Professional Documents
Culture Documents
1. A fund manager is considering investment in the stock of a health care provider. The
manager's assessment of probabilities for rates of return on this stock over the next year
are summarized in the accompanying table. Let A be the event "Rate of return will be
more than 10%" and B the event "Rate of return will be negative."
RATE OF
Less than - 10% - 10% to 0% 0% to 10% 10% to 20% More than 20%
RETURN
PROBABILITY .04 .14 .28 .33 .21
A B is the event in which the rate of return is both more than 10% and less than zero.
It is impossible for the rate of return both to be more than 10% and less than zero, so:
P A B 0
A B is the event in which the rate of return is either more than 10% or less than zero.
No. If, for example, the rate of return is 5%, then neither A nor B has occurred.
3. A department store manager has monitored the numbers of complaints received per week
about poor service. The probabilities for numbers of complaints in a week, established by this
review, are shown in the table. Let A be the event "There will be at least one complaint in a
week," and B the event "There will be less than 10 complaints in a week."
NUMBER OF 0 1-3 4-6 7-9 10-12 More than
COMPLAINTS 12
PROBABILITY .14 .39 .23 .15 .06 .03
a. Find the probability of A.
P A P 1 to 3 4 to 6 7 to 9 10 to 12 more than 12
0.39 0.23 0.15 0.06 0.03
0.86
b. Find the probability of B.
P B P 0 1 to 3 4 to 6 7 to 9
0.14 0.39 0.23 0.15
0.91
No. As we can see in (e), P A B 0 . Mutually exclusive means they can't both
happen at the same time. If the probability of A intersect B is zero, then A and B are
mutually exclusive. If the probability of A intersect B is more than zero, then A and B
are not mutually exclusive.
Yes. As we can see in (d), P A B 1.0 . Collectively exhaustive means that at least one
must happen. If the probability of A union B is 100%, then A and B are collectively
exhaustive. If the probability of A union B is anything less than 100%, then A and B are
not collectively exhaustive.
Note that there are three events that can result from a phone call:
Event Definition Probability
A Immediate Donation 0.05
B Request for Info 0.25
C Not Interested 0.70
Assume that "unsuccessful" means anything other than an immediate donation, an
event symbolized as A .The probability that "no immediate credit card donation will be
received until at least four unsuccessful calls have been made" can be restated as the
probability that A happens on the four phone calls in a row.
P A four times in a row
P A P A P A P A
1 P A 4
0.95 4
0.8145
b. What is the probability that the first call leading to any donation (either
immediately or eventually after a mailing) is preceded by at least four unsuccessful
calls?
Note that there are two possible events that can result from a mailing:
Event Definition Probability
D DonationMailing 0.20
E No DonationMailing 0.80
Also, the probability of a donation (either immediately or eventually after a mailing) is
P A D four times in a row 1 P A D 4
0.9 4
0.6561
One way to solve this is to set up a diagram, in which the shaded area represents orders
with no foul-ups:
BC BC BC
(Lost) (Damaged) (Not Lost or Damaged)
A (Correct Item) 0.0098 0.0392 0.9310 0.9800
A (Incorrect Item) 0.0002 0.0008 0.0190 0.0200
0.0100 0.0400 0.9500
Using the diagram, the probability of an order with at least one foul-up is
1 0.931 0.069 . Alternatively, we can use our probability formulae:
P A B C
P A P B P C P A B C P A B C P A B C P A B C
0.0200 0.0100 0.0400 0.0000 0.0002 0.0008 0.0000
0.0690
a. What is the probability that an adult in this city, who watches a television program
oriented to business and financial issues, reads a publication oriented to these
issues?
P W R
P RW
P W
0.10
0.18
0.5556
b. What is the probability that an adult in this city, who reads a publication oriented to business
and financial issues, watches a television program oriented to these issues?
P R W
P W R
P R
0.10
0.12
0.8333
P A D
Bayes' Law: P A D
P D
Therefore:
P A D
P A D
P D
0.01
0.08
P D
0.08 P D 0.01
0.01
P D
0.08
0.125
P LM
P M L
P M
0.26
0.30
0.867
b. Are the events "Problem occurs on Monday" and "Problem occurs in the last hour
of the day's shift" statistically independent?
If these events were statistically independent, then the probability of a Monday problem
being in the last hour (which is 1 - 0.867 = 0.133 in our case) would be the same as the
probability of being in the last hour on all days (which is 0.80). Since these two
probabilities are different, then "Problem occurs on Monday" and "Problem occurs in
the last hour of the day's shift" are not statistically independent.
Stated mathematically:
P L M P L
P N F
P N F
P F
0.19
0.12 0.48 0.19
0.2405
Therefore, they are not independent.
P O F
P O F
P F
0.07
0.07 0.06 0.08
0.3333
e. Are the events "Often buys generic products" and "Visits the store infrequently"
independent?
P O F
P O F
P F
0.07
0.07 0.06 0.08
0.3333
Therefore, they are not independent.
h. What is the probability that a customer either frequently visits the store or never
buys generic products, or both?
a. What is the estimated probability that both interest rates will be more than 1%
higher and significant earnings growth will result?
