You are on page 1of 23

Quantitative Methods for MBAs

Practice Problems for FINAL


Angelo Mele
Problem 1
The joint probability distribution of X and Y is partially shown in the table below.

0
0.11

X 1

0.09

Y
1

2
0.24

0.15

0.17

0.27
0.3

In addition you know the conditional probability


P (Y = 1|X = 0) = 0.5

1. Complete the table


Answer The table below contains the solution

0
0.11

Y
1
0.12

2
0.01

0.24

X 1

0.09

0.15

0.02

0.26

0.06
0.26

0.17
0.44

0.27
0.3

0.5

2. Compute the expected value of X (show your math)


E(X) = (0)(0.24) + (1)(0.26) + (2)(0.5) = 1.26
3. Compute the variance of X (show your math)
V (X) = (0 1.26)2 (0.24) + (1 1.26)2 (0.26) + (2 1.26)2 (0.5) = 0.6724
4. Compute the expected value of Y (show your math)
E(Y ) = (0)(0.26) + (1)(0.44) + (2)(0.3) = 1.04
5. Compute the Variance of Y (show your math)
V (Y ) = (0 1.04)2 (0.26) + (1 1.04)2 (0.44) + (2 1.04)2 (0.3) = 0.5584
6. Compute the covariance of X and Y (show your math)

COV (X, Y )

(0 1.04)(0 1.26)(0.11) + (1 1.04)(0 1.26)(0.12) + (2 1.04)(0 1.26)(0.01) +

(0 1.04)(1 1.26)(0.09) + (1 1.04)(1 1.26)(0.15) + (2 1.04)(1 1.26)(0.02) +

(0 1.04)(2 1.26)(0.06) + (1 1.04)(2 1.26)(0.17) + (2 1.04)(2 1.26)(0.27) = 0.2996

7. Are X and Y independent? Explain how you get the result.

Problem 2
The joint probability distribution of X and Y is partially shown in the table below.

Y
1

0
0

2
0.2

X 3

0.1

0
0.6

In addition you know the conditional probability


P (Y = 2|X = 2) = 0.5
P (X = 5|Y = 0) = 1

0.1

1. Complete the table

Answer The table below contains the solution

0
0

Y
1
0.1

2
0.1

0.2

X 3

0.1

0.1

0.6
0.6

0
0.2

0.1
0.2

0.7

2. Compute the expected value of X (show your math)


E(X) = (2)(0.2) + (3)(0.1) + (5)(0.7) = 4.2
3. Compute the variance of X (show your math)
V (X) = (2 4.2)2 (0.2) + (3 4.2)2 (0.1) + (5 4.2)2 (0.7) = 1.56
4. Compute the expected value of Y (show your math)
E(Y ) = (0)(0.6) + (1)(0.2) + (2)(0.2) = 0.6
5. Compute the Variance of Y (show your math)
V (Y ) = (0 0.6)2 (0.6) + (1 0.6)2 (0.2) + (2 0.6)2 (0.2) = 0.64
6. Compute the covariance of X and Y (show your math)

COV (X, Y )

(0 0.6)(2 4.2)(0) + (1 0.6)(2 4.2)(0.1) + (2 0.6)(2 4.2)(0.1) +

(0 0.6)(3 4.2)(0) + (1 0.6)(3 4.2)(0.1) + (2 0.6)(3 4.2)(0) +

(0 0.6)(5 4.2)(0.6) + (1 0.6)(5 4.2)(0) + (2 0.6)(5 4.2)(0.1) = 0.62

7. Are X and Y independent? Explain how you get the result.

Problem 3
The joint probability distribution of X and Y is partially shown in the table below.

Y
4

1
0.1

6
0.5

X 3

0.1

0.4
In addition you know the conditional probability
P (Y = 6|X = 2) = 0.2
P (X = 5|Y = 1) = 0.25

1. Complete the table

Answer The table below contains the solution

1
0.1

Y
4
0.3

6
0.1

0.5

X 3

0.2

0.1

0.3

0.1
0.4

0
0.3

0.1
0.3

0.2

2. Compute the expected value of X (show your math)


E(X) = (2)(0.5) + (3)(0.3) + (5)(0.2) = 2.9
3. Compute the variance of X (show your math)
V (X) = (2 2.9)2 (0.5) + (3 2.9)2 (0.3) + (5 2.9)2 (0.2) = 1.29

