ECON10005 Quantitative Methods 1

Example Exam Questions

• The following are designed to give an idea of the style of questions that may appear
on the QM1 final exam.

• These questions do not cover every possible topic that may be examined.

• These questions do not provide a substitute for studying tutorial, textbook and as-
signment questions and lecture and textbook reading.

• Data, calculations and indicative answers for questions 1–6 can be found in ExampleExamQs.xlsx.
Nearly of the formulae in that spreadsheet are “live” so that varying the data produces
new statistics and hence new questions to attempt.

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1. A simple random sample of assignment and marks (both measured as percentages)
were obtained for n = 49 students from a semester of QM1. The assignment marks
are denoted X1,i and the exam marks X2,i for i = 1, . . . , n. Some sample statistics
for these marks are given below, and can be used to answer the following questions.

(a) Calculate the mean assignment and exam marks for this sample.
(b) Calculate the sample variance and standard deviation of the assignment marks
and exam marks. Which marks are more variable?
(c) Calculate the covariance and correlation between exam and assignment marks.
What are the units of measurements of each of these statistics? Interpret.
(d) Give an estimate of the exam mark a student needed to exceed to be in the top
10$ of students on the exam in the semester.
(e) Calculate the inter-quartile range of assignment marks. What aspect of the
marks distribution does this statistic measure?

Sample statistics for Assignment and Exam marks

n
X Xn
X1,i = 3983.9 X2,i = 2603.3
i=1 i=1
n
X n
X
(X1,i − X̄1 )2 = 6582.90 (X2,i − X̄2 )2 = 13342.12
i=1 i=1

n
X
(X1,i − X̄1 )(X2,i − X̄2 ) = 4141.62
i=1

Median(X1,i ) = 84.2 Median(X2,i ) = 55.0

10th percentile of X1,i = 70.80 10th percentile of X2,i = 31.40
25th percentile of X1,i = 73.30 25th percentile of X2,i = 45.35
75th percentile of X1,i = 88.30 75th percentile of X2,i = 58.60
90th percentile of X1,i = 93.30 90th percentile of X2,i = 82.50

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2. Define an event A to be a randomly chosen student receives an H1 mark (≥ 80%)
on their assignments for the semester. Also define events N , P and H for when the
random selectedly students gets an exam mark in the N range (0–49), the P range
(50–64) and the honours range (≥ 65). The joint probability distribution of these
events are given by the following table.

N P H
A 0.16 0.29 0.14
Not A 0.25 0.14 0.02

(a) Calculate the marginal probability of the event A. What is the interpretation of
this probability? Also calculate P (Ā).
(b) Calculate the marginal probabilities of the events N , P and H. What is the
most likely grade to have been received by a student on this exam?
(c) Suppose you are told the randomly chosen student received an H1 mark for
the assignments. Using this information, calculate the new probabilities of the
events N , P and H.

3. Define an event A to be a randomly chosen student receives an H1 mark (≥ 80%)

on their assignments for the semester. Also define events N , P and H for when the
random selectedly students gets an exam mark in the N range (0–49), the P range
(50–64) and the honours range (≥ 65). The conditional probability distributions of
the exam events conditional on the assignment events are given by the following table.

N P H
conditional on A 0.27 0.49 0.24
conditional on Ā 0.61 0.34 0.05

You are also told that the marginal probability of a student receiving H1 marks on
their assignments is 0.59.
Suppose a randomly drawn student received an honours grade on their exam. Using
this information, what is the probability they received H1 for their assignments?
(This is a separate question from 2, don’t use the information from there.)

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4. Summary statistics of assignment marks (X1,i ) and exam marks (X2,i ), and the indi-
vidual differences between those marks (Di = X1,i − X2,i ), for a semester QM1 from
a random sample of n = 49 students are given in the following table.

X1,i X2,i Di
Mean 81.3 53.1 28.2
Variance 137.14 277.96 242.54

(a) Let us suppose (in a pretend parallel universe) that the University of Melbourne
is introducing a new rule that states that any piece of assessment with average
mark higher than 75 is deemed to be have been set/marked too easily. Carry
out a hypothesis test to see if there is the evidence that the assignments were
too easy. (Use the 5% significance level and a critical value decision rule.)
(b) Let us continue to inhabit the preceding pretend parallel universe and suppose
that the University of Melbourne is also introducing a rule that states that any
piece of assessment with average mark below 55 is deemed to have been too
difficult. Carry out a hypothesis test to see if there is the evidence that the
exams were too difficult. Use the 5% significance level and a p-value decision
rule. The following table of p-values can be used. Clearly identify precisely
which probability and df you use to choose your p-value.
Probability df = 48 df = 96
2P (tdf > 0.786) 0.4359 0.4340
P (tdf < −0.786) 0.2179 0.2170
P (tdf > 0.786) 0.2179 0.2170
P (tdf > −0.786) 0.7821 0.7830

(c) Carry out a hypothesis test to see if there is evidence that average assignment and
exam marks are different. Justify your choice of test. (Use the 5% significance
level and a critical value decision rule.)
(d) Calculate a 95% confidence interval for the difference between the assignment
and exam marks, and interpret the interval.