13. A manufacturer produces boxes of candy, each containing ten pieces. Two machines
are used for this purpose. After a large batch has been produced, it is discovered that
one of the machines, which produces 40% of the total output, has a fault that has led to
the introduction of an impurity into 10% of the pieces of candy it makes. From a single
box of candy, one piece is selected at random and tested. If that piece contains no
impurity, what is the probability that the box from which it came was produced by the
faulty machine?
P F I
P F I
P I
P F P I F
P F I P F I
P F P I F
P F P I F P F P I F
0.40 0.90
0.40 0.90 0.60 1.00
0.36
0.36 0.60
0.375
1. Get the 0.40 and 0.60 at the bottom of the two columns.
2. Put a zero for P I F because the non-faulty machine produces no impurities.
3. That means P I F has to be 0.60 (so the right column will add up).
4. 10% of the output from the faulty machine has impurities, so P I F must be
0.04.
5. That means P I F has to be 0.36 (so the left column will add up).
6. The bottom row adds across to a total of 0.96.
7. The question is, if we are in the bottom row (no impurity), what is the chance we
are in the left column (faulty machine)?
a. What is the probability that he will find all three courses enjoyable?
P E PV
P E PV
P PV
P PV E P E
P PV E P PV E
P PV E P E
P PV E P E P PV E P E
0.60 0.70
0.60 0.70 0.25 0.30
0.42
0.42 0.075
0.8485
15. In a large corporation, 80% of the employees are men and 20% are women. The
highest levels of education obtained by the employees are graduate training for 10% of
the men, undergraduate training for 30% of the men, and high school training for 60%
of the men. The highest levels of education obtained are also graduate training for 15%
of the women, undergraduate training for 40% of the women, and high school training
for 45% of the women.
Let us define the following events:
Event Definition Probability
F Employee is Female 0.20
G Employee has Graduate Training
U Employee has Undergraduate Training
H Employee has High School Training
G F 0.15
U F 0.40
H F 0.45
G F 0.10
U F 0.30
H F 0.60
P F G
P F G
P G
P G F P F
0.11
0.10 0.80
0.11
0.7273
d. Are sex and level of education of employees in this corporation statistically
independent?
No, because:
0.08 0.088
P F G
P F P G
P F G
P F G
P G
P F P F G
1 P G
0.20 P F P G F
1 0.11
0.20 0.20 0.15
0.89
0.17
0.89
0.191
Note that all of these questions can be answered with a diagram:
G U H
Female 0.030 0.080 0.090 0.200
Male 0.080 0.240 0.480 0.800
0.110 0.320 0.570
No because P F P F N .
17. Subscriptions to American History Illustrated are classified as gift, previous renewal,
direct mail, or subscription service. In January 1979, 8% of expiring subscriptions were
gift; 41%, previous renewal; 6%, direct mail; and 45% subscription service. The
percentages of renewals in these four categories were 81%, 79%, 60%, and 21%,
respectively. In February 1979, 10% of expiring subscriptions were gift; 57%, previous
renewal; 24%, direct mail; and 9% subscription service. The percentages of renewals
were 80%, 76%, 51%, and 14%, respectively.
a. Find the probability that a randomly chosen subscription expiring in January 1979
was renewed.
For January:
P Re newal P R G P G P R E P E P R D P D P R S P S
0.5192
b. Find the probability that a randomly chosen subscription expiring in February 1979
was renewed.
For February:
P Re newal P R G P G P R E P E P R D P D P R S P S
0.6482
This is not a positive development, even though the probability of a renewal increased.
The increase is due to a change in the mix of expiring subscriptions. A larger share of
gift and previous renewal subscriptions expired; these types of subscriptions have a
higher probability of being renewed than direct mail or subscription service. Note that,
for each category, the probability of a renewal went down from January to February.
18. The accompanying table shows, for 1,000 forecasts of earnings per share made by financial analysts, the
numbers of forecasts and outcomes in particular categories (compared with the previous year).
Outcome Forecast
Improvement About the Same Worse
Improvement 210 82 66
About the Same 106 153 75
Worse 75 84 149
a. Find the probability that if the forecast is for a worse performance in earnings, this outcome will result.
P W FW
P W FW
P FW
0.149
0.29
0.5138
b. If the forecast is for an improvement in earnings, find the probability that this outcome fails to result.
P I FI
P I FI
P FI
0.181
0.391
0.4629
Probability Function
0.350
0.300
0.250
0.200
Proportion
0.150
0.100
0.050
0.000
47 48 49 50 51 52 53
Number of Clips per Box
1.000
0.900
0.800
0.700
0.600
Cum. Probability
0.500
0.400
0.300
0.200
0.100
0.000
47 48 49 50 51 52 53
Number of Clips per Box
a. Find the mean and standard deviation of the number of paper clips per package.