4. Compute the expected value of Y (show your math)


E(Y ) = (1)(0.4) + (4)(0.3) + (6)(0.3) = 3.4
5. Compute the Variance of Y (show your math)
V (Y ) = (1 3.4)2 (0.4) + (4 3.4)2 (0.3) + (6 3.4)2 (0.3) = 4.44
6. Compute the covariance of X and Y (show your math)

COV (X, Y )

(1 3.4)(2 2.9)(0.1) + (4 3.4)(2 2.9)(0.3) + (6 3.4)(2 2.9)(0.1) +

(1 3.4)(3 2.9)(0.2) + (4 3.4)(3 2.9)(0) + (6 3.4)(3 2.9)(0.1) +

(1 3.4)(5 2.9)(0.1) + (4 3.4)(5 2.9)(0) + (6 3.4)(5 2.9)(0.1) = 0.16

7. Are X and Y independent? Explain how you get the result.

Problem 4
Use the following table to solve the question

P (Z < 1.282) = 0.9


P (Z < 2.576) = 0.995

Student-t distribution
P (Z < 1.645) = 0.95
P (Z < 1.96) = 0.975

P (Z < 2.326) = 0.99


P (Z < 0.842) = 0.8

In a survey of 200 individuals we calculate a sample proportion of p = 0.42. Test the hypothesis
H0 : p = 0.4
H1 : p > 0.4
at significance level = 0.05
1. Compute the bound(s) of the rejection region and the value of the test statistic for this test
Answer. The test statistics for the sample proportion is
p p0
q

N (0, 1)

p0 (1p0 )
n

which is approximately normally distributed, according to the central limit theorem. This is a one-tail test so
we are looking for a rejection region bound that leaves 0.05 on the right. Using the table at the end of the
booklet we find P (Z < 1.645) = 0.95 which implies P (Z > 1.645) = 0.05. The rejection region is then
0
REJECT if p ppp
> 1.645
(1p )
0

DO NOT REJECT otherwise.


2. Can you reject the null?
AnswerThe value of the test statistics is
p p0
q

p0 (1p0 )
n

0.42 0.4
= q
= 0.577
0.4(0.6)
200

therefore we DON OT REJECT the null.


5

3. Can you reject at = 0.01 significance level?

Answer. With a significance level of 0.01, the rejection region bound must leave 0.01 probability on the right,
so our bound is 2.326 (because P (Z < 2.326) = 0.99 or P (Z > 2.326) = 0.01). The rejection region is:
0
REJECT if p ppp
> 2.326
(1p )
0

DO NOT REJECT otherwise.


Since the test statistics value is 0.577 < 2.326, we DO NOT REJECT the null at 0.01 significance level.

Problem 5
Consider the 3 independent random variables
X Bernoulli(0.2)
Y Bernoulli(0.3)
S Bernoulli(0.5)

1. Compute the expected value of the variable W = X + S


E(W ) =
Answer.
E(W ) = E(X + S) = E(X) + E(S) = [0.2(1) + 0.8(0)] + [0.5(1) + 0.5(0)] = 0.2 + 0.5 = 0.7

2. Compute the variance of the variable H = X + 5Y 3S


V (H) =
Answer. The variables are independent, therefore we dont need to consider the covariance terms.
V (H) = V (X + 5Y 3S) = V (X) + 52 V (Y ) + 32 V (S)
Notice that the variance of a Bernoulli variable with parameter p is given by p(1 p), therefore we get
V (H) = V (X) + 52 V (Y ) + 32 V (S) = 0.2(0.8) + 25(0.3)(0.7) + 9(0.5)(0.5) = 7.66

3. Are X an Y identically distributed? Explain.


Answer. NO, they both have Bernoulli distribution, but with different probability of success (0.2 for X and
0.3 for Y ).

Problem 6
A playboy goes to a party in New York, where he meets 5 fabulous ladies. He asks each of them out, independently
(i.e. making sure that they do not know he invited the others too). From his past experience, the playboy knows
that his probability of success with a lady is p = 0.4.

1. What is the probability that all ladies reject the invitation? Explain your answer
Answer. The probability of rejection in one trial is 1 p = 0.6. So the probability of n = 5 independent
failures is given by 0.65 = 0.07776. In alternative, you can also use the binomial formula to get the same answer
P (X = 0) =

5!
0.40 0.65 = 0.07776
5!0!

2. What is the probability that at least 1 lady accepts the invitation? Explain your answer
Answer. Using the binomial distribution formula
P (X 1) = 1 P (X = 0) = 1

5!
0.40 0.65 = 1 0.07776 = 0.92224
5!0!

