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Project Answer

Project Answer - proportion oF “very satisfed” people...

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STA 103 Fall 2007 Final Project Submitted by: I. H. Dinwoodie December 6, 2007 I have adhered to the Duke Community Standard in completing this assign- ment. 1
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STA103 Project 2 3 points each, 18 points total 1. Independence in a 4 × 4 Table (a) The fitted values are: Job Satisfaction very little moderately very Income ($1000) dissatisfied dissatisfied satisfied satisfied < 6 14.2 24.7 72.9 94.2 6-15 19.9 34.6 102.3 132.2 15-25 16.2 28.2 83.2 107.5 > 25 11.8 20.4 60.5 78.2 (b) The χ 2 statistic is 11.99 and the p -value is 0.21 (the area above 11.99 under the χ 2 (9) density). So the table does not contradict the null hypothesis of independence. (c) The largest residual value in absolute value is +13.8, which occurs at “ > 25” Income and “very satisfied.” In other words, the inde- pendence model under predicts the number in this combination, and the population with highest salaries shows a relatively high
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Unformatted text preview: proportion oF “very satisfed” people. STA103 Project 3 2. Volatility of a Portfolio of Two Stocks (a) One can achieve volatility of 0.0105 in two ways. One can set α = . 89 or α = . 44 and either gives the value 0.0105. These can be read from a good graph or determined numerically. 0.0 0.2 0.4 0.6 0.8 1.0 0.0100 0.0105 0.0110 0.0115 0.0120 0.0125 0.0130 Graph of Portfolio Volatility α Portfolio Volatility (b) The two choices of α give diFerent expected returns. Since IBM has the higher expected return, the better portfolio is the one that puts more weight in IBM, so this gives α = . 89 and a portfolio return of . 00140 = . 89 × . 001402 + . 11 × . 001365. (c) No, the volatility curve does not go as low as 0.010....
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