MA629/07

UNIVERSITY OF KENT
FACULTY OF SCIENCE, TECHNOLOGY AND MEDICAL STUDIES

LEVEL I EXAMINATION

PROBABILITY AND INFERENCE

Tuesday, 1 May 2007: 2.00 – 4.00

This paper contains SIX questions. Candidates should not

attempt more than THREE questions. Actuarial Science
students should NOT attempt question 2. All other students
should NOT attempt question 6. Each question will be
marked out of 40.

Candidates are advised to show their working on their

scripts. Marks might then be awarded for use of a correct
method, even if the numerical or algebraic result is incorrect.

Copies of the New Cambridge Statistical Tables are provided.

Approved calculators may be used.

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1. (a) Suppose that random variables X and Y have joint probability density function given by
(
1+x−y, 0 ≤ x ≤ 1, 0 ≤ y ≤ 1;
fX,Y (x, y) =
0 otherwise.

(i) Sketch the region of the x-y plane for which the probability density function is non-
zero. [ 4 marks ]
(ii) Find the marginal probability density function of X. [ 4 marks ]
(iii) Determine whether X and Y are independent. [ 4 marks ]
(iv) Calculate the covariance between X and Y . [ 8 marks ]
(v) Find the conditional probability density function of Y given X = x. [ 2 marks ]
(vi) Hence find the conditional expectation E(Y | X = 1/3). [ 6 marks ]
(b) Suppose that random variables U and V are defined by the equations U = X1 + X2 and
V = X1 − X2 , for two general random variables X1 and X2 .
(i) Find E(U V ) in terms of the moments of X1 and X2 . [ 4 marks ]
(ii) Now assume that the random variables X1 and X2 have equal variances. Show that
this implies that U and V are uncorrelated. [ 8 marks ]

2. NOT TO BE ATTEMPTED BY ACTUARIAL SCIENCE STUDENTS

(a) A random sample X1 , X2 , . . . , Xn of size n is selected from a Poisson distribution with
some mean µ.
(i) Write down the likelihood function for µ. [ 2 marks ]
(ii) Hence show that the sample mean is the maximum likelihood estimator.
[ 12 marks ]
(b) Along a particular stretch of road, accidents occur at random in time, so that the number
X occurring in one week has a Poisson distribution, with some mean µ. A planner wants to
use the data from one week to estimate the probability, p, that there there will be no accidents
along the stretch for two consecutive weeks.
(i) Give an expression for p in terms of µ. [ 4 marks ]
(ii) Show that the estimator g(X) = (−1)X is an unbiased estimator of p. [ 8 marks ]
(iii) Comment on whether you consider that this estimator will be a good one, doing any
calculations you consider useful to illustrate your point. [ 8 marks ]
(iv) Suggest an alternative estimator which you might consider instead of using g(X) and
give two advantages of your choice. [ 6 marks ]
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3. (a) Suppose that X is a random variable with expectation µ and variance σ 2 . The random
variable Y is defined by Y = g(X), where g(·) is a continuous function. Derive approxima-
tions for E(Y ) and Var(Y ) in terms of of µ and σ 2 , stating any conditions needed for the
approximations to be reasonable. [ 8 marks ]
(b) The mean of an exponentially distributed random variable W with probability density
function (
θ−1 e−w/θ , w > 0;
fW (w) =
0 otherwise,

is θ. Show that Var(W ) = θ2 . [ 6 marks ]

(c) A large random sample W1 , W2 , . . . , Wn is selected from the exponential distribution with
mean θ. The sample mean is denoted by X and Y = log X.
(i) Write down E(X) and Var(X). [ 4 marks ]
(ii) Hence find approximations for E(Y ) and Var(Y ). [ 6 marks ]
(d) Define the term pivotal function and explain when pivotal functions can be useful in
statistical inference. [ 6 marks ]
(e) If θ is unknown, find a function of Y (as defined in part (c) above) and θ which could be
Xn
used, approximately, as a pivotal function. Hence, in the case n = 60, Wi = 324.3, find
i=1
an approximate 95% interval for θ. [ 10 marks ]

