Example 3.2: Given Probability Distribution

BUSINESS STATISTICS 3-1
Example 3.2
Given Probability Distribution
The Probability Distribution of the Number of Switches
x P(x)
0.4
0 0.1
1 0.2 0.3
2 0.3
P(x)
3 0.2 0.2
4 0.1
0.1
5 0.1
1 0.0
0 1 2 3 4 5
x
Probability of more than 2:

P(X > 2) = P(3) + P(4) + P(5) = 0.2 + 0.1 + 0.1 = 0.4
Probability of at least 1:
P(X 1) = 1 - P(0) = 1 - 0.1 = .9
International University – School of Business Assoc. Prof. Ho Thanh Phong
Discrete and Continuous Random

Variables
A discrete random variable:
 has a countable number of possible values
 has discrete jumps between successive values
 has measurable probability associated with individual values
 counts
A continuous random variable:

 has an uncountably infinite number of possible values
 moves continuously from value to value
 has no measurable probability associated with each value
 measures (e.g.: height, weight, speed, value, duration, length)

Discrete Probability Distributions -

(Probability Mass Function)
The probability distribution of a discrete random

variable X sometime is called Probability Mass
function, must satisfy the following two conditions.
1. P ( x )  0 for all values of x.
2.  P ( x )  1
all x
Corollary : 0  P ( X )  1

Cumulative Distribution Function

(Probability Distribution)
The cumulative distribution function, F(x), of a discrete

random variable X is:
F(x)  P( X  x)   P(i)
all i  x
Cumulative Probability Distribution of the Number of Switches

x P(x) F(x)
1 .0
0 0.1 0.1 0 .9
0 .8
1 0.2 0.3 0 .7
2 0.3 0.6 0 .6
F(x)
0 .5
3 0.2 0.8 0 .4
0 .3
4 0.1 0.9 0 .2
0 .1
5 0.1 1.0 0 .0
1 0 1 2
x
3 4 5

Example
The probability that at most three will occur:
x P(x) F(x)
0 0.1 0.1
1 0.2 0.3 The Probability That at Most Thre e S witches W ill Occur
2 0.3 0.6 0 .4
3 0.2 0.8 P(X 3)  F(3)

0 .3
4 0.1 0.9
5 0.1 1.0
P ( x)
0 .2
1 0 .1
0 .0
0 1 2 3 4 5

3-2 Expected Values of Discrete Random Variables

The mean of a probability distribution is a
measure of its centrality or location, as is the
mean or average of a frequency distribution.
It is a weighted average, with the values of
the random variable weighted by their
0 1 2 3 4 5
probabilities. 2.3
The mean is also known as the expected value (or expectation) of a random
variable, because it is the value that is expected to occur, on average.
x P(x) xP(x)
The expected value of a discrete 0 0.1 0.0
random variable X is equal to the sum 1 0.2 0.2
2 0.3 0.6
of each value of the random variable 3 0.2 0.6
multiplied by its probability. 4 0.1 0.4
5 0.1 0.5
  E ( X )   xP ( x ) 1.0 2.3 = E(X)=
all x

Variance and Standard Deviation of a Random Variable

Example µ = 1.15
X P(X) (X-µ)2 (X-µ)2.P(X)
0 .37 (0-1.15)2 = 1.32 (1.32) (.37) = .49
1 .31 .02 .01
2 .18 .72 .13
3 .09 3.42 .32
4 .04 8.12 .32
5 .01 14.82 .15
Σ(X-µ)2.P(X)=1.41
The variance = 1.41. Standard deviation = 1.41  1.19
The Binomial Distribution

Bernoulli trials are a sequence of n identical trials satisfying the
following conditions:
1. Each trial has two possible outcomes, called success *and failure.
The two outcomes are mutually exclusive and exhaustive.
2. The probability of success, denoted by p, remains constant from trial
to trial. The probability of failure is denoted by q, where q = 1-p.
3. The n trials are independent. That is, the outcome of any trial does
not affect the outcomes of the other trials.
A random variable, X, that counts the number of successes in n
Bernoulli trials, where p is the probability of success* in any given trial,
is said to follow the binomial probability distribution with parameters
n (number of trials) and p (probability of success). We call X the
binomial random variable.
* The terms success and failure are simply statistical terms, and do not have positive or negative implications. In a
production setting, finding a defective product may be termed a “success,” although it is not a positive result.

