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3. 1: Measuresof CentralTendencv 97

The Mean
The arithmetic mean (typically referredto asthe mean) is the most commonmeasureof cen-
tral tendency.The meanis the only commonmeasurein which all the valuesplay an equalrole.
The meanservesasa "balancepoint" in a setof data(like the fulcrum on a seesaw). you calcu-
late the meanby addingtogetherall the valuesin a dataset and then dividing that sum by the
numberof valuesin the dataset.
The symbol X, called,X-bar,isusedto representthe meanof a sample.For a samplecon-
taining n values,the equationfor the meanof a sampleis written as

Sum of the values

X=
Number of values

Using the seiesXr, Xr, . . . , Xnto representthe setof n values andn torepresentthe numberof
values,the equationbecomes:

x= Xr+Xr+...+Xn
By using summationnotation (discussedfully in Appendix B), you replacethe numerator

Xr+ X2* ' ' ' * Xnby theterm *r,which meanssumall theX, valuesfrom the firstXvalue,
f
l =l

Xt, to the lastXvalue, Xn,to form Equation(3.1),a formal definition of the samplemean.

SAMPLEMEAN
The samplerneaR,: ;. u of theva ueson,*ro uv *re nu;-,
"r*ur:

ff,.,:.* i=i
ffi (3.1)
:r:11rl
" n,,
rl;::;::::1;:
i,::,t,::::

.:'
..t..i '.,r.1.t
".t'.,;t..;,
where ;,il.,t
,,,..,.t,l.f t1,'.;,..,f..;;:.,
;ilir+
ff a *u*nt. ..t'..i ... ,.
...ttil
','',t. :ltt.",:
J,tii.,i,:lii.:

i,:,i:,:
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tt,tt::,fi

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ff# in the sample

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Becauseall the valuesplay an equalrole, a mean is greatly affectedby any value that is
greatly different from the others in the data set. When you have such extremevalues, you
shouldavoidusing the mean.
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typical time it takes you to get ready in the morning, you might be able to better plan your
morning andminimizeany excessivelateness(or earliness)going to your destination.Suppose
you define the time to get ready as the time (roundedto the nearestminute) from when you get
out of bed to when you leaveyour home.You collect the times shownbelow for 10 consecutive
work days(storedin the datafile@S$:
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 3. 1: Measuresof CentralTendency 99

Fund { t

Three-Year
Category Objective R+sX Return
Baron Growth Small Cap Growth Low 20.8
ColumbiaAcorn Z Small Cap Growth Low 26.0
FBR Small Cap Small Cap Growth Low 24.9
Perritt Micro CapOpportunities Small Cap Growth Low 29.9
SchroderCapitalUS OpportunitiesInv Small Cap Growth Low 22.3
ValueLine EmergingOpportunities SmallCap Growth Low 19.0
Wells FargoAdvtg Small CapOpp Adm Small Cap Growth Low 22.4

Computethe meanthree-yearannualizedreturn for the small-capgrowth funds with low risk.

SOLUTION The meanthree-yearannualizedreturn for the small-capgrowth funds with low
risk is 23.61.calculatedasfollows:

Sum of the values

Number of values
n

),LJ'x,
_ i-|
n

- 16s'3- 23.6143
7

The ordered array for the seven small- cap growth funds with low risk is:

19.0 20.8 223 22.4 24.9 26.0 29.9

Four of thesereturnsarebelow the meanof 23.61.and threeof them are abovethe mean.

The Median
The median is the middle value in a set of datathat hasbeenrankedfrom smallestto largest.
Half the values are smaller than or equal to the median, and half the values are larger than or
equalto the median.Themedianis not affectedby extremevalues,so you can use the median
when extremevalues are present.
To calculatethe median for a set of data, you first rank the values from smallestto largest
and then useEquation(3.2) to computethe rank of the valuethat is the median.

Mi'bAr.r
t3#}
:,.:.:.:.l;tllit;l::it,:tt:
i::

You compute-themedianvalueby following one of two rules:

, Rule 1 If there arean odd nttnrberof valuesin the dataset,the median is the middle-ranked
value.
; Rule 2If there ate arlevennumberof valuesin the dataset,thenthe medianisthe average
of the two middle rankedvalues.
To computethe median for the sampleof 10 times to get ready in the morning, you rank the
dailv times as follows:
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 3.1: Measuresof Central Tendency 10 I

3 .3 COMPUTING THE MODE

A systemsmanagerin chargeof a company'snetworkkeepstrack of the numberof serverfail-
uresthat occur in a day.Computethe mode for the follow,ing data,which representsthe num-
ber of serverfailuresin a day for the pasttwo weeks:

130326274023363
SOLUTION The orderedarray for thesedatais

001223333346726

Because3 appearsfive times, more times than any other value, the mode is 3. Thus, the systems
mar:rigercansaythat the most commonoccurrenceis havingthreeserverfailuresin a day.For this
dataset,the medianis alsoequalto 3, andthe meanis equalto 4.5.The extremevalue26 is anout-
lier. For thesedata,themedianandthe modebettermeasurecentraltendencvthanthe mean.

A set of datahasno mode if none of the valuesis "most typical." Example3.4 presentsa data
setwith no mode.

3 .4 DATA WITH NO MODE

Computethe mode for the three-yearannualizedreturn for the small-capgrowth funds
([@[@@) with low risk (seepage 99).
SOLUTION The orderedarrav for thesedatais

19.0 20.8 22.3 22.4 24.9 26.0 29.9

Thesedatahaveno mode.None of the valuesis most typical becauseeachvalue appeaxsonce.

Cluartiles
rlnnrnmfiiieil,-"
and O? Quartiles split a set of datainto four equalparts-the first quartileo 01, dividesthe smallest
-i5,:- 50th, 25.0% of the valuesfrom the other 75.0% that arelarger.The secondquartile, Q2, is the
il@rflEBr: ies, median-50 .0o/oof the values are smaller than the median and,50.0o/o are larger.The third
E:gli-eftons quartile, Q, dividesthe smallest75.0% of the valuesfrom the largest25.0%.Equations(3.3)
mrd 3"4) can and(3.4) define the first and third quartiles.l
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trn,c esl'c'enti/es;
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 3. 1: Measuresof CentralTendencv I 03

For these data

^ (n+l)
()r-- 'rankedvalue
4
7 +1
- i---ranked value = 2nd rankedvalue
4

Therefore,using Rule l, Qris the secondrankedvalue. Becausethe secondrankedvalue is

20.8, the first quartile, Qp is 20.8.
To find the third quariile, Qr:

1/r + l\
O, - -''" -' rankedvalue
4
3(7+ l)
= --)---------11s11ked
value = 6th rankedvalue
4

Therefore,using Rule l, Qris the sixth rankedvalue.Becausethe sixth rankedvalue is 26.0,

Q3is26.
The first quartile of 20.8 indicatesthat25Yoof the returnsare below or equalto 20.8 and
75o/oaregreaterthan or equalto 20.8. The third quartile of 26.0 indicatesthatT5Yoof the
returnsarebelow or equalto 26.0 and25o/oare greaterthan or equalto 26.0.

The GeometricMsan
The geometric mean measuresthe rate of changeof a variableover time. Equation(3.5)
the geometricmean.
.defines

The geometric mean rate of return measuresthe averagepercentagereturn of an invest-

ment overtime. Equation(3.6) definesthe geometricmeanrate of return.

To illustrate thesemeasures,consideran investmentof $100.000that declinedto a value of

$50,000at the end ofYear 1 and then reboundedback to its orisinal $100.000value at the end
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 3.2: Yaiationand Shaoe 105

3.2 VARIATIONAND SHAPE

In additionto centraltendency,every data set can be characterizedbyits variation and shape.
Variationmeasuresthe spread, or dispersion, of valuesin a dataset. One simple measureof
variation is the range,the differencebetweenthe largestand smallestvalues.More commonly
usedin statisticsare the standarddeviationand variance,two measuresexplainedlater in this
section.The shapeof a datasetrepresentsa patternofall the values,from the lowestto highest
value.As you will learn later in this section,many datasetshave apaltemthat looks approxi-
mately like a bell, with a peakof valuessomewherein the middle.

