Do not attach any additional sheets; use the back sides, if necessary.

To get any credit, you must

 circle/clearly indicate your final answer (in the space, whenever provided);

 answer all questions in the space provided,

 show (brief) adequate reasoning, including calculations, if any, in support of your answers.

 State any assumption you make. (Your assumptions need to be reasonable.)

This test + answer booklet has 8 pages, including this page.

Space for evaluation only

Question No. 1 2 3 Total

Maximum Marks 1+2+1+2=6 2+2+2=6 (1+3+2)+1+1=8 20
Student’s Score

Question 1. The descriptive statistics tool for current ratio of a group of companies yields the following
output, which is partially shown:

Current Ratio
Median 1.67
Mode 1.36
Sample Variance 0.49
Kurtosis 2.6
Skewness 1.73
Minimum 0.61
Maximum 6.74
Sum 363
Count 180
Largest(45) 3.36
Smallest(45) 0.92

Page 1 of 7
a) What is the mean current ratio of the selected companies?

[1 point]

Mean = 363/180 = 2.016667

b) Name and compute two different measures of (absolute) dispersion (other than variance, which is
already included in the table), for current ratio of the selected companies?

[2 points]

Any two of the following

1. Standard deviation = √0.49 =0.7

2. Range = 6.74 – 0.61 = 6.13
3. Inter-quartile Range = 3.36 – 0.92 = 2.44

Page 2 of 7
c) What can you say regarding skewness and kurtosis of the distribution of current ratio of these
companies? Use appropriate terminologies to describe these.

[1 point]

1. Skewness: Positively skewed (Excel output)

2. Kurtosis: Leptokurtic

d) What best can you say regarding the number of companies in this list which has current ratio more
than 3.25?

[2 points]
1 1
Use Chebyshev’s inequality: 𝑃[|𝑋 − 𝜇| ≤ 𝑘𝜎] ≥ 1 − 𝑘 2 , OR, 𝑃[|𝑋 − 𝜇| ≥ 𝑘𝜎] ≤ 𝑘 2

Estimate of µ = 363/180 = 2.016667; Estimate of σ = 0.7. So, 3.25 = 2.016667 + k * 0.7 ⟹ k = 1.761905;
1
Also, ∗ 180 = 57.9839 and 𝜇 − 𝑘𝜎 = 2.016667 − 1.761905 ∗ 0.7 = 0.7833
𝑘2

Therefore, at most 57 observations lie outside (0.7833, 3.25). The smallest observation is 0.61, which is
definitely outside (0.7833, 3.25). Thus, we can conclude that at most 57-1 = 56 companies may have
current ratio > 3.25.

Alternatively, 45th largest value (75th percentile) = 3.36. Therefore, there are at least 45 companies with
current ratio > 3.25.

Page 3 of 7
Question 2.

Students in a business school have to become a member of one and exactly one of the following 3 clubs:

 Party club (they would attend the Sunday night parties from 10 pm till 2 am)
 Sleeping club (they would sleep through this time)
 Study club (they would be studying during this time)
Before the new students enroll for the clubs, the new Dean has asked the students’ committee to
truthfully put up the chances of missing next day’s class, getting A grade, getting one of the failing
grades (D or F) for each of the 3 club members, based on the past data. (The school gives letter grades
in the form A/B/C/D/F. ) Accordingly, the notice board in students’ canteen, has this notice:

Probability of
Missing Getting A Getting D or F
Club
class grade grade
Sleeping 0.05 0.2 0.05
Party 0.2 0.05 0.1
Study 0.1 0.4 0.02

Only 60% of the new batch signs up for the Party club, while the membership for the Study club is 3
times as strong as the membership of the Sleeping club.

a) What would be the percentage of B and C grades (combined) for the new batch of students?

[2 points]

For the new batch,

P[Party]= 0.6, P[Study] =0.3, and P[Sleeping] = 0.1.

Let

BC = getting B or C grade; DF = getting D or F grade

P[BC] = P[BC and Party] + P[BC and Study]+ P[BC and Sleeping]

= P[BC|Party]*P[Party]+ P[BC|Study]*P[Study]+ P[BC|Sleeping]*P[Sleeping]

= (1 – 0.05 – 0.1)*0.6 + (1 – 0.4 -.02)*0.3 + (1 - 0.2 – 0.05)*0.1 = 0.51 + 0.174 + 0.075 = 0.759

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b) Given that a student got a failing grade (D or F), what is chance that he is a member of Party club?

[2 points]

To find, P[Party|DF].

