6.344% p.a.
If your account has at least $25,000 you will earn interest at j52 = 7.332% p.a.
NB Over the duration of this savings scheme, you will receive two different interest rates, depending upon how
much you have saved. All deposits are the same size, you will make a deposit every week while you are saving, and
you will stop saving as soon as your savings exceed $75000.
a) Represent this savings scheme scenario as a fully labelled time line diagram.
[4 marks]
b) Determine how many weeks it takes until you savings first exceed $25,000. Describe and apply a sanity
check to this duration. Also, determine the amount accumulated.
[4+1+1+4 = 10 marks]
c) Construct a sinking fund table showing the last three deposits made at the lower interest rate. Perform a
sanity check on the final value in the table.
[6+1 = 7 marks]
d) *Determine how long it will take to accumulate the target of $75,000
[9 marks]
Question 4 (40 marks)
In order to better understand the time to assemble a particular component on an assembly line, the assembly time is
measured for a random sample of 31 components. The data (in minutes) appears in the table below.
7.6
10.7
10.0
12.9
12.9
19.1
14.0
9.3

13.6
8.6
12.7
8.0
11.8
12.6
10.7
8.5

9.7
11.5
14.7
8.3
9.9
12.6
12.3
14.6

15.0
10.4
10.4
11.5
12.0
14.4
10.6

a) Present this data as a fully labelled stem and leaf diagram.

[6 marks]

b) Determine the mean, median, standard deviation and range for this sample of assembly times. Describe and
apply a sanity check for the standard deviation.
[2+2+3+1+2 = 10 marks]

c) Group the data and present as a frequency distribution table, with the first class being 6 X < 8. Determine
the mean, median and standard deviation of assembly times from this grouped data. Explain whether
statistics based on raw data or grouped data are more reliable.
[4+2+3+3+1 = 13 marks]

d) Eliminate the point from the raw data which is most likely to be an outlier. Recalculate the mean and median.
Referring to the change that has occurred in these statistics, identify a possible advantage of the median
over the mean as a measure of central tendency.
[2+2+2 = 6 marks]

e) *A statistician named Tukey devised a test for outliers - a point is deemed an outlier if it is less than Q1
1.5*IQR or more than Q3 + 1.5*IQR.
Determine whether the point that you eliminated would be deemed an outlier using Tukeys test.
[5 marks]
Question 5 (30 marks)
An economic geographer is trying to determine which has the stronger relationship with accommodation prices in a
major city, distance from city centre, or star rating. They take a random sample of 21 hotels, and for each they
determine the following:

Price for one night in a standard double room (no breakfast) on June 30, 2015.
Distance from city centre (in km)
Star Rating (http://www.starratings.com.au/ )

The data appears in the table below.

dist
0.1
0.2
0.3
0.8
1.0
1.2
1.4
1.7
1.7
1.7
1.8
1.8
1.9
2.3
2.4
2.9
2.9
3.3
4.4
4.6
8.9

star
4
5
3.5
3
4
3
3
3.5
4.5
3
3.5
4
3.5
2.5
3
3.5
2
4
3
3
4

price
876
915
687
465
505
320
289
195
210
201
130
135
120
102
110
96
100
100
87
85
202

Because one of the variables (star rating) is ordinal they decide to use and compare Spearman Rank Correlation
Coefficients (SRCC).
a) Covert the values of each of three variables into rankings, in each case giving a ranking of 1 to the lowest
score. (i.e. distance of 0.1 km, star rating of 2, and price of $85 each receive a ranking of one.) Be very careful
to resolve any ties.
[3+3+3 = 9 marks]

b) Determine the SRCC between distance and price.

[9 marks]

c) Determine the SRCC between star rating and price.

[9 marks]

d) Provide an interpretation of each of the two SRCCs, and draw a conclusion as which of distance and star
rating appear to have a stronger relationship with price.
[2+1 = 3 marks]
Question 6 (40 marks)
In many service industries, queue management is critical to business success. If you dont have enough service
agents, customers have to wait too long, and some will abandon the queue, and potentially go to your competitors.
On the other hand, if you have too many service agents, your service costs increase potentially making you
uncompetitive. Thus it is important to understand the relationship between wait time and abandonment. The
manager at a fast food outlet sets up an observational study in which the average wait time and the abandonment
rate are recorded for a random sample of 25 shifts. The data appears in the table below.
Av. wait time (secs)
13
41
151
82
66
48
103
37
244
78
23
120
41

abandonment rate
0.003
0.048
0.134
0.062
0.113
0.024
0.132
0.089
0.131
0.095
0.038
0.018
0.025

Av. wait time (secs)