Lets use Excel:
A B C D E F G H I
1 Calculations for Expected Value
2 NUMBER OF CLIPS PROPORTION OF PACKAGES =A3*B3
3 47 0.04 1.88
4 48 0.13 6.24
5 49 0.21 10.29
6 50 0.29 14.5
7 51 0.2 10.2
8 52 0.1 5.2
9 53 0.03 1.59 =SUM(C3:C9)
10 49.9 Expected Value
11
12
13 Calculations for Variance Error Error^2 Prob. D*E
14 47 49.9 -2.9 8.41 0.04
=C15*C15 0.3364
15 48 49.9 -1.9 3.61 0.13 0.4693
16 49 49.9 -0.9 0.81 0.21 0.1701 =E17*D17
17 50 49.9 0.1 0.01 0.29 0.0029
18 51 49.9 1.1 1.21 0.2 0.242
19 52 49.9 2.1 4.41 0.1 0.441
20 53 49.9 3.1 9.61 0.03 0.2883 =SUM(F14:F20)
21 1.95 Variance
22 =SQRT(F21)
23 1.396424 Std. Dev.
0.342
0.0279
Strategy 1: A profit of $10,000 with probability 0.15 and a loss of $1,000 with probability
0.85.
Strategy 2: A profit of $1,000 with probability 0.50, a profit of $500 with probability 0.30,
and a loss of $500 with probability 0.20.
Which strategy has the highest expected profit? Would you necessarily advise the investor to adopt
this strategy?
E X 1 10 , 000 0.15 1 , 000 0.85
650
E X 2 1 , 000 0.50 500 0.30 500 0.20
550
E X3 400
Strategy 1 has the highest expected value, but is also the riskiest. Therefore, it might not
necessarily be the best strategy for everyone.
No, as we can see by comparing the extreme right columns of the two tables shown in
(a) and (b) above. Knowing X has an effect on our predictions about Y.
6
P X 0 0.05 0 0.95 6
0
1 1 0.7351
0.7351
b. What is the probability that one of these components has a defect?
6
P X 1 0.05 1 0.95 5
1
6 0.05 0.7738
0.2321
c. What is the probability that at least two of these components have a defect?
P X 2 1 P X 1
1 P X 1 P X 0
1 0.2321 0.7351
0.0328
Let X be the number of weeks when the dollar rises against the yen. X is binomially
distributed with n = 7 and p = 0.5.
P X 4 P X 4 P X 5 P X 6 P X 7
7 7 7 7
0.5 4 0.5 3 0.5 5 0.5 2 0.5 6 0.5 1 0.5 7 0.5 0
4 5 6 7
35 0.0625 0.125 21 0.0313 0.25 7 0.0156 0.5 1 0.0078 1.0
0.2734 0.1641 0.0547 0.0078
0.5
28. A company installs new central heating furnaces, and has found that for 15% of all
installations a return visit is needed to make some modifications. Six installations were
made in a particular week. Assume independence of outcomes for these installations.
a. What is the probability that a return visit was needed in all of these cases?
6
P X 6 0.15 6 0.85 0
6
1 0.0000114 1
0.0000114
b. What is the probability that a return visit was needed in none of these cases?
6
P X 0 0.15 0 0.85 6
0
1 1 0.3771
0.3771
c. What is the probability that a return visit was needed in more than one of these cases?
P X 1 1 P X 0 P X 1
6
1 0.3771 0.15 1 0.85 5
1
1 0.3771 6 0.15 .4437
1 0.3771 0.3993
0.2236
a. Find the mean and standard deviation of the number of these automobiles that will be returned for refunds.
X np
50 0.15
7.5
X n p
1 p
50 0.15 0.85
2.525
b. Find the mean and standard deviation of the total refund costs that will accrue as a result of these fifty
purchases.
$ $250 7.5
$1 , 875.00
a. 5% defectives?
Note that we accept a shipment if it has either zero or one defective components. The probability of accepting with
5% defective is:
P accept P X 0 P X 1
16 16
0.05 0 0.95 16 0.05 1 0.95 15
0 1
1 1 0.4401 16 0.05 0.4633
0.4401 0.3706
0.8107
b. 15% defectives?
P accept P X 0 P X 1
16 16
0.15 0 0.85 16 0.15 1 0.85 15
0 1
1 1 0.0743 16 0.15 0.0874
0.0743 0.2098
0.2841
c. 25% defectives?
P accept P X 0 P X 1
16 16
0.25 0 0.75 16 0.25 1 0.75 15
0 1
1 1 0.0100 16 0.25 0.0134
0.0100 0.0536
0.0636
Student has a Bank Credit card and has a Travel and Entertainment card ( B T )
Student has a Bank Credit card and does not have a Travel and Entertainment
card ( B T )
Student does not have a Bank Credit card and has a Travel and Entertainment
card ( B T )
Student does not have a Bank Credit card and does not have a Travel and
Entertainment card ( B T )
(d) Why is "having a bank credit card and having a travel and entertainment credit
card" a joint event?
P B 0.6
P T 0.375
(g) the student has a bank credit card and a travel and entertainment card?
P B T 0.3
(h) the student has neither a bank credit card nor a travel and entertainment card?
P B T 0.325
(i) the student has a bank credit card or has a travel and entertainment card?
P B T P B P T P B T
0.675
(j) the student does not have a bank credit card or has a travel and entertainment card?