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5. In the semester following the one for which marks are given in question 4, some
changes were introduced to QM1 to encourage regular student studying throughout
the semester. A new simple random sample of 49 students was taken at the end of
this next semester and the exam marks recorded. Summary statistics for the exam
marks of the 49 students sampled in the first semester (X1,i ) and the exam marks for
those 49 students in the next semester (X2,i ), along with differences Di = X1,i − X2,i
are provided in the following table.

X1,i X2,i Di
Mean 53.13 59.14 −6.01
Standard Deviation 16.67 16.64 23.42

(a) Carry out a hypothesis test to see if there is evidence that the average exam
marks are different between the two semesters. Justify your choice of test. (Use
the 5% significance level and a critical value decision rule.)
(b) In addition to the statistics above, it was calculated that the pass rate in the
first semester was 59% of the observed sample and in the second semester was
78% of the sample. Carry out a hypothesis test for whether the pass rate has
increased in the second semester relative to the first. (Use the 5% significance
level and a critical value decision rule.)
(c) Construct a 95% confidence interval for the pass rate on the exam in the second
semester.

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6. A regression analysis was carried out to examine how assignment marks during the
semester explain average exam marks at the end of semester. The results from a least
squares regression of Exami on Assignmenti are given in the following equation.

d i = 1.9762 + 0.6291Assignmenti
Exam
(0.1764) (0.1843)

(a) Give an interpretation of the coefficient on Assignmenti .

(b) Give an interpretation of the Intercept coefficient. Does this make practical
sense? Explain.
(c) Is there evidence that higher assignment marks are associated with higher aver-
age exam marks at the end of semester?
(d) The R2 for this regression is 0.1953. What does this mean?
(e) Compute a 95% confidence interval for the change in average exam marks cor-
responding to a 1 mark increase in assignment marks.
(f ) What is the estimated average exam mark corresponding to an assignment mark
of 80%?
(g) What is the correlation coefficient between Exam and Assignment marks?

Page 6 of 8
7. (This question taken directly from Lecture 8, answers can be found there.)
You have $100 to invest, with choice of investment a fund with random outcome Z
or another fund with random outcome T . The possible outcomes of each fund and
their joint probability distribution are given in the following table.

Z
T 90 120
86 0.1 0.4
130 0.3 0.2

(a) Calculate the marginal probability distributions of T and Z.

(b) Calculate the expected values, variances and standard deviations of T and Z.
Which fund appears to be riskier?
(c) Calculate the correlation between T and Z. Are these random variables inde-
pendent? Explain.
(d) Calculate the conditional probability distribution of Z given T = 130.
(e) Calculate the conditional probability distribution of Z given T = 86.
(f ) Compare these two conditional probability distributions to the marginal dis-
tribution of Z in part (a). What do these imply about the independence (or
otherwise) between Z and T ? Explain. Is your answer consistent with the
finding in part (c)?
(g) Calculate the conditional expectation of Z given T = 86, and also when given
T = 130. Compare these two conditional expectations to the unconditional
expectation E(Z). How do these finding relate to what you found from the
correlation in part (c)?
(h) Demonstrate how your conditional expectations in (g) and unconditional expec-
tation in (b) are consistent with the Law of Iterated Expectations.
(i) Calculate the conditional standard deviation of Z given T = 86, and also when
given T = 130. What do these calculations imply about the risk of investing in
Z in conditions where T is anticipated to perform poorly?

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8. (This question taken directly from Lecture 12, answers can be found there.)
Suppose we have a simple random sample represented by the random variables X1,i ,
i = 1, . . . , n, in which E(X1,i ) = µ1 and var(X1,i ) = σ12 for every i.

(a) Show that the sample mean X̄1 = n1 ni=1 X1,i is an unbiased estimator of µ1 .
P

(b) What is the role of the sample size n in your answer to part (i)?
(c) Is it important that X1,i be normally distributed for X̄1 to be unbiased?
(d) Derive the variance of X̄1 and explain the role of the sample size n
(e) Suppose we have a second simple random sample X2,i , i = 1, . . . , n, in which
E(X2,i ) = µ2 and var(X2,i ) = σ22 for every i. Show that X̄2 − X̄1 is an unbiased
estimator for µ2 − µ1 . Does this apply for independent samples, matched pair
samples or both?1

9. (This question taken directly from Tutorial 6, answers can be found there. See also
Lecture 10.)
Suppose we have a simple random sample of 0/1 observations2 represented by the
random variables Xi , i = 1, . . . , n. Define p = P (Xi = 1).

(a) Define µ = E(Xi ) Show that µ = p.

(b) Define σ 2 = var(Xi ). Show that σ 2 = p(1 − p).
(c) Define the estimator p̂ = X̄ = n1 ni=1 Xi . Why is this called the “sample
P
proportion”? Show that p̂ is an unbiased estimator of µ.
(d) Consider the variance estimators
n
2 1 X
s = (Xi − X̄)2
n − 1 i=1

and
p̂(1 − p̂)
s̃2 = .
n
How are these two estimators related? Are they likely to give similar answers?

1
Include use of the addition formula for expected values for this question, which is on the formula sheet.
2
i.e. only possible values are 0 or 1

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