3. What is the probability that at most 4 lady accepts the invitation? Explain your answer
Answer. Using the binomial distribution formula
P (X 4) = 1 P (X = 5) = 1

5!
0.45 0.60 = 1 0.01024 = 0.98976
0!5!

4. What is the probability that at least 1 and at most 3 ladies accept the invitation? Explain your answer
Answer. Using the binomial distribution formula
P (1 X 3)

= P (X = 1) + P (X = 2) + P (X = 3)
5!
5!
5!
0.41 0.64 +
0.42 0.63 +
0.43 0.62
=
4!1!
3!2!
2!3!
= 0.2592 + 0.3456 + 0.2304
=

0.8352

Problem 7
Let X be the number of Emergency Room visits in a year. The probability distribution of X is given by the following
table
x
P (X = x)

0
0.45

1
0.3

2
0.15

3
0.05

4
0.03

5
0.02

1. What is the probability that a person would visit the emergency room more than twice in a year?
Answer. We are looking for the probability P (X > 2) which is equivalent to P (X > 2) = 0.1.

2. Suppose you randomly select n = 10 individuals: what is the probability that at least 1 of them visits the
emergency room more than twice a year?
Answer. We define the variable Y to be the event that a person visits the emergency room more than twice
a year. To answer the question we use the binomial distribution, with n = 10, y = 1 and p = 0.1.
P (Y 1) = 1 P (Y = 0) = 1

10!
0.10 (0.9)10 = 1 0.3486784401 = 0.6513215599
0!10!

Problem 8
To answer this question you cannot use the computer. You need to come up with the answers using only the data
provided. Here are several probabilities for the standard normal distribution.
P (Z < 0.13)

0.5517

P (Z < 1.22)

0.8888

P (Z > 1.35)

0.9115

Using only these probabilities and the properties of the distribution, compute the following probabilities. Explain
your answers and which properties of the distribution you used.

1. P (Z < 1.35)
Answer. Here we use the symmetry of the standard normal distribution. Because of the symmetry we have
P (Z < a) = P (Z > a), so P (Z < 1.35) = P (Z > 1.35) = 0.9115.

2. P (Z > 1.22)
Answer. Here we use the fact that the area below the pdf must sum to 1. So P (Z > a) = 1 P (Z < a). In
our case, P (Z > 1.22) = 1 P (Z < 1.22) = 1 0.8888 = 0.1112

3. P (Z > 0.13)
Answer. Here we use the fact that the area below the pdf must sum to 1. So P (Z > a) = 1 P (Z < a). In
our case, P (Z > 0.13) = 1 P (Z < 0.13) = 1 0.5517 = 0.4483.

4. P (1.22 < Z < 1.35)


Answer. To compute this probability we use the properties of the cdf, i.e. P (a < Z < b) = P (Z <
b) P (Z < a). From the result in (A) we know P (Z < 1.35) = 0.9115 and from the probabilities above we
have P (Z < 1.22) = 0.8888, so the probability is
P (1.22 < Z < 1.35) = P (Z < 1.35) P (Z < 1.22) = 0.9115 0.8888 = 0.0226999999999999

5. P (0.13 < Z < 1.22)


Answer. Using the cdf
P (0.13 < Z < 1.22) = P (Z < 1.22) P (Z < 0.13) = 0.8888 0.5517 = 0.3371
6. For the variable X = 9 + 4Z, compute the probability P (9.52 < X < 14.4)
Answer. The probability is


P (9.52 < X < 14.4)

9.52 (9)
X (9)
14.4 (9)
<
<
4
4
4
= P (0.13 < Z < 1.35)

= P (Z < 1.35) P (Z < 0.13) = 0.9115 0.5517 = 0.3598


7. For the variable X = 12 + 7Z, compute the probability P (11.09 < X < 2.55)
Answer. The probability is


X (12)
2.55 (12)
11.09 (12)
<
<
P (11.09 < X < 2.55) = P
7
7
7
= P (0.13 < Z < 1.35)

= P (Z < 1.35) P (Z < 0.13) = 0.9115 0.5517 = 0.3598

Problem 9
Use the following table to solve the question

P (t42
P (t43
P (t44

Student-t distribution
> 1.302) = 0.1
P (t42 > 1.682) = 0.05
> 1.302) = 0.1
P (t43 > 1.681) = 0.05
> 1.301) = 0.1
P (t44 > 1.68) = 0.05