P B T
P B P T P B T
0.4 0.375 0.075
0.7
Employee is Male ( M )
(e) is a male?
P M 0.68
W W
U 0.025 0.575 0.6
U 0.015 0.385 0.4
0.04 0.96 1
(b) Give an example of a simple event.
P W 0.04
PU 0.4
(g) needs a warranty repair and is manufactured by a company based in the United States?
P W U 0.025
(h) does not need a warranty repair and is not manufactured by a company based in the
United States?
P W U 0.385
(i) needs a warranty repair or was manufactured by an American-based company?
P W U P W P U P W U
0.615
P W U P W P U P W U
0.04 0.4 0.015
0.425
P W W P W P W P W W
0.04 0.96 0.000
1.000
Probabilities:
T T
B 0.300 0.300 0.600
B 0.075 0.325 0.400
0.375 0.625
Bayes' Law:
P T B
P T B
P B
0.3
0.6
0.5
(b) Assume that we know that the student does not have a travel and entertainment card.
What, then, is the probability that he or she has a bank credit card?
P BT
P BT
PT
0.3
0.625
0.48
(c) Are the two events, having a bank credit card and having a travel and
entertainment card, statistically independent? Explain.
If these two events were independent, then knowledge about one of them would not
affect our expectation about the other.
For example, if we are ignorant about whether or not someone has a bank credit card,
we expect that there is a 0.375 probability that they have a travel and entertainment
card. If the two events were independent, then the probability that a person has a travel
and entertainment card, given that we know the person has a bank credit card, should
also be 0.375.
36. Use the data from Problem 33 above (in which a company has made health club
facilities available to its employees) to answer the following:
(a) Suppose that we select a female employee of the company. What, then, is the
probability that she has used the health club facilities?
Probabilities:
M M
U 0.260 0.180 0.440
U 0.420 0.140 0.560
0.680 0.320
Bayes' Law:
PUM
PU M
PM
0.18
0.32
0.5625
PUM
PUM
P M
0.42
0.68
0.618
(c) Are the gender of the individual and the use of the health club facilities
statistically independent? Explain.
No. We know that P U M 0.618 P U 0.56 . If the two events were independent,
these probabilities would be the same. It turns out that men are less likely than women
to use the health club.
37. Use the new car performance ratings data from Problem 34 above to answer the
following:
(a) Suppose we know that the car was manufactured by a company based in the
United States. What. then, is the probability that the car needs a warranty repair?
Probabilities:
W W
U 0.025 0.575 0.6
U 0.015 0.385 0.4
0.04 0.96 1
Bayes' Law:
P W U
P W U
P U
0.025
0.6
0.042
P W U
P WU
PU
0.015
0.4
0.038
(c) Are need for a warranty repair and location of the company manufacturing the
car statistically independent?
No. American companies' cars are more likely to need a warranty repair.
38. A standard deck of cards is being used to play a game. There are four suits (hearts,
diamonds, clubs, and spades), each having 13 faces (ace. 2, 3, 4, 5, 6, 7, 8, 9, 10, jack,
queen, and king), making a total of 52 cards. This complete deck is thoroughly mixed,
and you will receive the first two cards from the deck without replacement.
Let Q1 be the event that you get a queen on the first card, and Q2 be the event that you get a
queen on the second card, given Q1. On the first card, you have four chances to get a queen out
of 52 cards. On the second card (assuming you get a queen on the first card) there are three
remaining chances out of 51 cards.
P Q1 Q 2 P Q1 P Q 2 Q1
4 3
*
52 51
0.004525
On the first card, you have four chances to get a 10 out of 52 cards. On the second card
(assuming you get a 10 on the first card) there are eight remaining chances to get a 5 or 6 out of
51 cards.
0.012066
(c) If we were sampling with replacement, what would be the answer in (a)?
Now, the second draw would consist of 52 cards, four of which are queens so
4
P Q1 P Q 2 .
52
P Q1 Q 2 P Q1 P Q 2 Q1
P Q 1 P Q 2
2
4
52
0.005917
(Drawing two queens is more likely with replacement than without replacement.)
(d) In the game of Blackjack, the picture cards (jack, queen, king) count as 10 points
and the ace counts as either 1 or 11 points. All other cards are counted at their
face value. Blackjack is achieved if your two cards total 21 points. What is the
probability of getting blackjack with two cards?
It is impossible to get Blackjack in two cards if the first card drawn is neither a 10, a
Picture, or an Ace (32 out of 52).
If the first card drawn is either a 10 or a Picture (16 out of 52), then you can get
Blackjack if the second card is an Ace (4 out of 51).
If the first card drawn is an Ace (4 out of 52), then you can get Blackjack if the
second card is either a 10 or a Picture (16 out of 51).
16 4 4 16
52 51 52 51
0.0241 0.0241
0.0483
39. Suppose that the probability that a person has a certain disease is 0.03. Medical
diagnostic tests are available to determine whether the person actually has the disease.