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4. (a) A random variable X represents the number of successes in n Bernoulli trials, where p
is the probability of success. Find the probability generating function for X, and hence find
the expectation and variance of X. [ 8 marks ]
(b) Random variables X1 , X2 , . . . , Xk are independently binomially distributed, all with
parameter p. The index of Xi is ni , i = 1, 2, . . . , k; that is Xi results from a set of ni
Bernoulli trials. Two statisticians, A and B, review the data, aiming to estimate the unknown
parameter p. Statistician A decides to use
k
1 X Xi
p̂1 =
k ni
i=1

as the estimator, while B decides to use

Pk
Xi
p̂2 = Pi=1
k
.
j=1 nj

Show that both estimators are unbiased. [ 8 marks ]

k
X
(c) Find the probability generating function of Xi and deduce its distribution. In the
i=1
case k = 2, n1 = 20 and n2 = 40, find the variance of both estimators and compare them.
[ 16 marks ]
(d) Write down an expression for the likelihood function for the experiment in which one
observation xi is made on Xi , i = 1, 2, . . . , k. Show that p̂2 is the maximum likelihood
estimator of p. Comment on the result of the comparison made in part (c). [ 8 marks ]

5. Suppose that X1 , X2 , . . . , X9 is a random sample from N (µ, 1), where the parameter µ is
unknown, and that you wish to use the sample to test H0 : µ = 0 against H1 : µ = 1.
(a) Explain what is meant by describing H0 and H1 as simple hypotheses. Give an example
of a hypothesis which could be used in the present circumstances which would not be simple.
[ 4 marks ]
(b) Define the size and power of a hypothesis test, and explain how these can be used to
assess the quality of a test. [ 6 marks ]
(c) Let X = (X1 + X2 + · · · + X9 )/9. State the distribution of X when H0 is true, and
determine the size of the test of H0 which rejects H0 when X > 0.7. Also calculate the power
of this test. [ 8 marks ]
(d) Show that the test in part (c) is a likelihood ratio test of H0 against H1 . Discuss briefly
an optimum property possessed by the test which stems from the fact that it is a likelihood
ratio test. [ 12 marks ]
(e) A client of yours is satisfied with the size of the test in part (c), but feels that the power
is inadequate, and that a power of at least 0.9 is needed. Discuss, giving your reasons, how
you would advise the client, and devise a test which would be acceptable. [ 10 marks ]
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6. ONLY TO BE ATTEMPTED BY ACTUARIAL SCIENCE STUDENTS.

Consider the linear regression model

yi = α + βxi + ei , i = 1, 2 . . . , n, (1)

where e1 , e2 , . . . , en are independent and identically distributed N (0, σ 2 ).

n
X
−1
Let α̂ and β̂ be the least squares estimators of α and β, respectively, and let y = n yi ,
i=1
n
X n
X n
X n
X
x = n−1 xi , Syy = (yi − y)2 , Sxx = (xi − x)2 , and Sxy = (xi − x)(yi − y). In
i=1 i=1 i=1 i=1
answering the following questions you may quote formulae for α̂ and β̂ without derivation.
(a)
(i) Prove the identity
T SS = RegSS + RSS,
where
n
X n 
X 2 n
X
2
T SS = (yi − y) ; RegSS = α̂ + β̂xi − y ; RSS = (α̂ + β̂xi − yi )2 .
i=1 i=1 i=1

[ 10 marks ]
(ii) Show that RegSS = β̂ 2 Sxx and E(RegSS) = σ 2 + β 2 Sxx .
(Hint: You can quote or derive the known expression for V ar(β̂) here). [ 6 marks ]
(b) For a particular data set consisting of n = 50 pairs of observations (xi , yi ), i = 1, 2, . . . , 50,
it is found that
Xn Xn
xi = 637.7 , yi = 298.99 ,
i=1 i=1
n
X n
X
x2i = 10721.47 , yi2 = 2485.838
i=1 i=1

and
n
X
xi yi = 5121.984.
i=1

(i) Based on these figures calculate α̂, β̂ and construct the ANOVA table for the linear
regression model (1). [ 12 marks ]
(ii) Construct two statistics (a t-statistic and an F -statistic) for testing the null hypothesis
H0 : β = 0 versus H1 : β 6= 0. [ 6 marks ]
(iii) Show that these testing procedures are equivalent. [ 6 marks ]