P (t42 > 2.018) = 0.025


P (t43 > 2.017) = 0.025
P (t44 > 2.015) = 0.025

The height (in centimeters) of high schoolers, indicated by variable X, is normally distributed. We are interested
in estimating and make inference about the population mean . We collect an i.i.d. sample of n = 43 observations,
with sample mean x
= 156 and sample variance s2 = 324.
1. Construct a 80% confidence interval for
Answer. The confidence interval is such that
P

t42,0.1 <

x
0
s
n

!
< t42,0.1

= 0.8

or


s
s
P x
t42,0.1 < < x
+ t42,0.1
= 0.8
n
n
From the table, we find P (t42 > t42,0.1 ) = 1.302, so the confidence interval is
s
18
x
t42,0.1 = 156 1.302 = [152.426, 159.574]
n
43
9

2. Construct a 95% confidence interval for


Answer. The confidence interval is such that
t42,0.025 <

x
0
s
n

!
< t42,0.025

= 0.95

or


s
s

P x
t42,0.025
<<x
+ t42,0.025
= 0.95
n
n
From the table, we find P (t42 > t42,0.025 ) = 2.018, so the confidence interval is
s
18
x
t42,0.025 = 156 2.018 = [150.461, 161.539]
n
43
3. Construct a 90% confidence interval for
Answer. The confidence interval is such that
P

t42,0.05 <

x
0
s
n

!
< t42,0.05

= 0.9

or


s
s

<<x
+ t42,0.05
= 0.9
P x
t42,0.05
n
n
From the table, we find P (t42 > t42,0.05 ) = 1.682, so the confidence interval is
18
s
x
t42,0.05 = 156 1.682 = [151.383, 160.617]
n
43

Problem 10
Please compute the first derivative of the following functions:

1. f (x) = x6
Answer. f 0 (x) = 6x5

2. f (x) = x3
Answer. f 0 (x) = 3x2

3. f (x) = x11
Answer. f 0 (x) = 11x10

10

4. f (x) = 3x3 + 4x6 + 6x5


Answer.
f 0 (x)

3 3x31 + 6 4x61 + 5 6x51

9x2 + 24x5 + 30x4

5. f (x) = 4x5 + 5x3 + 7x11


Answer.
f 0 (x)

5 4x51 + 3 5x31 + 11 7x111

20x4 + 15x2 + 77x10

6. f (x) = 8x6 + 7x5 + 3x8


Answer.
f 0 (x)

7. f (x) = ln 4x6 + 2x4 + 6x9

6 8x61 + 5 7x51 + 8 3x81

48x5 + 35x4 + 24x7

Answer.
f 0 (x)

=
=

8. f (x) = ln 13x12 + 4x3 + 5x7



1
6 4x61 + 4 2x41 + 9 6x91
4x6 + 2x4 + 6x9
24x5 + 8x3 + 54x8
4x6 + 2x4 + 6x9

Answer.
f 0 (x)

=
=

9. f (x) =



1
12 13x121 + 3 4x31 + 7 5x71
3
7
+ 4x + 5x
156x11 + 12x2 + 35x6
13x12 + 4x3 + 5x7

13x12

14x10 +16x7 +10x12


13x15 +13x18 +15x16

Answer.
[(10)14x101 +(7)16x71 +(12)10x121 ][13x15 +13x18 +15x16 ][14x10 +16x7 +10x12 ][(15)13x151 +(18)13x181 +(16)15x161 ]
f 0 (x) =
[13x15 +13x18 +15x16 ]2
=

[140x9 +112x6 +120x11 ][13x15 +13x18 +15x16 ][14x10 +16x7 +10x12 ][195x14 +234x17 +(240x15 ]
[13x15 +13x18 +15x16 ]2

10. f (x) =

12x11 +17x7 +7x11


10x6 +5x9 +17x17

Answer.
[(11)12x111 +(7)17x71 +(11)7x111 ][10x6 +5x9 +17x17 ][12x11 +17x7 +7x11 ][(6)10x61 +(9)5x91 +(17)17x171 ]
f 0 (x) =
[10x6 +5x9 +17x17 ]2
=

[132x10 +119x6 +77x10 ][10x6 +5x9 +17x17 ][12x11 +17x7 +7x11 ][60x5 +45x8 +(289x16 ]
[10x6 +5x9 +17x17 ]2

11. f (x) =

12x7 +4x10 +15x7


15x16 +10x13 +10x17

Answer.
[(7)12x71 +(10)4x101 +(7)15x71 ][15x16 +10x13 +10x17 ][12x7 +4x10 +15x7 ][(16)15x161 +(13)10x131 +(17)10x171 ]
f 0 (x) =
[15x16 +10x13 +10x17 ]2
=