The Range
The range is the simplestnumericaldescriptivemeasureof variationin a set of data.

fi
The rtnge is equalto,thelargestvalue,minus,the
smallest
',,' va1ue.

Range = Xlurg"rt (3.7)

'Xi**llest

To determinethe range of the times to get ready in the morning, you rank the data from small-
estto largest:

29 3L 35 39 39 40 43 44 44 s2

Using Equation (3.7), the range is 52 - 29 : 23 minutes.The range of 23 minutes indicates

that the largestdifferencebetweenany two daysin the time to get ready in the morning is 23
minutes.

3 .7 COMPUTING THE RANGE IN THE THREE-YEARANNUALIZED RETURNS

FOR SMALL.CAPGROWTH MUTUAL FUNDS WITH LOW RISK
The 838 mutual funds (E!!@@ that arepart of the Using Statisticsscenario(seepage
96) are classified according to the category (small cap, mid cap, and large cap), the type
(growth or value),andthe risk level of the mutual funds(low, average,andhigh). Computethe
range of the three-year arcnalized returns for the small-cap growth funds with low risk (see
page99).
SOLUTION Rankedfrom smallestto largest,the three-yearannualizedreturnsfor the seven
small-cap growth funds with low risk are

19.0 20.8 22.3 22.4 24.9 26.0 29.9

usingEquation(3.7),therange- 29.9- 19.0- 10.9.

Therefore,
The largestdifferencebetweenany two returnsis 10.9.

The rangemeasuresthe total spreadinthe setof data.Although the rangeis a simplemea-

sure ofthe total variation in the data,it doesnot take into accounthow the data aredistributed
betweenthe smallestand largestvalues.In otherwords,the rangedoesnot indicatewhetherthe
values are evenly distributedthroughoutthe data set, clusterednear the middle, or clustered
near one or both extremes.Thus, using the rangeas a measureof variation when at least one
value is an extremevalue is misleadine.

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 3.2: Variation
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A simple measureof variation aroundthe mean might take the differencebetweeneach

value and the mean and then sum thesedifflerences.However, if you did that, you would find
that becausethe mean is the balancepoint in a set of data, for every set of data,thesediffer-
enceswould sumto zero.One measureof variationthat differs from datasetto data setsquares
the differencebetweeneachvalue and the mean and then sumsthesesquareddifferences.In,
statistics,this quantityis calleda sum of squares(or .S^S).
This sumis then dividedby the num-
ber of valuesminus I (for sampledata)to get the samplevariance(S2;.fne squareroot of th6
samplevarianceis the samplestandarddeviation(^9).
Becausethe sum of squaresis a sum of squareddifferencesthat by the rules of arithmetic,
will alwaysbe nonnegative,neither the variancenor the standarddeviationcqn ever be nega-
tive. For virtually all setsof data,the varianceand standarddeviationwill be a positive value,
althoughboth of thesestatisticswill be zero if there is no variation at all in a set of data and
eachvalue in the sampleis the same.
For a-samplecontainingn values,xp x2, X3, . . . , Xn, rhe samplevariance(given by the
symbol52) is

q2 (x, - X)2 + (x, - X)2 + ...+ (x, - X)2

L)

Equation(3.9) expressesthe samplevariance;-:rn-ation notation,and Equation(3.10)

expresses
the samplestandarddeviation.

i i!,,itiit i,
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 3.2: Variation and,Shape I 09

Becausethe varianceis in squaredunits (in squaredminutes,for thesedata),to compute

the standarddeviation,you takethe squareroot ofthe variance.Using Equation(3.10)on page
l07,the samplestandarddeviation,S, is

=^tr-
,S 45.82= 6.77

This indicatesthat the getting-readytimes in this samplearerclusteringwithin 6.77 minutes

aroundthe meanof 39.6minutes(i.e.,clusteringbetweenX - lS:32.83 and X + 1S:
46.37).lnfact,7 out of l0 getting-readytimeslie within this interval.
Using the secondcolumn of Table 3.1, you can also calculatethe sum of the differences
betweeneachvalue and the meanto be zerc.For any setof data,this sum will alwaysbe zero:

n
sr
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^L\t'i
i :1

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ffal tendency.

uE
, 3.9 COMPUTING THE VARIANCEAND STANDARD DEVIATIONOF THE
THREE-YEARANNUALIZED RETURNSFOR SMALL-CAPGROWTH MUTUAL
FUNDS WITH LOW RISK
The 838 mutual fu"ds (E@tf,@El@ that arepart of the Using Statisticsscenario(seepage
96) are classifiedaccordingto the category(small cap, mid cap, and large cap), the type
(gro6h or value), and the risk level of the mutual funds (low, average,and high). Computethe
variance and standarddeviation of the three-yearannualizedreturns for the small-cap growth
fundswith low risk (seepage99).

SOLUTION Table3.2 illustratesthe computationof the varianceand standarddeviationfor

the three-year annualizedreturnsfor the small-cap growth funds with low risk.

3 "2 X - 23.6143
_: Three-\'ear
:* = Thrree- Annualized Step I: Sten 2:
-: o Returns Return (Xi - Xt (xi: x)2
.{r;1f1T;.;' 2 n
.Jf ve ti ./

r[ii1{|ir*1r-
3 FundS 20.8 -2.8143 7.9202
260 2.3857 5.6916
24.9 r,285i 1.653I
29.9 6.2857 39.5102
22.3 --1.3143 r.7273
19.0 -4.6143 2r.2916
22.4 .-I.2143 r.4745
Step 3: Step 4:
Sum: Divide by (tr - 1):
79.2686 T3.2TT4
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 3.2: YaiationandShape I I I

For the sampleof l0 getting-readytimes, becauseX : 39.6 and.S : 6.77, the coefficient of
variationis

cv= = (q)roo%= r7.ro%

[+)'oo%[ 3 e .)6
For the getting-readytimes,the standarddeviationis I7.l% of the sizeof the mean.
The coefficient of variation is very useful when comparingtwo or more setsof data that
are measuredin differentunits, as Example3.10 illustrates.

3.10 COMPARINGTWO COEFFICIENTSOF VARhilON WHEN TWO VARIABLES

HAVE DIFFERENTUNITS OF MEASUREMENT
The operationsmanagerof a packagedelivery serviceis decidingwhetherto purchasea new fleet
of trucks. Whenpackagesarestoredin the trucks in preparationfor delivery you needto consider
two major constraints-the weight (in pounds)and the volume (in cubic feet) for eachitem.
The operationsmanagersamples200 packagesand finds that the mean weight is 26.0
pounds,with a standarddeviationof 3.9 pounds,and the meanvolume is 8.8 cubic ieet, with a
standarddeviationof 2.2 cubicfeet.How canthe operationsmanagercomparethe variationof
the weight and the volume?
SOLUTION Becausethe measurementunits differ for the weight and volume constqaints,the
operationsmanagershouldcomparethe relativevariability in the two typesof measurements.
For weight,the coefficient of variationis

= 3'g \
r/w-(
cT/ _ 15.0%
lfr )r00%
For volume, the coefficient of variation is

Cvr = ('-r-\roo%
- 25.0%
\.8.8
i
Thus, relative to the mean,the packagevolume is much more variable than the packageweight.

Z Scoras
An extreme value or outlier is a value located far awayfrorn the mean.Z scoresare useful in
identifying outliers' The larger the Z score,thegreaterthe distancefrom the value to the mean.
The Zscore is the differencebetweenthe value and the mean,divided by the standarddeviation.

