ECONOMETRICS I: HW 3 Due October 26, 2017

Please answer questions on a printed copy of the emailed homework. Use one side of each sheet, add additional sheets if required and, staple separate sheets together. Your writing must be legible. Eligible students seeking honors credit must answer Question 3.

Price earnings ratio (P/E) of 28 NYSE companies

Company P/E Company P/E

AA 27.96 INTC 36.02

AXP 22.90 IBM 22.94

T 8.30 JPM 12.10

BA 49.78 JNJ 22.43

CAT 24.68 MCD 22.13

C 14.55 MRK 16.48

KO 28.22 MSFT 33.75

DD 28.21 MMM 26.05

EK 34.71 MO 12.21

XOM 12.99 PG 24.49

GE 21.89 SBC 14.87

GM 9.86 UTX 14.87

HD 20.26 WMT 27.84

HON 23.36 DIS 37.10

Suppose that the above is a random sample from companies listed in the NYSE. Denote P/E by Y.

We are interested in knowing about the population of all NYSE companies (3000 or so) from the information above.

1. What is the estimator that you will use to estimate the average of price earning ratio for the aforementioned population? Why would you use it?

2. Use this random sample to provide an estimate of the average value of Y for all NYSE companies.

4. Let X denote the number of miles per gallon achieved by cars of a particular brand. You are told that X ~ N (25, 4). What is the probability that a car will run between 16 and 24 miles?