[84x6 +40x9 +105x6 ][15x16 +10x13 +10x17 ][12x7 +4x10 +15x7 ][240x15 +130x12 +(170x16 ]
[15x16 +10x13 +10x17 ]2

11

12. Compute the partial derivatives of the function f (x, y) = 4x5 y 13


Answer. The derivatives are:
f (x, y)
x
f (x, y)
y

(5)4x51 y 13

20x4 y 13

(13)4x5 y 131

52x5 y 12

13. Compute the partial derivatives of the function f (x, y) = 5x13 y 5


Answer. The derivatives are:
f (x, y)
x
f (x, y)
y

(13)5x131 y 5

65x12 y 5

(5)5x13 y 51

25x13 y 4

14. Compute the partial derivatives of the function f (x, y) = 4x5 y 4


Answer. The derivatives are:
f (x, y)
x
f (x, y)
y

(5)4x51 y 4

20x4 y 4

(4)4x5 y 41

16x5 y 3

15. Compute the partial derivatives of the function f (x) = 5x10 y 10 3x14 y 6 + 7x
Answer. The derivatives are:
f (x, y)
x
f (x, y)
y

(10)5x101 y 10 (14)3x141 y 6 + 7

50x9 y 10 42x13 y 6 + 7

(10)5x10 y 101 (6)3x14 y 61

50x10 y 9 18x14 y 5

16. Compute the partial derivatives of the function f (x) = 3x4 y 4 4x6 y 11 + 6x
Answer. The derivatives are:
f (x, y)
x
f (x, y)
y

(4)3x41 y 4 (6)4x61 y 11 + 6

12x3 y 4 24x5 y 11 + 6

(4)3x4 y 41 (11)4x6 y 111

12x4 y 3 44x6 y 10

17. Compute the partial derivatives of the function f (x) = 4x4 y 9 3x6 y 11 + 6x

12

Answer. The derivatives are:


f (x, y)
x
f (x, y)
y

(4)4x41 y 9 (6)3x61 y 11 + 6

16x3 y 9 18x5 y 11 + 6

(9)4x4 y 91 (11)3x6 y 111

36x4 y 8 33x6 y 10

Problem 11
The sample for variable x is
65654
and the sample for variable y is
65362
Please compute:
1. The mean, median, and mode of the sample for x and y
2. The variance and standard deviation for x and y
3. The covariance and correlation of the two variables
Answers.
When there are few observations in the sample, it is convenient to create a table like this

1
2
3
4
5

xi
6.000
5.000
6.000
5.000
4.000

yi
6.000
5.000
3.000
6.000
2.000

(xi x
)
0.800
-0.200
0.800
-0.200
-1.200

(xi x
)2
0.640
0.040
0.640
0.040
1.440

(yi y)
1.600
0.600
-1.400
1.600
-2.400

(yi y)
2.560
0.360
1.960
2.560
5.760

(xi x
)(yi y)
1.280
-0.120
-1.120
-0.320
2.880

Using the table we can compute all the quantities we need for the answers.
Pn
1. The mean of the sample x is computed using the formula x
= n1 i=1 xi , i.e. we sum the entries of column xi
from the table and divide by the number of observations n = 5.
x
=

26
= 5.2
5

To compute the median we sort the sample from the lowest to the highest value and find the value that leaves
50% of the observations on the left side and 50% of the observation on the right side.
45566

13

So the median of our sample is


xm = 5
For the mode we just look at the sample and find the most frequent value. In this sample the mode is therefore
x0 = 5.5
For variable y we do the same and obtain
y =

4.4

ym

y0

2. The variance s2x and standard deviation sx are computed according to the formulas
n

1 X
2
(xi x
)
n 1 i=1
p
=
s2x

s2x

sx
We can compute the
i.e.

Pn

i=1

(xi x
) by summing the column (xi x
) of the table, then dividing by n 1 = 4,

sx

2.8
= 0.7 = 0.7
4
=
0.7 = 0.837

s2y

sy

s2x

For variable y we get


13.2
= 3.3 = 3.3
4
3.3 = 1.817

3. For the covariance we use the last column of the table. The formula is given by
n

sxy =

1 X
(xi x
)(yi y)
n 1 i=1

Therefore we obtain
Pn
sxy

=
=

x
)(yi y)
n1

i=1 (xi

2.6
= 0.65
4

and the correlation is obtained by


rxy

=
=

sxy
sx sy
0.65
= 0.427
0.837 1.817

14

Problem 11
Suppose we have two random variables X and Y and we know that
X

N (20, 36)

N (30, 25)