,:: :: I , '
,,'

z scoRES
, .2,,*,# Q,l2)

For the time-to-get-readydata,the mean is 39.6 minutes,and the standarddeviation is 6.77

minutes'The time to get readyon the first day is 39.0minutes.You computetheZ scorcforDay
1 by using Equation(3.12):
X -X
Z=
^S
39.0- 39.6
6.77
= - 0.09
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 3.2: Yaiationand Shape 113

Shapeinfluencesthe relationshipof the meanto the medianin the following ways:

ffi
Mean < median:negative,or left-skewed
ffi
Mean: median:symmetric,or zeroskewness
ffi
Mean > median:positive,or right-skewed
Figure3.1 depictsthreedatasets,eachwith a different shape.
3"1
n of th ree
fri;-'l:,:
1 5 ] - e i l ' t n g In

PanelA P a n e lB P a n e lC
Negative,or left-skewed Symmetrical Positive,or right-skewed

The datain PanelA arenegative,or left-skewed.In this panel,most of the valuesarein the
upper portion of the distribution.A long tail and distortion to the left is causedby some
extremely small values.Theseextremely small values pull the mean downward so that the
meanis lessthan the median.
The data in Panel B are symmetrical.Each half of the curve is a mirror image of the other
half of the curve.The low andhigh valueson the scalebalance,andthe meanequalsthe median.
The datain PanelC arepositive,or right-skewed.In this panel,most of the valuesarein the
lower portion of the distribution.A long tail on the right is causedby someextremelylargevalues.
Theseextremelylargevaluespull the meanupward so that the meanis greaterthan the median.

AL EXPLORATIONSExploringDescriptive
Statistics
iiitoiinuu
-;i61 use the Visual Explorations Descriptive
aililillliltmic$
trocedure to seethe effect of changing datavalues
i;res of central tendency,variation, and shape.Open
add-in workbook (seeAppendix D)
lrffirrvr:\isualExplorations t Descriptive Statistics
: --1003) or Add-ins + Visual Explorations t
h e Statistics(Excel 2007)from the Microsoft
"mreriu
bar. Read the instructions in the pop-up box
il;ur*mation
below) and click oK to examine a dot-scale
diagram for the sample of 10 getting-ready times used
throughout this chapter.
Experiment by entering an extreme value such as 10
minutes into one of the tinted cells of column A. Which
measuresare affected by this change?Which ones are not?
You can flip between the "before" and "aftef' dtagramsby
repeatedly pressing Crtl + Z (undo) followed by Crtl + Y
(redo) to help see the changesthe extreme value causedin
the diagram.
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tlNe Basics
t following is a set of data from a sample
ffi
7 49 8 2
fu mean, median, and mode.
:ffie ftmge, interquartile range, varrance, stan-
mmion-and coefficient of variation.
ffis Z scores.Are there anyoutliers?
shape of the data set.
followitrg is a set of data from a sample
7 497 3 12
tffis mean, me dian, and mode.
ffis range, interquartile tange, variance, stan-
and coefficient of variation.
M Z scores.Are there anyoutliers?
ffiE shape of the data set.
following set of data is from a sample
[27 49 0 7 3
lilffie
mean,median,and mode.
ffie range, interquartile range, variance, stan-
ilmim' and coefficient of variation.
ffie Z scores.Are there anyoutliers?
shape of the data set.
The following is a set of data from a sample
m: 5:
7-5-879
ffis mean,median, andmode.
ffis range,interquartile ran5e,variance,stan-
tffiilm, and coefficient of variation.
Z gcores.Are thereany outliers?
shapeof the dataset.
Supposethe rate of return for a particular
during the past two years was l0% and
Computethe geometricmeanrateof return.
of return of 10o/ois recorded as 0.10, and a
ffi3'0f/ois recordedas 0.30.)
Concepts
The operations manager of a plant that
s tires wants to compare the actual
diameters of two grades of tires, each of
to be 575 millimeters.A sampleof five
3.2: Variation and Shape 115
tires of each grade was selecte{ and the resultsrepresent-
ing the inner diameters of the tires, rankedfrom smallest
to largest, are as follows:
GradeX Grade Y
568 s70 s75 578 584 573 s74 575 577 578
a. For eachof the two gradesof tires, computethe mean,
median,and standarddeviation.
b. Which gradeof tire is providing betterquality?Explain.
c. What would be the effect on your answersin (a) and (b)
if the last value for grade )'were 588 insteadof 57g?
Explain.
3.7 The datain the file @ containthe price
for two ticketswith online servicecharges,largepopcorn,
and two medium soft drinks at a sampleof six theatre
chains:'
$36.1s $3I .00 $35.0s $40.2s $33.75 $43.00
source:Extractedfrom K. Kelly,"TheMultiplex(Indersiege,"The
WallStreetJournal, December 24-25,200i,pp.pI, p5.
a. Computethe mean, median, first quartile, and third
quartile.
b. Compute the va:nance,standard deviation, range,
interquartilerange,and coefficient of variation.
c. Are the dataskewed?If so, how?
d. Basedon the resultsof (a) through(c), what conclusions
canyoureachconcerningthe costof goingto the movies?
3.8 A total of 92,000new single-familyhomeswere sold
in the united Statesduring February 2006.The median
price of the homeswas $230,400,a decrease
of 2.9% from
February2005 (U.S. CensusBureau,www.census.gov).
Why do you think the CensusBureaurefersto the median
price insteadof the meanprice?
3.9 The datain the file @ containthe bounced
checkfees,in dollars,for a su*pt. of 23 banksfor direct-
depositcustomers who marntaina$100 balance:
26 28 20 20 2t 22 25 25 18 2s 15 20
18 20 2s 2s 22 30 30 30 ls 20 29
Source: Extractedfrom "Tlte l{ew Face of Bankiftg," June 2000.
Copyright @ 2000 by Consumers(Jnion of (J.5.,Inc.,yonkers, Ny
r0703-r057.
L. Compute the mean, median, first quartile, and third
quartile.
b. Compute the variance, standard deviation, range,
interquartile rarrge,coefficient of variation, and Z scores.
c. Are the data skewed? If so, how?
d. Based on the results of (a) through (c), what conclusions
can you reach concerning the bounced check fees?
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 3.2: Variationand Shape ll7

-e mrean,median, first quartile, and third tions institutions,and the military, TASER'spopularity
has enjoyeda roller-coasterride. The stockprice in 2004
the r-ariance, standard deviation, tange, increased36r.4%,but in 2005,it decreased 78.0%
range, coefficient of vanattofl, and Z (Source: Extracted
fromfinance.yahoo.com, April I 7,2006).
fiiMG thEre any outliers? Explain.
a. Computethe geometricmean rate of increasefor fhe
skewed? If so, how?
two-yearperiod 2004-2005.(Hint: Denotean increase
rvalks into the branch office during the
of 3 61.4%asRl : 3.614.)
she asks the branch manager how long she
b. If you purchased$ 1,000of TASER stockat the start of
tmu-ait. The branch managerreplies, 'Almost
2004,what wasits valueat the end of 20A5?
fiqxi's
than five minutes." On the basis of the
c. comparethe resultof (b) to that of problem3.17(b).
( a pthrough (c), evaluate the accuracy of this
3.19 In 2002, all the major stock market indexes
decreaseddramaticallyas the attackson glll drove stock
that another branch. located in a residen-
prices spiralingdownward.Stockssoon rebounde4but
rurilsn
concerned with the noon-to- 1 p.m. lunch
what type of meanreturn did investorsexperienceover the
w,ururingtime, in minutes (defined as the time
four-yearperiod from 2002 to 2005?The datain the fol-
qnters the line to when he or she reachesthe
1owingtab1e(containedinthedatafi1eEBI@)repre-
). of a sampleof 15 customersduring this
sentthe total rate of return (in percentage)for the Dow
over a period of one week. The results
JonesIndustrtalAverage(DJIA), the Standard& Poor's
500 (s&P 500), and the technology-heavyNASDAe
Composite(Nasdaq).
5 ar) 8.02 5.79 9.73 3.82 9.01 9.35
ffi"ffi85.64 4.09 6.t7 g.gI 5.47
Year DJIA s&P500 NASDAQ
2005 -0._6 2.9 r .4
tfuemean,median, first quartile, and third 20041 3.4 g.L 8.6
2001 30.0 26.4 50.0
the variance, standard deviation, range,. 200t/ * 16.8 -24.2 -3 1.5
range, and coefficient of variation. Are
ruruthers?
Explain. source:Extracted
from finance.yahoo.com,
April I 4, 2006.
skewed? If so" how?
walks into the branch office during the a. Calculate the geometric mean rateof return for the DJIA,
he asks the branch manager how long he can S&P 500, and Nasdaq.
tM,wrait. The branch manager replies, 'Almost b. What conclusions can you reach concerning the geomet-
ilessthan five minutes." On the basis of the nc rates of return of the three market indexes?
(iat nhrough (c), evaluate the accuracy of this c. Compare the results of (b) to those of Problem 3.20 (b).

