Question 1: Bombardier of Montreal.
Bombardier designs and manufactures trains and planes and relies on large deals from its customers for these high cost products. This series of large contracts makes for a very variable revenue stream, compared with the more even income it derives from long term service contracts. The share of revenue from services dropped from 21% to 14% between 2007 and 2010 compared to the much higher figure of 51% for Rolls-Royce in 2010. In 2011, Nina Gupta, an analyst, predicts that Bombardier's service share will drop to 13% with a standard deviation of 1% in 2014 and that Rolls-Royce's service share will increase to 54% with a standard deviation of 2%. Assuming you believe Nina's forecast, what is the probability that
(a) Bombardiers service share will be lower in 2014 than in 2010 and
(b) Rolls Royce's service share will be higher in 2014 than in 2010.
(c) State your assumptions clearly and whether you think the assumptions are true.
(d) "Bombardier's service % is still going down while Rolls Royce's is going up" says Nina in her report. Comment on the ethics of Nina's statement in relation to the ASA Ethical Guidelines in Appendix C.
Question 2: Problem Statement Area
The Charlevoix Seismic Zone (CSZ) is the most seismically strive region of eastern Canada. Earthquakes of magnitude 6.0 and over occurred in 1663; 1791; 1860; 1870; and 1925 These large quakes therefore occur once every 52.4 years on average.
What is the probability that the next large quake (magnitude 6.0 and over) in CSZ occurs during the next 10 years (a) for someone living in 1926(b) for someone living in 2013? (e) Explain how your answers to (a) and (b) compare to each other.
Question 3: Aluminum and Alzheimers Disease.
The relatives of a man recently diagnosed with Alzhcimers disease are suing a company that sells drinks in aluminum cans claiming damages. They say that the man consumed 1-2 of these drinks per day and the cans contained no warning that the aluminum from the can could be absorbed into the drink and cause Alzheimers disease. They call an expert witness who states "there are numerous studies in the medical literature showing an increased level of aluminum in the brains of patients with Alzheimers disease. These aluminum deposits arc in the precise area of the brain affected by the disease. There is a clear link between aluminum and this terrible disease." You are called as an expert witness for the drinks manufacturer.
(a) What would you say to the court?
(b) In what way is your testimony consistent with the ASA guidelines on ethics?
(c) How do the ASA guidelines on ethics apply to the testimony of the expert witness for the other side?