XY

COV (X, Y ) = 0

1. Are X and Y independent? Explain your answer.


Answer. NO, they are not necessarily independent.
The statement is: IF they are independent, THEN the covariance is zero.
The opposite is not true (remember the third question in the second homework)
2. Are X and Y identically distributed? Explain your answer
Answer. NO, they have different mean and variance.
3. Compute the probabilities below. Explain your answer.
Answer.
P (X > 20) = 0.5. The normal distribution is symmetric around the mean.
P (Y = 30) = 0. With continuous distribution we can only compute probabilities for intervals. The probability
that the random variable takes on a specific value is zero.
4. Suppose we draw an i.i.d. sample of n = 30 observations from X. Compute the expected value and variance
Explain how you got the result.
of the sample mean X.
Answer
2
N (X , X ). As a conseThe sample mean for normally distributed i.i.d. data has sampling distribution X
n
quence:
= X = 20
E(X)
2
= X = 36 = 1.2
V (X)
n
30

Problem 12
The sample for variable x is
23776
and the sample for variable y is
55524
Please compute:
1. The mean, median, and mode of the sample for x and y
2. The variance and standard deviation for x and y
3. The covariance and correlation of the two variables
15

1
2
3
4
5

xi
2.000
3.000
7.000
7.000
6.000

yi
5.000
5.000
5.000
2.000
4.000

(xi x
)2
9.000
4.000
4.000
4.000
1.000

(xi x
)
-3.000
-2.000
2.000
2.000
1.000

(yi y)
0.800
0.800
0.800
-2.200
-0.200

(yi y)
0.640
0.640
0.640
4.840
0.040

(xi x
)(yi y)
-2.400
-1.600
1.600
-4.400
-0.200

Answers.
When there are few observations in the sample, it is convenient to create a table like this

Using the table we can compute all the quantities we need for the answers.
Pn
1. The mean of the sample x is computed using the formula x
= n1 i=1 xi , i.e. we sum the entries of column xi
from the table and divide by the number of observations n = 5.
x
=

25
=5
5

To compute the median we sort the sample from the lowest to the highest value and find the value that leaves
50% of the observations on the left side and 50% of the observation on the right side.
23677
So the median of our sample is
xm = 6
For the mode we just look at the sample and find the most frequent value. In this sample the mode is therefore
x0 = 7
For variable y we do the same and obtain
y =
ym =
y0

4.2
5

2. The variance s2x and standard deviation sx are computed according to the formulas
n

1 X
2
(xi x
)
n 1 i=1
p
=
s2x

s2x

sx
We can compute the
i.e.

Pn

i=1

(xi x
) by summing the column (xi x
) of the table, then dividing by n 1 = 4,
s2x

sx

s2y

22
= 5.5 = 5.5
4
5.5 = 2.345

For variable y we get

sy

6.8
= 1.7 = 1.7
4
1.7 = 1.304
=

16

3. For the covariance we use the last column of the table. The formula is given by
n

sxy

1 X
=
(xi x
)(yi y)
n 1 i=1

Therefore we obtain
Pn
sxy

=
=

x
)(yi y)
n1

i=1 (xi

7
= 1.75
4

and the correlation is obtained by


rxy

=
=

sxy
sx sy
1.75
= 0.572
2.345 1.304

Problem 13
The joint probability distribution of X and Y is partially shown in the table below.

0
0.14

X 1

0.12

Y
1

2
0.25

0.1

0.08

In addition you know the conditional probability


P (Y = 1|X = 0) = 0

1. Complete the table

Answer The table below contains the solution

17

0.28
0.39

0
0.14

Y
1
0

2
0.11

0.25

X 1

0.12

0.1

0.22

0.17
0.43

0.08
0.18

0.28
0.39

0.53

2. Compute the expected value of X (show your math)


E(X) = (0)(0.25) + (1)(0.22) + (2)(0.53) = 1.28
3. Compute the variance of X (show your math)
V (X) = (0 1.28)2 (0.25) + (1 1.28)2 (0.22) + (2 1.28)2 (0.53) = 0.7016
4. Compute the expected value of Y (show your math)
E(Y ) = (0)(0.43) + (1)(0.18) + (2)(0.39) = 0.96
5. Compute the Variance of Y (show your math)
V (Y ) = (0 0.96)2 (0.43) + (1 0.96)2 (0.18) + (2 0.96)2 (0.39) = 0.8184
6. Compute the covariance of X and Y (show your math)

COV (X, Y )