3.20 In 2002-2005 precious metals changed rapidly in

Electric (GE) is one of the world's largest value. The data in the following table (contained in the data
mfuelops, manufactures,and marketsa wide fi1e@@representthetota|rcteofreturn(inpercent.
. including medical diagnostic imaging age) for platinum, gold, and silver:
cngines, lighting products, and chemicals.
ilare,NBC Universal, GE produces and deliv-
Year Platinum Gold Silver
'ierision andmotionpictures.In 2004.,GE's
20.6%,but in2005,thepricedropped1.4% 2005 12.3 17.8 29.5
mwC
.trwmfinance.yahoo.com,April I 7, 2006).
2004 5.7 4.6 14,:C
rhe geometric mean rate of increase for the
2003i 36.0 19.9 77i&'.
2402 24.6 2,5.6 "3'3
Mcriod2004-2005.(Hint' Denotean increase
;msrRt:0.206.) Source: Extractedfrom www.kitco.com , April 14, 2006.
S1,000of GE stockat the startof 2004.
mmn ralue at the endof 2005?
ttttrne a. Calculatethe geometricmean ruteofrefurnfor platinum,
resultof (b) to thatof Problem3.18 (b).
go14and silver.
lnternational, Inc., develops, manufac- b. What conclusionscanyou reachconcerningthe geomet-
su,[,[,s
nonlethal self-defense devices known as ric ratesof returnof the threepreciousmetals?
ing primarily to law enforcement, correc- c. Comparethe resultsof (b) to thoseof Problem3.19(b).
 ueerueq] 6snrlJ
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 3.3: Numerical DescriptiveMeasuresfor a population 119

The Population Varianceand Standard Deviation

The population variance andthe population standard deviation measurevariationin a popu-
lation. Like the relatedsamplestatistics,the populationstandarddeviationis the squarerool of
thepopulationvariance.The symbolo2,the Greeklowercaselertersigmasquared,represents the
populationvariance,andthe symbolo, the Greeklowercaseleltersigma,represents the popula-
tion standarddeviation.Equations(3.14)and (3.15)define theseparameters. The denominators
for the right-sidetermsin theseequationsuseN andnot the (n - l) term that is usedin the equa-
tionsfor the samplevarianceandstandarddeviation[seeEquations(3.9)and(3.10)on pagetOZ1.

*'TP"on mean

o2= (3;14)

ffiere
:
l"r population mean
xi: ith valueof the var rrbleX
1r
Lr', -,u)r- summationof all the squareddifferencesbetweenthe

:Ji;,il''
i= !

POPULATIONSTANDARD
nr
Itti -p)r
i =7
O= (3.15)
ff

To computethe populationvariancefor the dataof Table3.5, you useEquation(3.14):

,A/

Zrri-',)2
i= l
o2=
t/
_(2.74-2.63)2+ (r. 6 2-2 . 6 3 )2+ (2 . 2 5-2 $ )2 + e . 8 8- 2 . $ )2 + (3.66- 2.$)2
5
0.0121+ 1.0201
+ 0.1444+ 0.0625+ 1.0609

)10
=:::: = 0.46
5

Thus, the varianceofthe one-yearreturnsis 0.46 squaredpercentagereturn.The squared

units make the variance hard to interpret. You should use the standard deviation that is
expressedin the original units ofthe data(percentagereturn).From Equation(3.15),

o= I

= 40.46= 0.68
^F_
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 3.3: Numerical DescriptiveMeasuresfor a Population l2I

You can use this rule for any value of ft greaterthan 1. Considerk : 2. The Chebyshevrule
statesthat at least 1t - 1ttZ121x100%io:75%of the valuesmust be found within +2 standard
deviationsof the mean.
The Chebyshevrule is very generaland appliesto any type of distribution.The rule indi-
catesat least what percentageof the values fall within a given distance from the mean.
However,if the data set is approximatelybell shaped,the empirical rule will more accurately
l r i llllilr reflect the greaterconcentrationof datacloseto the mean.Table3.6 comparesthe Chebyshev
ililillll\\\h* and empiricalrules.
illllliltffililll
" iilllllililll' '"i,rililliittlllll[[,,-,S: o/o afValues Found in Intervals Around the Mean
3 6
rrrrrliiillllli'''

ililrfilulltll]r
lit::"-"., ;,,'-, +fCUnd
iirrrtllli'i,'.r,,11111, Chebyshev Empirical Rule
Interval (an distribution) (bell-shaped distribution)

hlllrtttttillllrir (p-o,Fr+o) At least0% Approximately 68%

0r-26,p+2o) At least75% Approximately95%
m||m|tfill[l|rr
(p-3o,p+3o) At least88.89% Approximately99.7%

,'J.
E 3.1 3 USINGTHE CHEBYSHEVRULE
As in Example3.12,a populationof 12-ouncecansof cola is known to havea meanfill-weight
of 12.06 ouncesand a standarddeviation of 0.02. However,the shapeof the population is
unknown, and you cannotassumethat it is bell shaped.Describethe distribution of fill-
weights.Is it very likely that a canwill containlessthan 12 ouncesof cola?
SOLUTION p + o - 12.06+0.02: (12.04,12.08)
p + 2o - 12.06
+ 2(0.02): (12.02,
t2.10)
p + 30 - 12.06 - (12.00,
+ 3(0.02) 12.12)

Becausethe distribution may be skewed,you cannot use the empirical rule. Using the
Chebyshevrule, you cannot say anything about the percentageof cans containing between
t2.04 and 12.08ounces.You can statethat at least75Yoof the canswill containbetween12.02
arrd12.10onncesand at least88.89%will containbetween12.00and 12.12ounces.Therefore,
between0 and l l.Il% of the canswill containlessthan 12 ounces.