Binomial Probabilities (Continued)
In general:
1. The probability of a given 2. The number of different sequences

sequence of x successes of n trials that result in exactly x
out of n trials with successes is equal to the number of
probability of success p choices of x elements out of a total of
and probability of failure q n elements. This number is denoted:
is equal pxq(n-x)
 n n!
nCx    
 x  x! ( n  x )!

The Binomial Probability Distribution
The binomial probability distribution: N u m b er o f

su ccesses, x P ro b ab ility P (x )
n!
 n x ( n  x ) n! 0 p 0 q (n 0)
P( x)    p q  p x q ( n x) 0 !( n  0 ) !
 x x!( n  x)! 1
n!
p 1 q ( n  1)
where : 1 !( n  1 ) !
n!
p is the probability of success in a single trial, 2 p 2 q (n 2)
2 !( n  2 ) !
q = 1-p, n!
n is the number of trials, and 3 p 3 q (n 3)
3 !( n  3 ) !
x is the number of successes.  
n!
n p n q (n n)
n !( n  n ) !
1 .0 0

The Cumulative Binomial Probability Table

n=5
p
x 0.01 0.05 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 0.95 0.99
0 .951 .774 .590 .328 .168 .078 .031 .010 .002 .000 .000 .000 .000
1 .999 .977 .919 .737 .528 .337 .187 .087 .031 .007 .000 .000 .000
2 1.000 .999 .991 .942 .837 .683 .500 .317 .163 .058 .009 .001 .000
3 1.000 1.000 1.000 .993 .969 .913 .813 .663 .472 .263 .081 .023 .001
4 1.000 1.000 1.000 1.000 .998 .990 .969 .922 .832 .672 .410 .226 .049
h F(h) P(h)
Cumulative Binomial Deriving Individual Probabilities
Probability Distribution and 0 0.031 0.031
from Cumulative Probabilities
Binomial Probability 1 0.187 0.156
Distribution of H,the 2 0.500 0.313 F (x )  P ( X  x )   P(i )
all i  x
Number of Heads
3 0.813 0.313 P(X) = F(x) - F(x - 1)
Appearing in Five Tosses of
4 0.969 0.156
a Fair Coin For example:
5 1.000 0.031
1.000
P (3)  F (3)  F (2)
.813.500
.313

Calculating Binomial Probabilities

60% of Brooke shares are owned by LeBow. A random sample
of 15 shares is chosen. What is the probability that at most
three of them will be found to be owned by LeBow?
n=15
p
.50 .60 .70
0 .000 .000 .000 F (x )  P ( X  x )   P (i )
all i  x
1 .000 .000 .000
2 .004 .000 .000 F ( 3)  P ( X  3)  .002
3 .018 .002 .000
4 .059 .009 .001
... ... ... ...

Mean, Variance, and Standard Deviation

of the Binomial Distribution
Mean of a binomial distribution:
  E ( X )  np For example, if H counts the number of

heads in five tosses of a fair coin:
Variance of a binomial distribution:
 H  E (H )  (5)(.5)  2.5
  V ( X )  npq
2
 2H  V (H )  (5)(.5)(.5)  05
.
Standard deviation of a binomial distribution:  H  SD(H )  05

. .7071
 = SD(X) = npq

Shape of the Binomial Distribution

p = 0.1 p = 0.3 p = 0.5
Binomial Probability: n=4 p=0.1 Binomial Probability: n=4 p=0.3 Binomial Probability: n=4 p=0.5
0.7 0.7 0.7
0.6 0.6 0.6
0.5 0.5 0.5
n=4 0.4 0.4 0.4

P(x)
P(x)
P(x)
0.3 0.3 0.3
0.2 0.2 0.2
0.1 0.1 0.1
0.0 0.0 0.0

0 1 2 3 4 0 1 2 3 4 0 1 2 3 4
x x x
0.5 0.5 0.5
0.4 0.4 0.4
0.3 0.3 0.3
n = 10
P(x)
P(x)
P(x)
0.2 0.2 0.2
0.1 0.1 0.1
0.0 0.0 0.0

0 1 2 3 4 5 6 7 8 9 10 0 1 2 3 4 5 6 7 8 9 10 0 1 2 3 4 5 6 7 8 9 10
x
x x
0.2 0.2 0.2
n = 20
P(x)
P(x)
P(x)
0.1 0.1 0.1
0.0 0.0 0.0

0 1 2 3 4 5 6 7 8 9 1011121314151617181920 0 1 2 3 4 5 6 7 8 9 1011121314151617181920 0 1 2 3 4 5 6 7 8 9 1011121314151617181920
x x x
Binomial distributions become more symmetric as n increases and as p .5.