(0 0.96)(0 1.28)(0.14) + (1 0.96)(0 1.28)(0) + (2 0.96)(0 1.28)(0.11) +

(0 0.96)(1 1.28)(0.12) + (1 0.96)(1 1.28)(0.1) + (2 0.96)(1 1.28)(0) +

(0 0.96)(2 1.28)(0.17) + (1 0.96)(2 1.28)(0.08) + (2 0.96)(2 1.28)(0.28) = 0.1512

7. Are X and Y independent? Explain how you get the result.

Problem 14
The table below contains the joint distribution of two indepedent variables: X (rows) and Y (columns).
X=12
X=24
X=51

Y=24
0.01
0.08
0.01

Y=34
0.03
0.24
0.03

Y=48
0.01
0.08
0.01

18

Y=56
0.04
0.32
0.04

Y=74
0.01
0.08
0.01

1. Please compute the covariance and correlation of X and Y. Explain.


Answer. There is no need to compute the covariance. The variables are indepedent, therefore the covariance
is zero: XY = COV (X, Y ) = 0 and XY = 0.

2. Compute the conditional probability of X = 24, given Y = 48.


P (X = 24|Y = 48) =
=48)
Asnwer. There is no need to compute this using the usual formula P (X = 24|Y = 48) = P (X=24,Y
.
P (Y =48)
The variables are independent, therefore the conditionals are equal to the marginals. This means that P (X =
24|Y = 48) = P (X = 24).To obtain the marginal for X we sum the entries of the table by row, and we get

P (X = 24) = 0.8

3. Compute the conditional probability of X = 51, given Y = 34.


P (X = 51|Y = 34) =
=34)
.
Asnwer. There is no need to compute this using the usual formula P (X = 51|Y = 34) = P (X=51,Y
P (Y =34)
The variables are independent, therefore the conditionals are equal to the marginals. This means that P (X =
51|Y = 34) = P (X = 51).To obtain the marginal for X we sum the entries of the table by row, and we get

P (X = 51) = 0.1

4. Compute the conditional probability of Y = 34, given X = 51.


P (Y = 34|X = 51) =
.
Asnwer. There is no need to compute this using the usual formula P (Y = 34|X = 51) = P (YP=34,X=51)
(X=51)
The variables are independent, therefore the conditionals are equal to the marginals. This means that P (Y =
34|X = 51) = P (Y = 34).To obtain the marginal for Y we sum the entries of the table by column, and we get
P (Y = 34) = 0.3

Problem 15
The joint probability distribution of X and Y is partially shown in the table below.

0
0.15

Y
1
0.06

2
0.09

X 1

0.15

0.06

0.09

0.5

0.2

0.3

19

1. Compute the marginal probability of X (show your math)


Answer. The first 2 entries are simple. We have all the joint probabilities for X = 0 and X = 1. So we get
P (X = 0)

P (X = 1)

= P (X = 0, Y = 0) + P (X = 0, Y = 1) + P (X = 0, Y = 2)
=

0.15 + 0.06 + 0.09

0.3

= P (X = 1, Y = 0) + P (X = 1, Y = 1) + P (X = 1, Y = 2)
= 0.15 + 0.06 + 0.09
= 0.3

For the remaining probability we just use the fact that the marginal probabilities have to sum to 1, so we have
P (X = 0) + P (X = 1) + P (X = 2) = 1
and we can back up P (X = 2)
P (X = 2) = 1 P (X = 0) P (X = 1) = 1 0.3 0.3 = 0.4

0
0.15

Y
1
0.06

2
0.09

0.3

X 1

0.15

0.06

0.09

0.3

0.4
0.5

0.2

0.3

2. Complete the table of joint probabilities (show your math)


Answer. To find the remaining joint probabilities, we use the fact that each column should sum up to the
marginal probability of Y . So for the first column we get that the missing probability P (X = 2, Y = 0) is such
that
p(Y = 0) = 0.5 = 0.15 + 0.06 + P (X = 2, Y = 0)
So P (X = 2, Y = 0) is equal to
P (X = 2, Y = 0) = 0.5 0.15 0.15 = 0.2