You can use thesetwo rules for understandinghow data aredistributedaroundthe mean
when you havesampledata.In eachcase,you usethe valueyou calculated for X in place of trr
and the valueyou calculatedfor ^Sin placeof o. The resultsyou computeusing the samplesta-
tistics areapproximationsbecauseyou usedsamplestatistics( X,
^9)andnot populationparam-
eters(p, o).

the Basics
3.22 The following is a set of datafor a popula-
3"21 The following is a set of datafor a popula-
tion with l/: 10:
. I \ \ ir hi /-1 0 :
1t 8 3 62 98 7 5 6664 8 693
::e population mean. a. Compute the population mean.
:re population standarddeviation. b. Compute the population standarddeviation.
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 3.4: ExploratoryDataAnalysis 123

,I
Wffiruw
ffiHqdw-ffi
wmhwr Swffisffiffiryr
;illilril
A five-numbersummarvthatconsists
of

Xsm.allest Qt Median Qt Xrurg"rt

provides a way to determine the shape of a distribution. Table 3.7 explains how the relation-
ships among the "five numbers" allows you to reco gnrze the shape of a data set.

iii[ruiriifll|,i"!
3.7 ?elationships
Among the Five-NumberSummaryand the Typeof Distribution
Tlpe of Distribution
ifillmN$llll
,ttlitliililulrmmnmutufftlnlr
[lffir Left-Skewed Symmetric Right*Skewed
ilillitltttttun', lil]Iltllh,
iillnlululii*rnu,.
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Trru"-I;:ll \-efSUS Xsmall.stto the median is are the same. Xsmalt"st,to the median
l; :rOm the greater than the distance is less than the
from the median to distance from the
1/
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r;* ftom Xsmallest The distance from Both distances The distance from
,(ms*isthe Xsmaltest
to Ql ts greater are the same. Xsmattertto Q, is less
i: in O. to
4- J
than the distance frorn than the distance from
Q3 toxlurg.rt' Q3 to xlurn.rt'
:,efromQlto The distance from Ql to Both distances The distance from Q,
r,iinm
",ensusthe the median is greater are the same. to the median is less
:: nnthe than the distance from than the distance from
i t!u
the median to Qs. the median to Qz.

For the sampleof 10 getting-ready

times,the smallestvalue ts 29 minutes and the largest
valueis 52 minutes(seepage100).Calculations donein Section3.1 show that the median -
39.5,Qt - 35, andQt: 4L.Therefore, the five-numbersummaryis

29 35 39.5 44 52

The distancefromX.-uu"., to the median(39.5- 29: 10.5)is slightly lessthanthe distance

from the medianto Xl.g"rt 62 - 39.5: 12.5).The distancefrom Xr.uur, et e5 - 29 : 6) is
,to
slightly lessthanthe disiancefrom Qrto Xl*n.rt 62 - 44: 8). Therefoii,-ihegetting-readytimes
are slightly right-skewed

IPLE 3.14 COMPUTINGTHE FIVE.NUMBERSUMMARYOF THE THREE.YEARANNUALIZED

RETURNSFOR SMALL-CAPGROWTH MUTUAL FUNDS WITH LOW RISK
The 838 mutual funds ([!E[[@ED that arepart of the Using Statisticsscenario(seepage
96) are classifiedaccordingto the category(small cap, mid cap,and large cap), the type
(growth or value),and the risk level of the mutual firnds(low, average,and high). Computethe
five-number summary of the three-yearannualizedreturns for the small-capgrowth flrnds with
low risk (seepage99).
SOLUTION From previouscomputationsfor the three-yearannualizedreturnsfor the small-
cap growthfundswith low risk (seepages100, 102,and 103),the median: 22.4,e1: 20.8,
*fi, Qz: 26.0.In addition,the smallestvaluein the dataset is 19.0,and the largestvalue is
29.9.Therefore.the five-numbersummaryis

19.0 20.8 22.4 26.0 29.9

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 3.4: Exploratory DataAnalysis I25

iiipE3.4 Tfires'Year Annudized Return By Risk

ri' ,', l i l l
: - c el b o x -
i,,lillllllllllr
' , ,: - c lot s o f th e
lt ll ' " : - : ^' t ua l i z e d
illlllllilililrr, " I * ^ u ' - r iSk,

- " : . and h i g h -
' . . : t - lds
" Average

ffi-

Figure 3.5 demonstrates the relationshipbetweenthe box-and-whiskerplot and the poly-

gon for four different types of distributions.(Note: The areaunder eachpolygon is split into
quartilescorrespondingto the five-numbersunmary for the box-and-whiskerplot.)

5"3
-i?

"" '- s<erplots

:i:
tl'l*':'*":;1
iililli, : I C in g
llt''t:i ": - -CUf

h-- ffi --j L**

f
**_r**T*L**t
L**L*J E
P anel A P a n e lB
B el l -shaped di stri buti on Left-skewedd istribution

h--ffi
P a n e lC P a n e lD
Right-skeweddistribution Rectangular d istribution

PanelsA andD of Figure3.5 are symmetrical.In thesedistributions,the meanandmedian

are equal.In addition,the length of the left whisker is equalto the length of the right whisker,
and the medianline dividesthe box in half.
PanelB of Figure3.5 is left-skewed.The few small valuesdistort the meantowardthe left tail.
For this left-skeweddistribution,the skernnessindicatesthat thereis a healy clusteringof valuesat
the high endof the scale(i.e.,the right side);75%of aJlvaluesarefoundbetweenthe left edgeof
the box (01) andtne endof the right whisker(Xl.*.J.Therefore, the long left whisker containsthe
smallest25%oof Ihevalues,demonstratingthe distortion from slzmmetryin this dataset.
PanelC of Figure 3.5 is right-skewed.The concentrationof valuesis on the low end of the
scale(i.e., the left side of the box-and-whiskerplot). Here, 75Yoof all datavaluesare found
betweenthe beginningof the left whisker(Xr.urr"rt)and the right edgeof the box (Q), andthe
remaining25%oof the valuesare dispersedalongthe long right whisker at the upperend of the
scale.
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 3.5: TheCovariance
andtheCoefficientof Correlation I27

i , r:-inch located rn a commercial district of a time, in minutes (defined as the time the customer enters
:: : :r3d an improved process for serving cus- the line to when he or she reachesthe teller window), of a
- _ : -e n o o n -to -1 :0 0p .m . l u n c h p eri od. The sample of 15 customers during this hour is recorded over a
ill r llllt lli ":; - :ninutes (defined as the time the customer period of one week. The results are contained in the data
,ll, ilti
ilnri " : n hen he or she reachesthe teller window), file ffi and are listed below:
imllllt : - 5 customers during this hour is recorded
9.66 5.90 8.02 5.79 8.73 3.82 8. 01 8. 35
ilrlrir:r""
- : rrfleweek. The results are contained in the
'irrh:, and are listed below:
iril'lii 10.49 6.68 5 .64 4.08 6.n 9 .9T s . 47
a. List the five-number summaries of the waiting times at
:: 3.02 5.13 4.77 2.34 3.54 3.20 the two bank branches.
0 38 5.12 6.46 6.19 3.79 b. Construct box-and-whisker plots and describe the shape
of the distribution of each for the two bank branches.
located Ln a residential are1 is also con- c. What similarities and differences are there in the distrib-
noon-to-1 p.m. lunch hour. The waiting utions of the waiting time at the two bank branches?

3.5 THECOVARIANCE
AND THECOEFFICIENT
OF CORRELATION
In Section2.5, yott usedscatterplots to visually examinethe relationshipbetweentwo numeri-
cal variables.This sectionpresentslnryonumericalmeasuresthat examinethe relationship
betweentwo numericalvariables:the covarianceand the coefficient of correlation.

The Covariance
Thecovariancemeasures thestrengthof thelinearrelationshipbetweentwonumericalvariables
(X andY).Equation(3.16)definesthesamplecovariance, andExample3.16illustrates
its use.

THE SAMPLECOVARIANCE
;::/l : ,.

Xt:i, - x)v, -v1

:,i+r
cov(X ,Y ) (3.16)
/1";"'1

t E 3 .15 COMPUTING THE SAMPLE COVARIANCE

In Section2.5 on page58, you examinedthe relationshipbetweenthe cost of a fast-foodham-
burgermeal and the cost of two movie ticketsin 10 cities aroundthe world (extractedfrom K.
Spors,"KeepingUpwith . . . Yourself,"TheWallStreetJournal,Apilll,2005,p.R4).The data
fileEltEflffifficontains the completedataset.Computethe samplecovariance.
SOLUTION Table 3.8 providesthe cost of a fast-food hamburgermeal and the cost of two
movie ticketsin l0 cities aroundthe world.