If the disease is actually present, the probability that the medical diagnostic test will
give a positive result (indicating that the disease is present) is 0.90. If the disease is not
actually present, the probability of a positive test result (indicating that the disease is
present) is 0.02. Given this information, we would like to know the following:
(a) If the medical diagnostic test yields a positive result (indicating that the disease is
present), what is the probability that the disease is actually present?
Events Symbol Probability Given
Disease D 0.03
No Disease D
Test Positive T
Test Not Positive T
Test Positive, Given Disease T D 0.90
Test Positive, Given No Disease T D 0.02
8 D Not D
9 T 0.0270 0.0194 0.0464
10 Not T 0.0030 0.9506 0.9536 =1-E9
11 0.0300 0.9700
12
13 =1-C11
14
15 =B2 =D11-D9
16
The question for Part (a) is "If the medical diagnostic test yields a positive result, what is
the probability that the disease is actually present?" In other words, what is the
probability of D given T?
P D T
P D T
P T
0.027
0.0464
0.582
(b) If the medical diagnostic test has given a negative result (indicating the disease is not
present), what is the probability that the disease is not present?
P DT
P DT
PT
0.9506
0.9536
0.997
(a) If the Olive Construction Company gets the job, what is the probability that the
Base Construction Company did not bid?
Events Symbol Probability Given
Base Bids B 0.70
Base Does Not Bid B
Olive Wins Job O
Olive Does Not Win Job O
Olive Wins, Given Base Does Not Bid OB 0.50
Olive Wins, Given Base Bids OB 0.25
Probability Table:
B B
O 0.175 0.150 0.325
O 0.525 0.150 0.675
0.700 0.300 1
P BO
P BO
P O
0.15
0.325
0.4615
(b) What is the probability that the Olive Construction Company will get the job?
P O
P O B P O B
P O B P B P O B P B
0.25 0.70 0.50 0.3
0.175 0.15
0.325
(a) If a new municipal bond is to be issued by a city, what is the probability it will
receive an A rating?
First, organize what we know:
Event Symbol Probability Given
City Issuer U
Suburban Issuer S
Rural Issuer R
A Rating A 0.70
B Rating B 0.20
C Rating C 0.10
U given A U A 0.50
S given A S A 0.40
R given A RA 0.10
U given B U B 0.60
S given B S B 0.20
R given B RB 0.20
U given C U C 0.90
S given C SC 0.05
R given C R C 0.05
Using Bayes' Law, we can fill in the following table:
Rating
Issuer A B C
U 0.50*0.70 = 0.60*0.20 = 0.90*0.10 = 0.35 + 0.12 + 0.09 =
0.35 0.12 0.09 0.56
S 0.40*0.70 = 0.20*0.20 = 0.05*0.10 = 0.28 + 0.04 + 0.005 =
0.28 0.04 0.005 0.325
R 0.10*0.70 = 0.20*0.20 = 0.05*0.10 = 0.07 + 0.04 + 0.005 =
0.07 0.04 0.005 0.115
0.70 0.20 0.10
Now, if a new municipal bond is to be issued by a city, what is the probability it will
receive an A rating?
This is asking for the probability of A , given U .
P U 0.56
P S 0.325
42. Using the company records for the past 500 working days, the manager of Torrisi
Motors, a suburban automobile dealership, has summarized the number of cars sold
per day into the following table:
Number of Cars Frequency
Sold per Day of Occurrence
0 40
1 100
2 142
3 66
4 36
5 30
6 26
7 20
8 16
9 14
10 8
11 2
Total 500
A B C D E
1 Number of Cars Frequency
2 Sold per Day of Occurrence
=B3/$B$15
3 0 40 0.080
4 1 100 0.200
5 2 142 0.284
6 3 66 0.132
7 4 36 0.072
8 5 30 0.060
9 6 26 0.052
10 7 20 0.040
11 8 16 0.032
12 9 14 0.028
13 10 8 0.016
14 11 2 0.004
15 Total 500 1.000
(b) Compute the mean or expected number of cars sold per day.
A B C D E F
1 Number of Cars Frequency
2 Sold per Day of Occurrence =A3*C3
3 0 40 0.080 0.000
4 1 100 0.200 0.200
5 2 142 0.284 0.568
6 3 66 0.132 0.396
7 4 36 0.072 0.288
8 5 30 0.060 0.300
9 6 26 0.052 0.312
10 7 20 0.040 0.280
11 8 16 0.032 0.256
12 9 14 0.028 0.252
13 10 8 0.016 0.160
14 11 2 0.004 0.044 =SUM(D3:D14)
