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Semester 1 2015
Weeks 3 and 4
1. (a) Explain what it means to say that two probabilistic events in a sample space are mutually
exclusive of one another.
If two events lets call them A and B are mutually exclusive, then it means that they do not
have any simple events in common: i.e., that the simple events that combine to make up A
have no elements in common with those that make up B.
(b) Explain what it means to say that two probabilistic events in a sample space are independent
of one another.
When two events are independent of one another, it means that the effect of conditioning on
the occurrence of one of them has no effect of the marginal probability of the other: i.e.,
Pr(A/B) = Pr(A).
(c) Why can two events not at the same time be both mutually exclusive and independent of one another?
Because if A and B are mutually exclusive, then Pr(A and B) = 0, whereas if they are
independent, Pr(A and B) = Pr(A)*Pr(B) 0.
2. A department store wants to study the relationship between the way customers pay for an item and
the price of the item. 250 transactions are recorded and the following table is formed.
Price category
Payment
Cash
Credit card
Debit card
Under $20
15
9
18
$20-$100
11
53
52
Over $100
6
38
48
Convert the table to a joint distribution. Express each of the following questions in terms of
probability statements, and then solve:
Joint distribution:
Price category
Means of Payment
Under $20
$20-$100
Over $100
Marginal
Cash
0.06
0.044
0.024
0.128
Credit card
0.036
0.212
0.152
0.4
Debit card
0.072
0.208
0.192
0.472
Marginal
0.168
0.464
0.368
1
P(($20-$100) = 0.464
3. In a small batch of 20 manufactured widgets, there are, in fact, 3 defective ones. You, as quality
control officer for the company making the widgets, decide to examine a sample of 3 widgets,
selected without replacement, to see how many defective ones are selected.
(a) Use a probability tree to evaluate the probability distribution of the number of defectives
sampled.
The tree is of the obvious kind with the first branch from a branch where the probability of
defective is 0.15 and not defective is 0.85. From the upper of these branches at the next node the
probability of defective being selected is 2/19 and non-defective is 17/19. From the lower first
branch, the probability of a defective is 3/19 and of a non-defective is 16/19. From the nodes at
the end of the 4 second branches, the 8 probabilities of defective and non-defective are,
respectively, 1/18, 17/18, 2/18, 16/18, 2/18, 16/18, 3/18 and 15/18.
Since draws are made independently each time, the relevant probability distribution of X, the
number of defectives drawn in a sample of 3 without replacement, is
x
P(X = x)
680/1140
408/1140
51/1140
1/1140
P(X=x) = 1
(b) How would your answer change if the sampling were done with replacement?
The resultant probability distribution is now
x
P(X = x)
4913/8000
2601/8000
459/8000
27/8000
P(X=x) = 1
0.41
0.25
0.18
0.10
0.06
P(0 X 3)
E ( X )==
all x
( 01.15 ) 0.41+ (11.15 ) 0.25+ ( 21.15 ) 0.18+ (31.15 ) 0.10+ ( 41.15 ) 0.06=1.5075
(e)
P(X = x|x>0)
0.42
0.31
0.17
0.10
8. Suppose that the daily number of errors a randomly-selected bank teller makes is denoted by X and
follows the distribution given in the table below.
A human resource manager records the daily
numbers of errors of two randomly selected tellers. Denote the associated random variables by X1
and X2. As the selection is random, X1 and X2 are independent and follow the same distribution as X.
X +X
The manager then computes the sample mean X = 1 2 where the sample size is n = 2.
2
x
P(X = x)
0.6
0.2
0.2
(b)
Find the mean and variance of X1. Explain why we do not need to find the mean and variance
of X2 once we know those of X1.
Since X1 and X2 are random, so is X . Find the mean and variance of the random variable
X . Compare these with the result from (a) and comment. Hint: you will find it useful to note
that Cov ( X 1 , X 2 ) =0 because X1 and X2 are independent. This simplifies the evaluation of the
variance of the random variable X .