'ar
{
' - t,,'
tt
tfl
lU City Hamburger Nlovie Tickets
Tokyo 5.99 32.66
London 7.62 28.4r
New York s.75 20.00
Sydney 4.4s 20.71
Chicaeotr)
4.99 18.00
San Francisco 5.29 19.50
Boston 4.39 18.00
Atlanta 3.70 16.00
Toronto 4.62 18.05
Rio de Janeiro 2.99 9.90
 . . , . . . dLaa*
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 3.5: The Covarianceand the Coefficient of Correlation 129

In PanelA of Figure 3.7, thereis a perfect negativelinear relationshipbetweenX and Y.

Thus,the coefficientofcorrelation,p, equals-1, andwhenXincreases,fdecreasesin a per-
fectly predictablemanner.PanelB showsa situationin which thereis no relationshipbetween
X and Y. In this case,the coefficient ofcorrelation, p, equals0, and asXincreases,thereis no
tendencyfor Ito increaseor decrease.PanelC illustratesa perfectpositiverelationshipwhere
p equals+1. In this case,Iincreases in a perfectlypredictablemannerwhenXincreases.
When you have sampledata,the samplecoefficient of correlation,r, is calculated.When
usingsampledata,you areunlikelyto havea samplecoefficientof exactly+1, 0, or -1. Figure3.8
presentsscatterplots alongwith their respectivesamplecoefficientsof correlation,r, for six data
sets.eachof which contains100valuesof X andY.

.300 "t4t "?0$

P anelB (r: -0.6)

+
t

+
a

l+

+
It

.}t

0lr 30s {00 $m

-
J,i P anelD (r:0.3)

.{0 .2S U * dO 6S * t00 120 140 t60 i80

_
A

P anelF(r:0.9)

&8
r- ,: r,is created from Microsoft E x c e l and thei r sampl e coeffi ci entsof correl ati on,r
 = '{S
* !i)
T,(4

T?.
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 3.5: The Covarianceand the Coefficient of Correlation 131

. . lli

,rt|{llrrrrJ&"-
f 3 "17 COMPUTING THE SAMPLECOEFFICIENTOF CORRELATION
i,,iii'rlllirl

):l-lli
Considerthe cost of a fast-foodhamburgermeal and the cost of two movie tickets in 10 cities
aroundthe world (seeTable3.8 on page 127).From Figure 3.9 and Equation(3.17), compute
""rllllllllllr the samplecoefficient of correlation.
Itllltlltr

SOLUTION
cov(x,Y)
,-
at

SxSy
6.83777
(r.2e2sx6.337)
- 0.8348

{r

&,v
fi,

llunnbxrg*r
lil*sl
$.$$.
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s.F$l ?s s.*$.44 s,st${ $,'W*S
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s,f i t$, ,tr-s,$, {$,ffi*- s"3tr$.s
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3.$S; S,$' $-$ffitr *S{,ffi'F ffis33$
suw;Js*S$,
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f , ffi"tPs *fiVSffifrSSffirS*tI
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'r
s'3$r* *$*ftY{*t* I Ht$
r i $-sS{S **Sffiffi#|"{&tue1i,
ffi${t}

The cost of a fast-foodhamburgermeal and the cost of two movie tickets are positively
correlated.Thosecities with the lowestcost of a fast-foodhamburgermeal tend to be associ-
atedwith the lowestcost of two movie tickets.Thosecities with the highestcost of a fast-food
hamburgermeal tend to be associatedwith the highestcost of two movie tickets.This relation-
ship is fairly strong,as indicatedby a coefficient of correlation,r: 0.8348.
You cannot assumethat having a low cost of a fast-food hamburgermeal causedthe
low cost of two movie tickets. You can only say that this is what tended to happen in the
sample.

In summary the coefficient of correlationindicatesthe linear relationship,or association,

betweentwo numericalvariables.When the coefficient of correlationgetscloserto *1 or -1,
the linear relationshipbetweenthe two variablesis stronger.When the coefficient of correla-
tion is near 0, little or no linear relationshipexists.The sign of the coefficient of correlation
indicateswhetherthe data are positively correlated(i.e., the larger values of X ne typically
pairedwith the largervaluesof I) or negativelycorrelated(i.e., the largervaluesofXare typi-
cally pairedwith the smallervaluesof I). The existenceof a strongcorrelationdoesnot imply
a causationeffect.It only indicatesthe tendenciespresentin the data.
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imi 3.6: Pitfalls in Numerical DescriptiveMeasuresand Ethical Issues 13 3

,*,',ilil-l
[*tn,[lege basketball is big business, with coaches'
rllrrLr$tti,.
rrqvenues,and expensesin millions of dollars. The
'riiiiillu* contains the coaches'
ir,,rllnrrrtti$i
nnC revenue for college basketball at selected
fim& recent year (extracted from R. Adams, "Pay
;,,,rrr,irlrilllrlillrltilliliii
.ttr,rrrllllllluumuirrruffi."'
The Wall Street Journal, March I 1-12, 20A6,
irrrrrr
iilffi1r , ili'$
,rrr,rn|lnmmrume
the cov arLance.
the coefficient of correlation.
rnmclusionscan you reach about the relationship
lllMunen a coach's salary and revenue?
3.43 College football players trying out for the NFL are
given the Wonderlic standardtzedintelligence test. The data
in the file@ contains the averageWonderlic score
of football players tryitrg out for the NFL and the gradua-
tion rate for football players at selected schools (extracted
from S. Walker, "The NFI-s Smartest Team," The Wall
StreetJournal, September30,2005, pp. Wl, W10).
a. Compute the covanance.
b. Compute the coefficient of correlation.
c. What conclusions can you reach about the relationship
between the averugeWonderlic score and graduation rate?

3.6 IN NUMERICALDESCRIPTIVE
PITFALLS MEASURES
AND ETHICALISSUES
In this chapter,you have studiedhow a set ofnumerical data can be characterizedbyvarious
statisticsthat measurethe propertiesofcentral tendency,variation,and shape.Yournext stepis
qnalysisand interpretationofthe calculatedstatistics.Your analysisis objective;your interpre-
tation is subjective.Youmust avoid errorsthat may ariseeitherin the objectivity of your analy-
sis or in the subjectivity of your interpretation.
The analysis of the mutual funds is objective and reveals several impartial findings.
Objectivity in dataanalysismeansreporting the most appropriatenumericaldescriptivemea-
suresfor a given data set. Now that you have read the chapter and have become familiar with
various numerical descriptive measuresand their strengthsand weaknesses,how should you
proceedwith the objective analysis?Becausethe data distribute in a slightly asymmetrical
manner,shouldn't you report the median in addition to the mean?Doesn't the standarddevia-
tion provide more information about the property of variation than the range?Should you
describethe datasetasright-skewed?
On the othe*hand,datainterpretation is subjective.Different people form different conclu-
sions when interpretingthe analytical findings. Everyoneseesthe world from different per-
spectives.Thus,becausedatainterpretationis subjective,you must do it in a fair, neutral,and
clear manner.

