You are a financial planner at a well-known financial planning firm. During a ca
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Question
You are a financial planner at a well-known financial planning firm. During a casual family gathering, a relative by the name of Uncle Tom asked you some investment-related questions as he can withdraw about $200,000 worth of cash from his CPF. He queried about the difference between Singapore Government Bonds and Fixed Deposits, as well as how long one should lock in their money.
You explained to Uncle Tom that Singapore Government Securities (SGS) bonds and Treasury bills (T-bills) are marketable debt instruments of the Government of Singapore. These debt instruments are considered safe investments, as they are backed by the full credit of the Singapore Government. As such they are seen as almost risk free because it is very unlikely that a government can go bankrupt and not able to pay its loans. Besides the government has a tax revenue stream it can use to repay its borrowings.
You further explained to Uncle Tom: “Fixed deposits are backed by the credit rating of the bank. Unlike when you borrow from the bank, the bank does not give you any collateral when it borrows from you. However, it is obligated to pay you your interest and principal when it falls due. The bank can however default when it goes bust as we have seen in past years in the Europe and the United States. When a bank fails, depositors may lose all or part of their money, including fixed depositors.”
Based on your hunch, you know that Uncle Tom will be asking more detailed questions and in anticipation, you proceed to download the historical interest rate dataset from the Department of Statistics Singapore.
Please use the Excel software and the data file “BUS105e_GBA_Data_Interest.xlsx” to answer the following questions.
Question 1
Upon your explanation, Uncle Tom seek your advice on whether the 1-year Treasury Bills yield is essentially the same as a 12-month fixed deposit as they are of the same period. Therefore, according to Uncle Tom, it would make more sense to invest in Treasury Bills as it is deemed more secure. Present the relevant info concisely and clearly for Uncle Tom's appreciation. You are also required to identify and describe the appropriate measures of location and dispersion. Interpret your preliminary observations.
(15 marks)
please use the following link for the data in excel.
https://www.dropbox.com/s/8uh1nrjhadhnje2/BUS105e_GBA_Data_Interest.xlsx?dl=0
Explanation / Answer
Statistics are supposed to make something easier to understand but when used in a misleading fashion can trick the casual observer into believing something other than what the data shows. That is, a misuse of statistics occurs when a statistical argument asserts a falsehood. the conclusions are unjustified or incorrect." The "numbers" include misleading graphics divert the focus to some other conclusion other than the true conclusionWhile numbers don’t lie, they can in-fact be used to mislead with half truths. This is known as the “misuse of statistics.”
However, the telling of have truths through statistical study is not only limited to mathematical amateurs. A 2009 investigative survey by Dr. Daniele Fanelli from The University of Edinburgh found that 33.7% of scientists surveyed admitted to questionable research practices, including modifying results to improve outcomes, subjective data interpretation, withholding analytical details
misuse of statistics can be accidental or purposeful. While a malicious intent to mislead and misuse data with misleading statistics will surely magnify bias, intent is not necessary to create statistical misunderstands. The misuse of statics is a much broader problem that now permeates through multiple industries and fields of study
The statistical inaccuracy and misleading is also facilitited by “data dredging” (and related to flawed correlations). It is a data mining technique where extremely large volumes of data are analyzed for the purposes of discovering relationships between data points. Seeking a relationship between data isn’t a data misuse per se, however, doing so without a hypothesis is.
Other major concerns related to business aspects can be
1. False correlation between variables.
2. Faulty conclusion owing to slective data representation.
3. bias in the dataset.
As a financial planner iwill do the following to get correct statisitcal output
1. Data statification
2. Removal of data bias.
3. normalization of hte data
4. Increase sample size to as much as possible.
5. Check hypothesis by correct cohice of hypothesis testing.
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