X +X
1
1
E ( X ) =E 1 2 = E ( X 1 ) + E ( X 2) =0.6
2
2
2
X +X
1
1
Var ( X )=Var 1 2 = Var ( X 1 ) + Var ( X 2 ) =0.32
2
4
4
The means of X and X are the same, and the variance of
divided by 2 (the sample size).
is the variance of X
(d) Find the possible values that X may take. Hence list the probability distribution of
of size 2. (This is known as the sampling distribution of X ).
for samples
If n=2 then the possible values for the mean are 0, , 1, 3/2, 2.
We know the possible values for the mean are 0, , 1, 3/2, 2. Now we need to assign
probabilities to each outcome to produce the probability distribution for the sample
mean.
For example,
The following table lists all possible outcomes and their associated probabilities:
X1 , X2
Probability
0,0
0,1
0,2
1,0
1,1
1,2
2,0
2,1
2,2
1
3/2
1
3/2
2
0.36
0.12
0.12
0.12
0.04
0.04
0.12
0.04
0.04
1/2
3/2
0.36
0.24
0.28
0.08
0.04
(e) Examine briefly what would happen if n =3, 4, ? For this last sub-question, you will need to use the
idea of a factorial of an integer n, labelled n ! , which means n multiplied by every positive integer
smaller than itself. So, for example, 3 !=3 2 1=6 . Also recall the combinatorial formula for
n
the number of ways of selecting x from n distinct objects (Sharpe page 193): C x =n ! / ( nx ) ! x ! .
If n=3, the possible values are 0, 1/3, 2/3, 1, 4/3, 5/3, 2. In combinatorial form,
2
0.6 .0 .2.
To understand this, note that the mean can only be 1/3 if two tellers
1
P X = =C 31
3
make no errors and the remaining one makes 1 error, and the combinatorial formula
is used to account for the fact that the teller who makes 1 error can be the first, the
second or the third sampled teller.
As n increases, we get a finer grid of values between the extremes of 0 and 2.
9. A student has enrolled in three courses in this semester. Lets call them courses A, B and C. Her
chances of passing each course are 0.8, 0.65, and 0.5, respectively. Passing each course is assumed
to be independent of passing other courses. Answer the following:
(b)
What is the probability that this student passes exactly two courses? Express this question in
terms of probability statements, and then solve.
P(passing two courses) = P(pass A & B but fail C)+ P(pass A & C but fail B)+ P(pass C
& B but fail A)= 0.8 0.65 ( 10.5 ) +0.8 0.5 ( 10.65 ) +0.65 0.5(10.8)=0.465
(d)
What is the probability that this student fails at least one course? Express this question in
terms of probability statements, and then solve.
Each of these combinations are equally likely because on any toss of a fair coin,
P(H) = P(T) = 0.5 and were assuming outcomes are independent
P(TTTT) = P(HTTT) = .= P(HHHH) = (0.5)4 = 0.0625
The required probability distribution becomes:
x
P( X =x)
0.0625
0.25
0.375
0.25
0.0625
(c)
E(X)
=
=
=
=
Var(X)
(d)
Consider a game where you win $5 for every head but lose $3 for every tail that appears in 4
tosses of a fair coin. Let the variable Y denote the winnings from this game. Formulate the
probability distribution of Y based on the probability distribution of X.
- 12
P( Y = y)
(e)
0.0625
-4
0.25
4
0.375
12
0.25
20
0.0625
What is the expected value of Y? Would you like to play this game? If so, why? If not, why not?
Directly from the formula given in part (c), we have:
E(Y)
=
=
5E(X) 3[4-E(X)]
10 12 +6 = 4
Or
E(Y)
= -120.0625 40.25 + 40.375 +12.025 +200.0625
= 4,
where the latter calculation comes directly from the probability distribution of Y given
in the table constructed in part (c). (The two evaluations, of course, give the same
value!)
If you play the game enough times you would expect to win $4 per game on average.
Thus, this is not a fair game (since in a fair game, expected returns are zero) but it is
biased towards the player. This is unlike games in casinos where expected winnings
are negative, meaning the game is biased towards the house.
Notice on any one play of the game you still might lose money and hence someone
who is extremely risk averse might not want to play the game even though on
average, over many plays of the game, they should win money.
11. Work through problem 41 on page 234 of Sharpe (Chapter 6).