Ethical lssues
Ethical issuesare vitally important to all dataanalysis.As a daily consumerof information, you
need to question what you read in newspapersand magazines,what you hear on the radio or
television,and what you seewhile surfing the Internet.Over time, much skepticismhas been
expressedabout the purpose,the focus, and the objectivity ofpublished studies.Perhapsno
commenton this topic is more telling than a quip often attributedto the famous,nineteenth-
century British statesmanBenjamin Disraeli: "There are threekinds of lies: lies, damnedlies,
and statistics."
Ethical considerationsarise when you are deciding what results to include in a report.
You should documentboth good and bad results. In addition, when making oral presenta-
tions and presentingwritten reports,you needto give results in a fair, objective,and neutral
manner.Unethical behavior occurs when you willfully choose an inappropriate summary
measure(for example,the mean for a very skewedset of data)to distort the facts in order to
support a particular position. In addition, unethical behavior occurs when you selectively
fail to report pertinent findings becauseit would be detrimentalto the supportof a particular
position.
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 ChapterReview Problems 135
/"
./*'
I 'lrnrtrmt
of Variation Population Standard Deviation

CV= [{)t oo% (3.11)

rllllllllllllililill \x) o_ (3.15)
lrillllii:," r''

llt irillllllllllll',,
itilililll11|lliillli

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rumrrrliiiiilmrul
fi: ,iilililllllillllillu' Z=
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ilffill|||lililililruiii n-I

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i= l (3.13)
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'l/ (3.17)
sxsv
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Lrri - v)2
i= l (3.14)
o2
t/

l-r8,3X1 9l mean 97 samplecoefficientof correlation 130

ijr,sKerplot I24 median 99 samplecovariance I27
:c\- 96 midspread 106 samplemean 97
-*,e 120 mode 100 samplestandarddeviation 107
:: correlation I28 outlier 111 samplevariance I0l
-: .,,ariation 110 populationmean 118 shape 96
:'- populationstandarddeviation t19 skewed II2
" t-l t'i
populationvariance 119 spread 105
*rlri3 120
Q{ first quartile 101 standarddeviation 106
iililitilllll*tr I I 1 Qz: secondquartile 101 sum of squares(SS) I07
$;;rrunary I23 Q{ third quartile 101 symmetrical I12
'T',[it;*n 103 quartiles 101 variance 106
rate of return
Tnrs;j:x 103 range 105 variation 96
lris:inqe 106 resistantmeasure 106 Zscore 111
-,1 J right-skewed 113

Vour Understanding 3.47 How do you interpretthe first quartile,medraf\ and

w: :he properties of a set of numerical data?
"l$I4ri{llhrun
third quartile?
3.48 what is meantby the propertyof variation?
W
!.'l[5 \\hat is meant by the property of cenftal I AssrsrI
',lii*slh*[ffi["
J']-l
3.49 What doestheZ scoremeasure?
3,*416\\laat are the differences among the mean, 3.50 What are the differences among the vari-
and mode, and what are the advantages
:m#;frtji-i:- ous measures of variation, such as the range,
gss of each? interquartile range, variance, standard deviation,
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lllll$rllfltt,ttl iriillililllillllllll;
ilmr ::le;&lnrriledian, range, and standard devia-
jffiffi *:,',ith. Interpret these measures of central
lltillil'
mm' rumffi-"'aiability.
uiurffiilllilIlul)$r
rlnrltfl ilitiiinruits
illllllllm -"1-lmb er sufirmary.
ililffililillllis,&':n:x-end-whisker plot and describe its shape.
,"iliillllffiilttttutirumr
,,/:r* conclude about the number of troughs
,rffilttrrrffiiiluilMi
ulnreffuhe company's requirement of troughs
rtilffi;tllll||tmmm
rilmn E"3 I and 8.61 inches wide?
irrilMrnr;fecruring
company in Problem 3.58 also
u umsulators.
If the insulatorsbreakwhen in
ils likely to occur. To test the strength of
-rnm,w;lt
ciestmctive testing is carried out to deter-
rrmnuush
tonce is required to break the insulators.
by observing how many pounds must be
ilfu mmsmtrator
before it breaks.The datafrom 30
this experiment are contained in the file
trfffii56
il.610 1,634I ,784 | ,522 I ,696 I ,592 | ,662
mLru4N.6621,7341,7741,550r,756 r,762 1,966
il[/ffiifr
[,688 1,9101,7521,6901,9101,6521,736
ffiB mrean,median, range, and standard devia-
fforce variable.
ffis measures of central tendency and variabil-
,nihox-and-whiskerplot and describe its shape.
Sml conclude about the strength of the insula-
'unqpany requires a force measurement of at
porrndsbeforebreakage?
with a telephone line that prevent a cus-
meiving or making calls are disconcerting to
and the telephone company. The data
'ffi€ file EEEIE
rffimr representsamplesof 20
to two different offices of a telephone
ffiE time to clear these probleffiS, in minutes,
'lines:
ffice I Time to Clear Problems (minutes)
,ffi'r-78
2.85 0.52 1.60 4.15 3.97 1.48 3.10
rffit931.60 0.80 1.05 6.32 3.93 5.45 0.97
ffice II Time to Clear Problems (minutes)
tffii[01.10 0.60 0.52 3.30 2.10 0.58 4.A2
m.970.60 1.s3 4.23 0.08 1.48 r.65 0.72
two central office locations:
ffis mean, median, first quartile, and third
fu range,interquartile range,variance,stan-
iilmion-and coefficient of variation.
Chapter Review Problems I37
c. Construct side-by-side box-and-whisker plots. Are the
data skewed? If so, how?
d. on the basis of the results of (a) through (c), are there
any differences between the two central offices?
Explain.
3.61 In many manufacturing processes,the term work-
in-process (often abbreviated wIP) is used. In a book
manufacturing plant, the WIP represents the time it takes
for sheetsfrom a press to be folded, gathered sewn, tipped
on end sheets, and bound. The data contained in the file
U[ilG represent samples of 20 books at each of two pro-
duction plants and the processing time (operationally
defined as the time, in days, from when the books came
off the press to when they were packed in cartons) for
thesejobs:
Plant A
5.62 s.2g 16.25 r0.g2 1r.46 2r.62 8.45 8.58 s.4r rr.42
rr.62 7.2g 7.50 7.96 4.42 10.50 7.58 g.2g 7.s4 8.g2
Plant B
9.54 tr.46 t6.62 12.6225.75 rs.4r 14.2913.13 13.7110.04
5.75 12.46 9.r7 t3.21 6.00 2.33 14.25 s.37 6.25 9.7r
For each of the two plants:
a. Compute the mean, median, first quartile, and third
quartile.
b. Compute the range, interquartile range, varrance, stan-
dard deviation, and coefficient of variation.
c. Construct side-by-side box-and-whisker plots. Are the
data skewed? If so, how?
d. on the basis of the results of (a) through (c), are there
arly differences between the two plants? Explain.
3.52 The data contained in the fil.@consist
of the in-state tuition and fees and the out-of-state tuition
and fees for four-year colleges with the highest percent age
of students graduating within six years.
Source:US. Departmentof Education,2006.
For each variable:
a. Compute the mean, median, first quartile, and third
quartile.
b. Compute the tange, interquartile tange, variance, stan-
dard deviation, and coefficient of variation.
c. Construct a box-and-whisbr plot. Are the data skewed?
If so, how?
d. Compute the coefficient of correlation between the in-
state tuition and fees and the out-of-state tuition and
fees.
e. What conclusions canyou reach concerning the in-state
tuition and fees and the out-of-state tuition and fees?
 ChapterReviewProblems I39

