Problems

1. We are testing a new flu drug. Out of 24 flu victims who were given the drug, 20 felt better and 4 felt worse. Out of 9 flu victims who were given a placebo, 6 felt better and 3 felt worse. What is the probability that the drug is more effective than the placebo?

2. A talk on the dangers of high cholesterol was given to eight workers. Each worker’s cholesterol was tested both before and after the talk, with the results given below. What is the probability that the talk caused the workers to undertake lifestyle changes that reduced their cholesterol?

   Open table as spreadsheet

   Cholesterol before	Cholesterol after
   220	210
   195	198
   250	210
   200	199
   220	224
   260	212
   175	179
   198	184

3. The beta of a stock is simply the slope of the best-fitting line used to predict the monthly return on the stock from the monthly return given in the Standard & Poor’s (S&P) 500 index. A beta that is larger than 1 indicates that a stock is more cyclical than the market, whereas a beta of less than 1 indicates that a stock is less cyclical than the market. The file Betaresampling.xlsx contains more than 12 years of monthly returns on Microsoft (MSFT), Pfizer (PFE), other stocks and the S&P index. Use this data to determine the probability that Microsoft has a lower beta than Pfizer. You will need to use the Excel SLOPE function to estimate the beta for each iteration of resampling.