15 Total 500 1.000 3.056
A B C D E F G H I
1 Number of Cars Frequency =A3-$D$15
Weighted Weighted =E3^2
2 Sold per Day of Occurrence Prob. Prob. Error Error^2 by Prob.
3 0 40 0.080 0.000 -3.056 9.339 0.747
4 1 100 0.200 0.200 -2.056 4.227 0.845 =F3*C3
5 2 142 0.284 0.568 -1.056 1.115 0.317
6 3 66 0.132 0.396 -0.056 0.003 0.000
7 4 36 0.072 0.288 0.944 0.891 0.064
8 5 30 0.060 0.300 1.944 3.779 0.227
9 6 26 0.052 0.312 2.944 8.667 0.451
10 7 20 0.040 0.280 3.944 15.555 0.622
11 8 16 0.032 0.256 4.944 24.443 0.782
12 9 14 0.028 0.252 5.944 35.331 0.989
13 10 8 0.016 0.160 6.944 48.219 0.772
14 11 2 0.004 0.044 7.944 63.107 0.252 =SUM(G3:G14)
15 Total 500 1.000 3.056 Variance 6.069 =SQRT(G15)
16 Std. Dev. 2.464
P X 4 P X 0 P X 1 P X 2 P X 3
0.696
P X 4 P X 0 P X 1 P X 2 P X 3 P X 4
0.768
P X 4 P X 4 P X 5 ... P X 11
0.304
P X 4 1 P X 4
0.304
P X 4 0.072
P X 4 P X 5 P X 6 ... P X 11
0.232
Alternatively,
P X 4 1 P X 4
0.232
43. In the carnival game Under-or-over-Seven, a pair of fair dice are rolled once, and the
resulting sum determines whether or not the player wins or loses his or her bet. For
example, the player can bet $1.00 that the sum will be under 7 that is, 2, 3, 4, 5, or 6.
For such a bet the player will lose $1.00 if the outcome equals or exceeds 7 or will win
$1.00 if the result is under 7. Similarly, the player can bet $1.00 that the sum will be over
7 that is, 8, 9, 10, II, or 12. Here the player wins $1.00 if the result is over 7 but loses
$l.00 if the result is 7 or under. A third method of play is to bet $1.00 on the outcome 7.
For this bet the player will win $4.00 if the result of the roll is 7 and lose $1.00 otherwise.
A B C D E F G H I
1 Results
2 1st Die 2nd Die Sum Bet Under 7 Bet Over 7 Bet = 7
3 1 1 2 Win Lose Lose
4 1 2 3 Win Lose Lose
5 1 3 4 Win Lose Lose
6 1 4 5 Win Lose Lose
7 1 5 6 Win Lose Lose
8 1 6 7 Lose Lose Win
9 2 1 3 Win Lose Lose
10 2 2 4 Win Lose Lose
11 2 3 5 Win Lose Lose
12 2 4 6 Win Lose Lose
13 2 5 7 Lose Lose Win
14 2 6 8 Lose Win Lose
15 3 1 4 Win Lose Lose
16 3 2 5 Win Lose Lose
17 3 3 6 Win Lose Lose
18 3 4 7 Lose Lose Win
19 3 5 8 Lose Win Lose
20 3 6 9 Lose Win Lose
21 4 1 5 Win Lose Lose
22 4 2 6 Win Lose Lose
23 4 3 7 Lose Lose Win
24 4 4 8 Lose Win Lose
25 4 5 9 Lose Win Lose
26 4 6 10 Lose Win Lose
27 5 1 6 Win Lose Lose
28 5 2 7 Lose Lose Win
29 5 3 8 Lose Win Lose
30 5 4 9 Lose Win Lose
31 5 5 10 Lose Win Lose
32 5 6 11 Lose Win Lose
33 6 1 7 Lose Lose Win
34 6 2 8 Lose Win Lose
35 6 3 9 Lose Win Lose
36 6 4 10 Lose Win Lose
37 6 5 11 Lose Win Lose =IF(C38=7,"Win","Lose")
38 6 6 12 Lose Win Lose
39 Number of Winning Outcomes 15 15 6 =COUNTIF(F3:F38,"Win")
Same deal:
Outcome Payoff Probability
Win $1 0.417
Lose -$1 0.583
(c) Form the probability distribution function representing the different outcomes
that are possible for a $1.00 bet on 7.
Outcome Payoff Probability
Win $4 0.167
Lose -$1 0.833
(d) Show that the expected long-run profit (or loss) to the player is the same no matter
which method of play is used.
Bet Expected Value Calculation
Under 7 E X 1 * 0.417 1 * 0.583 $0.167
Over 7 E X 1 * 0.417 1 * 0.583 $0.167
=7 E X 4 * 0.167 1 * 0.833 $0.167
44. Suppose that warranty records show the probability that a new car needs a warranty
repair in the first 90 days is 0.05. If a sample of three new cars is selected,
n! x
P X 0 p 1 p n x
x! n x !
3!
0.05 0 1 0.05 3 0
0! 3 0 !
1 1 0.95 3
0.857
P X 1 P X 0
1 P X 0
1 0.857
0.143
P X 1 1 P X 0 P X 1
3!
1 0.857 0.05 1 1 0.05 31
1! 3 1 !
1 0.857 3 0.05 0.95 2
1 0.857 0.135
1 0.993
0.007
For each of the three cars, there are only two possible outcomes: Either it
needs a warranty repair or it doesn't. (These two outcomes are mutually
exclusive and collectively exhaustive.)
The probability of any one car needing warranty repair is the same for all
cars, and is independent of what happens with any other car.