, -"u mneasurements made on the company's tion and benefits; national and other local expenses;and
l;ililllllllllltitl

il utillilrffitis)lrr;S
3.ffid140 measurements made on vermont income from baseball operations?
ffimr t:rrltttutrllrl,
*r*,:-:lurnber summary for the Boston shingles 3.69 In Section 3.5 on page 131, the correlation coeffi-
dffir illnirllililililtnu
-, cient between the cost of a fast-food hamburger meal and
rrruulllliiltlttmrr"rrtffitr
cnrront shingles.
the cost of movie tickets in 10 different cities was com-
s,1e-by-side box-and-whisker plots for the
r,irrilltillllMffilllliurrirr,r
puted. The datafile@also includes the overall
rumnntnlrrllittilrruumlil*
:'i shingles and describe the shapes of the
cost index, the monthly rent for a two bedroom apartment,
,,mnniiiilitttrurutn,fl
,ti)nius
and the costs of a cup of coffee with service, dry cleaning
i,,iuuuillililffimflm[fi,
r',,,,,,,,, :,r. uhreshingles' ability to achieve a granule
for a men's blazer, and toothpaste.
i{ffiuiurililt''irrtilr
li E:J.rTIor less.
a. Compute the correlation coefficient between the overall
,ffiur,d"
imthe file lssffi representthe resultsof cost index and the monthly rent for a two-bedroom
CcrnmunitySurvey,a samplingof 700,000 apartment, the cost of a cup of coffee with service, the
mrums,nm eachstateduringthe 2000U.S.Census. cost of a fast food hamburger meal, the cost of dry
u-ariablesaverage travel-to-work time in
'rmtili'ffi,e cleanin g a men's blazer, the cost of toothpaste, and the
mmnrrulcr3mge of homes with eight or more rooms, cost of movie tickets. (There will be six separatecorre-
oild income, and percentage of mortgage' lation coefficients.)
merswhose housing costs exceed 3 |oh of b. What conclusions carryou reach about the relationship
of the overall cost index to each of these six vniables?
rnhErnean, median, first quartile, and third
3.7O The data in the file EBIIfr contains the character-
istics for a sample of 20 chicken sandwichesfrom fast-food
ffie range, interquartile range, variance, stan-
chains.
and coefficient of variation.
a. Compute the correlation coefficient between calories
**-and-whisker plot. Are the dataskewed?
# and carbohydrates.
b. Compute the correlation coefficient between calories
snonscan you reach concerning the mean
and sodium.
r time in minutes, percentage of homes
c. Compute the correlation coefficient between calories
$'r'more rooms. medran household income,
and total fat.
ge of mortgage-paying homeowners whose
d. Which variable (total fat, carbohydrates, or sodium)
luroilsms
exceed 30% of income?
seemsto be most closely related to calories? Explain.
cs of baseball has causeda great deal of
3.71Thedatai nthefi 1e@ repreS entthetota1com .
w,ith owners arguing that they are losing
pensation (in $millions) of CEOs of the 100 largest compa-
aryuingthatowners are making money, and
nies, by revenue (extracted from "Special Report:
rnrn,i'rno
about how expensive it is to attend a
Executive Compensation," USA Tbday,April 10, 2006, pp.
Eameson cable television. In addition to
38,4B ).
ffim$eamstatistics for the 2001 season"the file
a. Compute the mean, median, first quartile, and third
statisticson ticketprices;
insteam-by-team
quartile.
regular gate receipts; local televi-
'rmflrnd€K' season b. Compute the range, interquartile tange, variance, stan-
;md cahle receipts; all other operating revenue;
dard deviation, and coefficient of variation.
lon and benefits; national and other local
c. Construct a box-and-whisker plot. Are the data skewed?
rncorne from baseball operations. For each
If so, how?
d. What conclusions can you draw concerning the total
ffire mean, median, first quartile, and third
c9-mpensation(in $millions) of CEOs?

l' -s tra.nge,interquartile range, variance, stan-
urm-and coefficient of variation.
;nrhor-and-whisker plot. Are the data skewed?
,10)
tffirecorrelation between the number of wins
clrrmpensationand benefits. How strong is the
rmmhem€en these two vartables?
rons can you reach concerning the regular
r@ receipts; local television, radio, and cable
omheroperating revenue; player compensa-
orffiili
3.72 The data in the file @ is the per captta
spending, in thousands of dollars, for each state in2004.
a. Compute the mean, median, first quartile, and third
quartile.
b. Compute the tange, interquartile tange, variance, stan-
dard deviation, and coefficient of variation.
c. Construct side-by-side box-and-whisker plots. Are the
data skewed? If so, how?
d. What conclusions can you reach concerning per caprta
spending, in thousandsof dollars, for each state in2004?
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{mWlll i lllr -trqffiS
lffil*r111ffi6, L..l|||llllt|l|lllii[[ri|gfficontainsinformationregard-
EtiitffMH[ii' rntttutu''i'rr{rilur:iinrb"es
from a sample of 838 mutual funds:
m, lililHhi ,ulturuumnl,,-T)?e of stocks comprising the mutual fund
rrrrrnnMlllilll
urffiffi^,
mid cdp,large cap)
illllllfuMm-,r-Cbjectiveof stocks comprising the mutual
irrffillllilltqgmrrrrnm,,*-il
or value)
lrrillffiililtii---:
nnilli ons of dollars
iiitimr'-S'tl,lE:ch&rges (no or yes)
lillfihpnmrrrm of expenses to net assets ln per-
-rlm-ratio
'iirffiffiilllilmH'
;-of-loss factor of the mutual fund (low,
I
"mxgh
Twelve-monthreturn in 2005
return-Annuali zed return, 2003100 5
uerurn-Annuali zedreturn, 200| -2005
rmmgrense
ratio in percentage, 2005 return, three-
md five-year return,
the mean, median, first quartile, and third
rtherange, interquartile tange, vatiance, stan-
io'o. and coefficient of variation.
n box-and-whisker plot. Are the data skewed?
'?
,rommmclusions
can you reach concerning these
,,fllll
w"""""""ush
to compare mutual funds that have fees to
,ffi, not have fees. For each of these two groups,
expenseratio in percentage,2005 return,
and five-year return,
the mean, median, first quartile, and third
ffie range, interquartile range, variance, stan-
ion- and coefficient of variation.
n hox-and-whisker plot. Are the data skewed?
lu@mmmctusions
aan you reach about differences
funds that have fees and those that do
mmunral
fuss?
wrsh to compare mutual funds that have a
h"e to those that have a value objective. For
fino groups, for the variables expense ratio in
3005 return, three-yeatreturn, and five-year
uhe nnean, median, first quartile, and third
ffie range, interquartile range, vatiance, stan-
Mon. and coefficient of variation.
a box-and-whisker plot. Are the data skewed?
l c. Compare the results of (b) to those of Problem 3 .82.
ChapterReviewProblems L4I
d. What conclusions can you reach about differences
between mutual funds that have a growth objective and
those that have a value objective?
3.79 You wish to compare sm aII cap mid e&p, and large
cap mutual funds. For each of these three groups, for the
variables expense ratio in percentage, 2005 return, three-
year return, and five-year return,
a. Compute the mean, median, first quartile, and third
quartile.
b. Compute the range, interquartile tange) variance, stan-
dard deviation, and coefficient of variation.
c. Construct a box-and-whisker plot. Are the data skewed?
If so, how?
d. What conclusions can you reach about differences
between small cap, mid edp,and large cap mutual funds?
Student Survey Data Base
3.80 Problem I.27 on page 15 describesa survey of 50
undergraduate students (see the file ).
For these data, for each numerical variable
a. Compute the mean, median, first quartile, and third
quartile.
b. Compute the range, interquartile range, variance, stan-
dard deviation, and coefficient of variation.
c. Construct a box-and-whisker plot. Are the data skewed?
If so, how?
d. Write a report summafiztngyour conclusions.
3.81 Problem 1.27 on page 15 describesa survey of 50
undergraduate students (see the file ).
L. Select a sample of 50 undergraduate students at your
school and conduct a similar survey for those students.
b. For the data collected in (a), repeat (a) through (d) of
Problem 3.80.
c. Compare the results of (b) to those of Problem 3.80.
3.82 Problem I.28 on page 15 describesa survey of 50
MBA students (see the file ffi). For these data,
for each numerical variable,
a. Compute the mean, median, first quartile, and third
quartile.
b. Compute the tange, interquartile tange, vatrance, stan-
dard deviation, and coefficient of variation.
c. Construct a box-and-whisker plot. Are the data skewed?
If so, how?
d. Write a report summarrzing your conclusions.
3.83 Problem I.28 on page 15 describesa survey of 50
MBA students (see the fileffi).
a,, Select a sample of 50 graduate students from your MBA
program and conduct a similar survey for those students.
b. For the data collected in (a), repeat (a) through (d) of
Problem 3 .82.

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