Using the same computations we also get


P (X = 2, Y = 1) = 0.2 0.06 0.06 = 0.08

P (X = 2, Y = 2) = 0.3 0.09 0.09 = 0.12

20

0
0.15

Y
1
0.06

2
0.09

0.3

X 1

0.15

0.06

0.09

0.3

0.2
0.5

0.08
0.2

0.12
0.3

0.4

3. Compute the expected value of X (show your math)


E(X) = (0)(0.3) + (1)(0.3) + (2)(0.4) = 1.1
4. Compute the variance of X (show your math)
V (X) = (0 1.1)2 (0.3) + (1 1.1)2 (0.3) + (2 1.1)2 (0.4) = 0.69
5. Compute the expected value of Y (show your math)
E(Y ) = (0)(0.5) + (1)(0.2) + (2)(0.3) = 0.8
6. Compute the Variance of Y (show your math)
V (Y ) = (0 0.8)2 (0.5) + (1 0.8)2 (0.2) + (2 0.8)2 (0.3) = 0.76
7. Compute the covariance of X and Y (show your math)

COV (X, Y )

(0 0.8)(0 1.1)(0.15) + (1 0.8)(0 1.1)(0.06) + (2 0.8)(0 1.1)(0.09) +

(0 0.8)(1 1.1)(0.15) + (1 0.8)(1 1.1)(0.06) + (2 0.8)(1 1.1)(0.09) +

(0 0.8)(2 1.1)(0.2) + (1 0.8)(2 1.1)(0.08) + (2 0.8)(2 1.1)(0.12) = 0

8. Are X and Y independent? Explain how you get the result.

Problem 16
Last year 45% of all cars traveling on Maryland highways were exceeding the speed limit of 65 mph. A cop randomly
selects (i.i.d) n = 7 cars traveling on I-95, and records if they are above the speed limit.
(A) What is the probability that all the cars are traveling above speed limit?
Answer. This probability is p7 = 0.457 = 0.00373669453125.
(B) What is the probability that exactly 2 cars are driving above speed limit?
21

Answer. Using the binomial probability formula


P (X = 2) =

7!
0.452 0.555 = 0.21402168046875
2!5!

(C) What is the probability that exactly 5 cars are driving above speed limit?
Answer. Using the binomial probability formula
P (X = 5) =

7!
0.455 0.552 = 0.11722149140625
5!2!

(D) What is the expected number of cars exceeding the speed limit?
Answer. The expected value of the binomial distribution is E(X) = np = 7 0.45 = 3.15

Problem 17
Use the following table to solve the question

P (Z < 1.282) = 0.9


P (Z < 2.576) = 0.995

Normal Distribution
P (Z < 1.645) = 0.95
P (Z < 1.96) = 0.975

P (Z < 2.326) = 0.99


P (Z < 0.842) = 0.8

In a survey of 98 individuals we calculate a sample proportion of p = 0.44.


1. Compute a 99% confidence interval for the proportion
Answer. The confidence interval is such that:

p p
P z1 2 < q

p(1

p)

< z1 2 1

where the value z1 2 is such that P (Z < z1 2 ) = 1 2 . In our case 1 = 0.99 and so 1 /2 = 0.995.
From the table at the end of the exam booklet we get P (Z < 2.576) = 0.995. So the confidence interval is
r
r
p(1 p)
0.44(1 0.44)
p 2.576
= 0.44 2.576
= [0.311, 0.569]
n
98
2. Compute a 95% confidence interval for the proportion
Answer. The confidence interval is such that:

P z1 2

p p
<q

p(1

p)

< z1 2 1

where the value z1 2 is such that P (Z < z1 2 ) = 1 2 . In our case 1 = 0.95 and so 1 /2 = 0.975.
From the table at the end of the exam booklet we get P (Z < 1.96) = 0.975. So the confidence interval is
r
r
p(1 p)
0.44(1 0.44)
p 1.96
= 0.44 1.96
= [0.342, 0.538]
n
98
22

3. Compute a 90% confidence interval for the proportion


Answer. The confidence interval is such that:

P z1 2

p p
<q

p(1

p)

< z1 2 1

where the value z1 2 is such that P (Z < z1 2 ) = 1 2 . In our case 1 = 0.9 and so 1 /2 = 0.95. From
the table at the end of the exam booklet we get P (Z < 1.645) = 0.95. So the confidence interval is
r
r
p(1 p)
0.44(1 0.44)
p 1.645
= 0.44 1.645
= [0.358, 0.522]
n
98
4. Compute a 80% confidence interval for the proportion
Answer. The confidence interval is such that:

P z1 2

p p
<q

p(1

p)

< z1 2 1

where the value z1 2 is such that P (Z < z1 2 ) = 1 2 . In our case 1 = 0.8 and so 1 /2 = 0.9. From
the table at the end of the exam booklet we get P (Z < 1.282) = 0.9. So the confidence interval is
r
r
p(1 p)
0.44(1 0.44)
= 0.44 1.282
= [0.376, 0.504]
p 1.282
n
98

23