E(X) np
3 0.05
0.15
(X) np( 1 p )
3 0.05 ( 0.95 )
0.143
0.377
(d) What would be your answers to (a)-(c) if the probability of needing a warranty repair was 0.10?
P X 0 0.729
P X 1 0.271
P X 1 0.028
E(X) 0.30
(X) 0.520
45. Suppose that the likelihood that someone who logs onto a particular e-commerce
site will purchase an item is 0.20. If the site has 10 people accessing it in the next minute,
what is the probability that
n! x
P X 0 p 1 p n x
x! n x !
10!
0.2 0 1 0.2 10 0
0! 10 0 !
1 1 0.8 10
0.107
n! x
P X 2 p 1 p n x
x! n x !
10!
0.2 2 1 0.2 10 2
2! 10 2 !
3 ,628 ,800
0.2 2 0.8 8
2 40 ,320
45 0.040 0.168
0.302
P X 2 1 P X 0 P X 1
10! 1
1 0.107 0.2 1 0.2 10 1
1! 10 1 !
1 0.107 0.268
1 0.376
0.624
P X 2 P X 0 P X 1 P X 2
0.678
P X 2 0.137
P X 2 0.931
P X 2 0.206
(f) If the probability of purchasing an item was only 0.10, what would be your answers to (a)-(d)?
P X 0 0.349
P X 2 0.194
P X 2 0.264
P X 2 0.930
(a) For the first five troubles reported on a given day, what is the probability that
n! x
P X 5 p 1 p n x
x! n x !
5!
0.7 5 1 0.7 5 5
5! 5 5 !
1 0.7 5 0.3 0
1 0.168 1
0.168
P X 3 P X 3 P X 4 P X 5
5! 5!
0.7 3 1 0.7 5 3 0.7 4 1 0.7 5 4 0.168
3! 5 3 ! 4! 5 4 !
120 3 120 4
0.7 0.3 2 0.7 0.3 1 0.168
6 2 24 1
0.837
P X 2 P X 0 P X 1
5! 5!
0.7 0 0.3 5 0.7 1 0.3 4
0! 5 ! 1! 4 !
120 120
1 0.0081 0.7 0.0024
1 120 1 24
0.0024 0.0284
0.031
For each of the five problems reported, there are only two possible outcomes:
Either they get repaired on the same day or they don't. (These two outcomes
are mutually exclusive and collectively exhaustive.)
The probability of any one problem getting repaired on the same day (0.70) is
independent of what happens with any other reported problem.
(c) What are the mean and the standard deviation of the probability distribution in (a)?
E(X) np
5 0.7
3.5
(X) np( 1 p )
5 0.7 ( 0.3)
1.05
1.025
A B C D E F G H I
1 n 5 a(i) 0.168
=BINOMDIST(5,$B$1,$B$2,0)
2 p 0.7
3 a(ii) 0.837 =1-BINOMDIST(2,$B$1,$B$2,1)
4
5 a(iii) 0.031 =BINOMDIST(1,$B$1,$B$2,1)
6
7 c 3.500 mean =B1*B2
8 1.025 =SQRT((B1*B2*(1-B2)))
9
(d) What would be your answers in (a) and (c) if the probability is 0.80 that troubles
in residential service can be repaired on the same day?
47. Suppose that a student is taking a multiple-choice exam in which each question has
four choices. Assuming that she has no knowledge of the correct answers to any of the
questions, she has decided on a strategy in which she will place four balls (marked A, B,
C, and D) into a box. She randomly selects one ball for each question and replaces the
ball in the box. The marking on the ball will determine her answer to the question.
(a) If there are five multiple-choice questions on the exam, what is the probability
that she will get
The number of correct answers out of five is binomially distributed with n = 5 and p =
0.25.
n! x
P X 5 p 1 p n x
x! n x !
5!
0.25 5 1 0.25 5 5
5! 5 5 !
1 0.25 5 0.75 0
1 0.0010 1
0.0010
P X 4 P X 4 P X 5
5!
0.25 4 1 0.25 5 4 0.0010
4! 5 4 !
120
0.0039 0.75 0.0010
24
0.0146 0.0010
0.0156
5!
P X 0 0.25 0 1 0.25 5 0
0! 5 0 !
120
1 0.2373
120
0.2373
P X 2 P X 0 P X 1 P X 2
5! 5!
0.2373 0.25 1 1 0.25 5 1 0.25 2 1 0.25 5 2
1! 5 1 ! 2! 5 2 !
120 120
0.25 0.75 0.25 0.75
1 4 2 3
0.2373
24 12
0.8965
For each of the five questions, there are only two possible outcomes: Either
she gets it right or she doesn't. (These two outcomes are mutually exclusive
and collectively exhaustive.)
The probability of getting any one question correct is the same for all
questions (0.25), and is independent of what happens with any other
question.
(c) What are the average and the standard deviation of the number of questions that she will get correct in (a)?
E(X) np
5 0.25
1.25
(X) np( 1 p )
5 0.25 ( 0.75)
0.9375
0.9682
48. Suppose that a survey has been undertaken to determine if there is a relationship between place of residence and
ownership of a foreign-made automobile. A random sample of 200 car owners from large cities, 150 from suburbs,
and 150 from rural areas was selected with the following results.