37
9
274
447
48
48
7
41
70
118
134
31

abandonment rate
0.022
0.040
0.197
0.466
0.084
0.084
0.031
0.044
0.028
0.017
0.053
0.034

a) Using Excel (or by hand), create a scattergram of the variables Av. Wait time and abandonment rate.
Comment on the feasibility of a linear relationship between Av. Wait time and abandonment rate.
[6 marks]
b) Determine the regression equation that explains the abandonment rate by the average wait time. Show
your working.
[8 marks]
c) Interpret the slope coefficient and the intercept term for this regression equation, noting any
assumptions required for the latter.
[4 marks]

d) Determine and interpret the standard error of the estimate and the coefficient of determination.
Describe and apply sanity tests on your values for SST and SSE.
[8+2=10 marks]
e) Check your results from (b) and (c) by carrying out the same regression in Excel. Include the regression
results printout with your assignment, and clearly identify the following statistics; the slope coefficient,
the intercept term, the standard error of the estimate, the coefficient of determination, SST & SSE. [NB
Six marks for checking your results and six marks for identifying key statistics.]
[12 marks]
Question 7 (20 marks)
An extensive study found that 32% of office desktop computers broke down in their first year of use. Further
investigation reveals that 55% of these were shut down every night, 20% were put into hibernation overnight, and
the remainder were run continuously.
In addition, investigation of those which did not breakdown reveals that 60% were shutdown overnight, 32% were
put into hibernation overnight, and the remainder were run continuously.
a)

Present this information in a fully labelled tree diagram.

[6 marks]

b)

Determine the probability that an office desktop computer will breakdown in its first year of use if:
(i)
It is shut down every night,
(ii)
It is put into hibernation every night,
(iii)
It is run continuously.
[2+2+2 = 6 marks]

If an office desktop computer breaks down during its first year of use, the extra average cost to the business is
estimated to be $400. If it is run continuously for a period of a year it will consume $175 more electricity compared
to if it was shut down every night, whereas it will only consume $60 more if it is put into overnight hibernation.
(Assume that no computer breaks down more than once in its first year of use.)
c)

Find the expected cost of breakdowns for an office desktop computer during its first year of use under
each of the following scenarios:
(i)
It is shut down every night,
(ii)
It is put into hibernation every night,
(iii)
It is run continuously.
[2+2+2 = 6 marks]

d)

By also considering the running costs for each scenario determine which scenario offers the lowest total
cost.
[2 marks]

Question 8 (20 marks)

BearCo produces alutin (and alloy of aluminium and tin) bearings for truck engines. Prior to shaping, ingots of alutin
pass through a rolling mill, where they are reduced to a mean thickness of 3.05 mm , with a standard deviation of
0.025 mm.

The alutin ingots can be shaped if their thickness is between 2.97 mm and 3.08 mm. These ingots are described as
in spec. If they are outside that range they are out of spec and need to be melted down and recast.

a)

Assuming that alutin ingot thickness follows a normal distribution, determine the probability that a
randomly selected ingot is suitable to be shaped.
[4 marks]

b)

BearCo needs 48 ingots for a bearing production run. If they roll 50 ingots, determine the probability that
they will have enough in spec ingots for the production run.
[8 marks]

c)

If BearCo rolls 350 ingots, determine the approximate probability that at least 300 are in spec.
[8 marks]

Question 9 (20 marks)

A quarrying company produces black granite bench tops for kitchen outfitting businesses. Their standard utility
bench top is 2000mm * 610mm, and sells for $438.38 if it has no processing blemishes. Historical data suggests that
the number of processing blemishes follows a Poisson distribution with an average of 0.21 blemishes per square
metre.
a) Determine the probability that a standard utility bench top (SUBT) has no processing blemishes.
[3 marks]

b) Determine the probability that a SUBT has one processing blemish.

[3 marks]

c) Determine the probability that a SUBT has two or more processing blemishes.
[3 marks]

If a SUBT has one blemish it can be sold for as seconds for $350.00, and if it has two or more blemishes it can be
sold as a reject for $150.00.
d) Determine the expected revenue per SUBT.
[3 marks]

If the SUBTs are processed (cut, routed and polished) slowly, the processing blemish rate is only 0.15 blemishes per
square metre. However, this slower processing increases the labour costs of processing by $23.22 per SUBT.
e) Determine the expected revenue per SUBT if they are processed slowly, and thus provide advice to the
company as to whether they should change to the slow process.
[6 + 2 = 8 marks]

Assessment Guidelines
The rubric below provides a guideline for students of the expectations with respect to key assessment criteria.

Criteria

Applies
To

Assumptions1

Methodology

Questions or
question parts

Excellent

Assumptions identified but

misstated or misrepresented.
Penalty 0-1 marks

Failure to identify and state an

assumption required to allow the
use of a particular methodology,
or use of a wrong assumption.
Penalty 1-2 marks

Student shows understanding of

the problem.
Appropriate methodology
chosen for the problem.
Enough detail in the answer for
the marker to follow the logic of
the student's approach. (As an
example, the level of detail
provided in examples in lecture
notes.)
No Penalty

Student shows some

understanding of the problem.
General approach basically
correct, but some steps wrong or
inappropriate.
Marker has some difficulty
following students approach
and/or there are significant
jumps of logic or missing details
Penalty <= 50% of marks
available.