P[Party|DF] = P[Party and DF]/P[DF]

P[Party and DF] = P[DF|Party]*P[Party] = 0.1*0.6 = 0.06

P[DF] = P[DF|Party]*P[Party]+ P[DF|Study]*P[Study]+ P[DF|Sleeping]*P[Sleeping]

= 0.1*0.6 + 0.02*0.3 + 0.05*0.1 = 0.06 + 0.006 + 0.005 = 0.071

P[Party|DF] = P[Party and DF]/P[DF] = 0.06/0.071 = 0.845

c) If there are 150 students in the new batch, what is the chance that more than 1 member of the
Sleeping club from this batch will miss the class the next day?

[2 points]

X = number of members from the sleeping club who will miss the class the next day

n = 150*0.1 =15, p = probability of a member of the sleeping club missing the class the next day = 0.05

X ~Bin(n = 15, p =0.05)

To find: P[X > 1]

P[X > 1] = 1 - P[X = 0] - P[X = 1]

= 1 – (0.95)^15 – 15*0.05*(0.95)^14 = 1 – 0.463291 – 0.365756 = 0.170953

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Question 3.

A tennis match is composed of a number of sets. A set consists of games, and games, in turn, consist of
points.

A game consists of a sequence of points. Any point played always results in favour of either the server
(who starts the play of that point) or the receiver (opponent of the server). A game is won by the first
player to have won at least four points in total and at least two points more than the opponent.
Because of these rules, the number of points to be played before a game is won can vary from a game to
another. The game is said to yield to at least one deuce, if the number of points in that game is more
than 6. [Denoting 1 by player 1 winning a point, 2 by player 2 winning the point, the following are some
examples of how a game can end: 11121, or 1221121222 or 12221111 ---in the first example, there is
no deuce]

During one particular game, for any of the points played, the player named F has 70% chance of winning
the point vs. his opponent R.

a) Find the probability distribution of the number of points played in the game. Listing the possible
values of the random variable along with finding the (non-zero) probabilities associated with at least 4
different values of this random variable would suffice. [Hint: you may find it convenient to split into
cases when F wins the game and the cases when R wins]

[1+5= 6 points]

Space for working 3 a)

X = number of points played in the game

Possible values of X are: 4, 5, 6, 8, 10, 12, 14, ….

Let

R be the event that R wins the game;

F be the event that F wins the game.

P[X = 4] = P[(X = 4) ∩ F] + P[(X = 4) ∩ R] (note that R and F are mutually exclusive)

= P[{1111}] + P[{2222}] = 0.7^4 + 0.3^4

= 0.2401 + 0.0081 = 0.2482

(Assuming that outcomes in different points are independent)

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For X = 5 to happen, the winner (of the game) has to win the 5th point and the loser (of the game) wins
any one of the first four points.

P[X = 5] = P[(X = 5) ∩ F] + P[(X = 5) ∩ R]

4 4
=( ) ∗ 0.74 ∗ 0.31 +( ) ∗ 0.71 ∗ 0.34 = 0.2881 + 0.0227 = 0.3108
1 1

For X = 6 to happen, the winner (of the game) has to win the 6th point and any three of the previous five
5
points, which can happen in ( ) = 10 ways.
3

P[X = 6] = P[(X = 6) ∩ F] + P[(X = 6) ∩ R]

= 10* 0.74 ∗ 0.32 + 10* 0.72 ∗ 0.34 = 0.2161 +0.0397 = 0.2558

For X = 8 to happen, the winner (of the game) has to win the last two points and any three from the first
6
six points, which can happen in ( ) = 20 ways.
3

P[X = 8] = P[(X = 8) ∩ F] + P[(X = 8) ∩ R]

= 20* 0.75 ∗ 0.33 + 20* 0.73 ∗ 0.35 = 0.0908 + 0.0167 = 0.1074

Please note that X cannot be equal to 7 or any higher odd number.

For X = 6 + 2n, n ≥ 1, we have

6
P[X = 6 + 2n] = ( ) ∗ 2𝑛−1 {0.7𝑛+4 ∗ 0.3𝑛+2 + 0.7𝑛+2 ∗ 0.3𝑛+4 }
3

b) What can you say regarding the chance of F winning the game? (A good lower bound would suffice)

[1point]

P[F] = ∑𝑥 𝑃[𝐹 ∩ (𝑋 = 𝑥)]

≥ 𝑃[𝐹 ∩ (𝑋 = 4)] + 𝑃[𝐹 ∩ (𝑋 = 5)] + 𝑃[𝐹 ∩ (𝑋 = 6)] + 𝑃[𝐹 ∩ (𝑋 = 8)

= 0.2401 + 0.2881 + 0.2161 + 0.0908 = 0.835

c) What is the chance of F winning the game if the game is won before any deuce?

[1point]

𝑃[𝐹∩(𝑋≤6)] 0.2401+0.2881+0.2161
P[F|X ≤ 6] = 𝑃[𝑋≤6]
= 0.2482+0.3108+0.2558= 0.9135

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