# BUSS 305 – STATISTICAL DECISION MAKING KCA Past Paper

UNIVERSITY EXAMINATIONS: 2019/2020
EXAMINATION FOR THE DEGREE OF BACHELOR OF BUSINESS IN
INFORMATION TECHNOLOGY
BUSS 305: STATISTICAL DECISION MAKING
FULL TIME/ PART TIME/ DISTANCE LEARNING
DATE: MAY, 2020 TIME: 6 HOURS
SECTION B

QUESTION ONE (20 MARKS)
(a) A researcher wished to estimate the difference between the proportion of users of two
shampoos who are satisfied with the product. In a sample of 400 users of Shampoo A
taken by this researcher, 78 said they are satisfied. In another sample of 500 users of
Shampoo B taken by the same researcher, 92 said they were satisfied.
i) Construct a 90% confidence interval for the true difference between the two population
proportions. (8Marks)
=0.1 to the claim that
there is no difference in customer satisfaction between the two shampoos. (2 Marks)
(b) Studies in finance have shown that the price of a share of stock (y) is directly related to the
issuing company’s level of debt (x1) and the dividend rate (x2).
Develop a regression model that relates the share of stock, level of debt and dividend rate
and hence estimate the share of stock when level when debt is 3 and the dividend rate is
5. (10 Marks)

SECTION C
QUESTION TWO (20 MARKS)
(a) A survey recently reported that the mean national annual expenditure for inpatient and
outpatient services of all persons over 64 years of age was \$5,423 with a standard
deviation of \$979. A random sample of 352 persons over age 64 living in Nairobi had an
average expense of \$5,516.
Can we conclude that the mean inpatient and outpatient expense of all Nairobi?
residents over age 64 is higher than the national average of \$5,423? Use the .01
level of significance. (9Marks)
(b) An investor is considering three alternatives-a certificate of deposit, a low risk stock fund,
and a high risk stock fund- for a \$20,000 investment. The investor considers three possible states
of nature

(i) Which action is selected by the investor if he is a risk seeker? [2Marks]
(ii) Which action is selected by the investor if he is a risk averter? [2Marks]
(iii) Which criteria is selected by the minim ax regret criterion? [4Marks]
(iv) Draw the decision tree for the investor’s problem. [3Marks]

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