Student shows no understanding

of the problem.
Totally inappropriate
methodology employed.
Large or incorrect jumps of logic.
Marker can not follow student's
approach.
Important details missing.
Penalty >= 50% of marks
available

Minor calculation and/or

transcription errors leading to
incorrect answers.
Penalty 1 mark.

Major and/or repeated errors.

Penalty 1-2 marks.

Interpretations, when asked for,

are partially correct or partially
complete.
Wrong (but not patently wrong)
answers are not picked up.
Penalty 1 mark.

Interpretations, when asked for

are either well off the mark or
are missing.
Patently wrong answers are not
picked up.
Penalty 1-2 marks.

At least one but not all attributes

of excellent presentation are
missing.
1 to 9% penalty.

Illegible and/or scrappy

Pages, questions and question
parts out of sequence,
Presented as loose pages,
bound as a booklet, contained in
plastic envelopes,
Cover sheet absent or not
signed.
10% penalty

As per unit outline

Handed in more than a week

late, or not handed in, without
prior arrangement and
supporting documentation.
100% penalty

with.2
No penalty.
Interpretations, when asked for
are correct and complete.
Answers have been sanity (or
reality checked) and where the
student identifies an answer as
infeasible but can't find the
mistake, they explain why it is
that the answer can't be right.
No penalty

Interpretation
and reflection

Presentation
Whole
Assignment

Timeliness

1
2

Poor

Identify and state any

assumptions required to allow
the use of a particular
methodology.
No Penalty

Answers are correct, given the

values that the student started
the problem (or problem part)

Evaluation

Intermediate

Neatly handwritten or typed.

Pages, questions and question
parts assembled in order.
Stapled or fastened in top left
hand corner.
Cover sheet attached and
signed.
No penalty

Handed in on or before due

date.
No penalty

NB Many questions may not need students to state any assumption as these may have been provided in the question.

If a student makes a mistake on a question part they will lose marks on that question part. If they then use a resulting incorrect number in a subsequent
question part, as far as possible they will not penalised in that subsequent part, except where it should have become obvious to the student that an error was
carried in.

Guidelines for BEA140 Quantitative Methods Assignment

Teams & Individuals

The assignment may only be completed and submitted by individuals. Team assignments are not allowed.
Whereas students are encouraged to discuss all elements of the unit, including the assignment, the preparation of the assignment must
be an individual effort. For example, two or more students discussing how to attack question 3, for example, is acceptable. Two students
working together to prepare a full solution to question 3 is NOT acceptable. A student presenting others work as their own is NOT
acceptable. A student allowing another student to copy all or part of their assignment is NOT acceptable.

Presentation

Assignments must be submitted with a signed cover sheet. If an assignment is submitted without being signed, the assignment and mark
will be withheld until the student come in and sign it.
There is no need for the assignment to be prepared on a word processor. (You can if you wish, but for many students this will be wasteful
of their time.) Neat hand writing is sufficient. Students are expected to show sufficient working such that the marker can establish the
logic of their thoughts. (Typically, the amount of working in examples in the lectures is a good indication of what is an acceptable amount
of detail.). Part marks will be available for incorrect answers, and will be allocated on the basis of the working.

Preparation Methodology

Students are encouraged to check their answers, and ask themselves questions such as "does this make sense?", "how can I tell if this
looks reasonable?" If a student gets an answer that is obviously wrong and can't figure out what has gone wrong, they are expected to at
least comment that it does not look reasonable (and why).
Students are encouraged to complete assignment questions as the relevant topics are covered in class. (The "mad rush at the last minute"
strategy is a dangerous one. See Problems below.)

Problems

Assignments that are handed in late will be penalised, unless prior arrangement has been made with the lecturer. Assignments up to one
week late will be penalised as described in the unit outline. Assignments more than one week late will not be marked.
In the event of sickness or other major disruption is likely to affect a students ability to submit the assignment on time, the lecturer
should be contacted a.s.a.p. Special consideration will require documentary evidence. (Medical certificate, memo on letterhead for
participation in representative (Tas, or Aust) sport or for interstate work commitments, etc)
Special consideration will most likely assume that the individual was working on the assignment as recommended in the Preparation
Methodology section above. For example, if one is sick for the last week before the assignment is due, it may well be expected that all of
the assignment that should have been prepared during previous weeks will be submitted on time, and that only the questions pertaining
to the last week's work will be granted an extension.
If you have any other questions or problems contact your lecturer or workshop tutor - the earlier the better.

Marking and Feedback

It will take a number of weeks to mark the assignment.

However, one week after the due date, a full and detailed set of solutions will be posted on mylo. Students are encourage to keep a copy
of their assignment which they can check against the solutions, and thus obtain feedback on their performance even before the
assignments are marked. This strategy is designed to allow students to take maximum advantage of the assignment in their exam
preparation study.
Upon return of marked assignments, teaching staff will be available for those students seeking more feedback.

You should be aware that assignments will be checked for plagiarism. Plagiarism is punishable by reduction or cancellation of marks, and in
the most serious cases, exclusion from a unit, a course or the University. This applies both to a student who submits somebody elses work as
their own, AND to a student who willingly allows another to copy and submit their work.