Type of Area
Car Ownership Large City Suburb Rural Total
Own foreign car 90 60 25 175
Do not own foreign car 110 90 125 325
Total 200 150 150 500
(a) If a car owner is selected at random, what is the probability that he or she
175
P F
500
0.35
150
P S
500
0.3
P F C P F P C P F C
175 200 90
500 500 500
0.57
P C S P C P S P C S
200 150 0
500 500 500
0.4 0.3 0
0.7
90
P C F
500
0.18
P RF
P R P F P R F
150 325 125
500 500 500
0.70
P F S
P F S
P S
0.12
0.30
0.4
If these two variables were independent, then knowing about a person's area of
residence would not affect our expectations about the type of car they own.
Mathematically:
P F C P F S P F R P F
In fact, the above probabilities are not equal, and therefore the two events are not
independent.
49. The finance society at a college of business at a large state university would like to
determine whether there is a relationship between a student's interest in finance and his
or her ability in mathematics. A random sample of 200 students is selected and they are
asked whether their interest in finance and ability in mathematics are low, average, or
high. The results are as follows:
Ability in Mathematics
Interest in Finance Low Average High Total
Low 60 15 15 90
Average 15 45 10 70
High 5 10 25 40
Total 80 70 50 200
(a) Give an example of a simple event.
(c) Why are high interest in finance and high ability in mathematics a joint event?
50
P HM
200
0.25
70
P AM
200
0.35
80
P LM
200
0.4
40
P HF
200
0.2
60
P LF LM
200
0.3
25
P HF HM
200
0.125
P LF LM P LF P LM P LF LM
90 80 60
200 200 200
0.55
P HF HM P HF P HM P HF HM
40 50 25
200 200 200
0.325
(e) Assume we know that the person selected has a high ability in mathematics. What is the
probability that the person has a high interest in finance?
P HF HM
P HF HM
P HM
0.125
0.25
0.5
(f) Assume we know that the person selected has a high interest in finance. What is the
probability that the person has a high ability in mathematics?
P HF HM
P HM HF
P HF
0.125
0.2
0.625
Note that the numerators are the same (representing the probability that a student has
both a high ability in mathematics and a high interest in finance. The denominators are
different.
No they are not. On the whole, 25% of students have a high ability in mathematics.
Knowing that a student has a high interest in finance shouldn't affect this probability if
the two events are independent. In question (f) above, we see that this bit of information
about a student increases the probability that he/she has a high ability in mathematics
from 25% to 62.5%.
50. On the basis of past experience, 15% of the bills of a large mail-order book company
are incorrect. A random sample of three current bills is selected.
n! x
P X 2 p 1 p n x
x! n x !
3!
0.15 2 1 0.15 3 2
2! 3 2 !
3 0.0225 0.85
0.0574
P X 2 1 P X 3
3!
1 0.15 3 1 0.15 0
0! 3 0 !
1 1 0.0034 1
0.9966
P X 2 P X 2 P X 3
0.0574 0.0034
0.0608
(b) What assumptions about the probability distribution are necessary to solve this
problem?
We assume that a bill must be either correct or incorrect, that the probability of any bill
being incorrect is 15%, and that the result with any one bill is independent of whether
any other bill is incorrect.
(c) What would be your answers to (a) if the percentage of incorrect bills was 10%?
(1) 0.0270
(2) 0.9990
(3) 0.0280
The number of correct items is binomially distributed with n = 10 and p = 0.7. We'll
solve this one using Excel.
(a) For a 10-item quiz, calculate the probability that Lauren will get
(2) fewer than 6 items right (and therefore fail the quiz).
(b) What is the expected number of items that Lauren will get right? What
proportion of the time will she get that number right?
(c) What is the standard deviation of the number of items that Lauren will get right?
(d) What would be your answers to (a)-(c) if she typically got 80% correct?
A B C D E F
1 n p
2 10 0.7
3
4 a =1-BINOMDIST(6,$B$2,$C$2,1)
5 (1) at least 7 items right. 0.650
=BINOMDIST(5,$B$2,$C$2,1)
6 (2) fewer than 6 items right (and therefore fail the quiz). 0.150
=1-BINOMDIST(8,$B$2,$C$2,1)
7 (3) 9 or 10 items right (and get an A on the quiz). 0.149
8 =B2*C2
9 (b) What is the expected number of items that Lauren will get right? 7
=BINOMDIST(B9,B2,C2,0)
10 What proportion of the time will she get that number right? 0.2668
11 =SQRT(B2*C2*(1-C2))
12 (c) What is the standard deviation of the number of items that Lauren will get right? 1.4491
13
14 d =1-BINOMDIST(6,$B$2,$C$19,1)
15 (1) at least 7 items right. 0.879
=BINOMDIST(5,$B$2,$C$19,1)
16 (2) fewer than 6 items right (and therefore fail the quiz). 0.033
=1-BINOMDIST(8,$B$2,$C$19,1)
17 (3) 9 or 10 items right (and get an A on the quiz). 0.376
18
19 0.8