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1. Let X be a random variable with a discrete probability distribution with population mean μx . Consider the following relationships:
Variance:
Covariance:
(i) (5 points) Prove that the right hand side of A = right hand side of B. Show all the steps. (ii) (5 points) Prove that the rhs of C = rhs of D. Show all the steps.
2. Consider the following two random variables y1 and y2 , both are linearly related to another random
variable x that has mean ( μx ) and variance ( σx(2) ), as follows:
y1 = a1 + b1x
y2 = a2 + b2x ,
where a1 , b1 , a2 , b2 are constants. For example vacation travel expenditure ( y1 ) may be linearly related to income ( x ) and the number of car ownership ( y2 ) may be linearly related to income ( x ). Based on this information, find the expressions for the following:
(i) (5 points) E(y1 ) =
(ii) (5 points) E(y2 ) =
(iii) (5 points) var(y1 ) =
(iv) (5 points) var(y2 ) =
(v) (5 points) covar(y1, y2 ) =
3. You all know that Unbiasedness and Efficiency are two most important properties of an estimator, which is also often called a sampling statistic. Consider the following two estimators:
where { X1 , X2 , X3 } is a sample of size n = 3 drawn independently from a population with mean (μx) and variance ( σx(2)).
(i) (5 points) Show that both estimators are unbiased.
(ii) (10 points) Prove that the estimator Y1 is more efficient relative to Y2 .
4. Using EXCEL, do the following in sequence:
(i) Generate two random samples ( x and y ) of size 10 from two Normal Distribution – one
from N(μx = 50, σx(2) = 25) and the other from N(μy = 75, σy(2) = 64) . Arrange them in
two columns one with column heading x and the other with column heading y .
(ii) Find in sequence the following summary statistics by showing the complete work in EXCEL:
a. (3 points) Sample mean: x =
b. (3 points) Sample mean: y =
c. (3 points) Sample variance: sx(2) =
d. (3 points) Sample variance: sy(2) =
e. (3 points) Sample correlation: rxy =
f. (5 points) Print out the EXCEL worksheet. I will not accept it if it is more than one page.