Other Discrete Probability

Distributions: Hypergeometric
The hypergeometric probability distribution is useful for determining the

probability of a number of occurrences when sampling without replacement. It
counts the number of successes (x) in n selections, without replacement, from a
population of N elements, S of which are successes and (N-S) of which are failures.
S
Hypergeome tric Distributi on : The mean of the hypergeometric distribution is:   np , where p 
 S  N  S  N
 
 

x  n  x  The variance is: 
2 
 
N  n
 npq
P ( x)  
N
 
 N  1
n
 

Other Discrete Probability Distributions:

Hypergeometric (continued)
Example 3-6:
Suppose that automobiles arrive at a 
2
  
 10  2
1  5  1 
2
1
8
4
2! 8!
5
 
dealership in lots of 10 and that for P (1)   
1! 1! 4 ! 4 !
  0.556
time and resource considerations, 10 10 10 ! 9
only 5 out of each 10 are inspected 5 5
      
  
5! 5!
for safety. The 5 cars are randomly
2 10  2 2! 8!
chosen from the 10 on the lot. If 2 2 8
out of the 10 cars on the lot are below 1 5 2 1 3
 
1! 1! 3 ! 5! 2
standards for safety, what is the P( 2)      0.222
10 10 10 ! 9
probability that at least 1 out of the 5
5 5
cars to be inspected will be found not 5! 5!
meeting safety standards?
Thus, P(1) + P(2) =
0.556 + 0.222 = 0.778.

Other Discrete Probability Distributions:

Hypergeometric (example 3-6 continued)
X = Number of Cars in Sample of 5 Not Meeting Safety Standard
Hypergeometric Distribution N = 10, S = 2, n = 5
X P(X = x) P(X <= x)

Example 3-6
0 0.222222 0.222222
1 0.555556 0.777778 0.6
2 0.222222 1
0.5
3 0 1
Probability
4 0 1 0.4
5 0 1 0.3
0.2
0.1
0
1 2 3 4 5 6
# of Inspected Cars Not Meeting Safety
Standards

The Normal Probability Distribution
• The normal is a family of

– Bell-shaped and symmetric distributions. because the
distribution is symmetric, one-half (.50 or 50%) lies
on either side of the mean.
– Each is characterized by a different pair of mean, ,
and variance, . That is: [X~N()].
– Each is asymptotic to the horizontal axis.
– The area under any normal probability density
function within k of  is the same for any normal
distribution, regardless of the mean and variance.

Normal Probability Distributions

All of these are normal probability density functions, though each has a different mean and variance.
Normal Distribution:  =40, =1 Normal Distribution:  =30, =5 Normal Distribution:  =50, =3
0.4 0.2 0.2
0.3
f(w)
f(x)
f(y)
0.2 0.1 0.1
0.1
0.0 0.0 0.0

35 40 45 0 10 20 30 40 50 60 35 45 50 55 65
w x y
W~N(40,1) X~N(30,25) Y~N(50,9)

Normal Distribution:  =0, =1
0.4 Consider:
0.3
The probability in each
P(39  W  41) case is an area under a
f(z)
0.2
0.1 P(25  X  35) normal probability density

0.0 P(47  Y  53) function.
P(-1  Z  1)
-5 0 5
z
Z~N(0,1)
The Standard Normal Distribution

The standard normal random variable, Z, is the normal random
variable with mean  = 0 and standard deviation  = 1: Z~N(0,12).
Standard Normal Distribution
0 .4
0 .3
=1
f( z)
0 .2
0 .1
{
0 .0
-5 -4 -3 -2 -1 0 1 2 3 4 5
=0
Z

Finding Probabilities of the Standard

Normal Distribution: P(0 < Z < 1.56)
Standard Normal Probabilities
Standard Normal Distribution z .00 .01 .02 .03 .04 .05 .06 .07 .08 .09
0.0 0.0000 0.0040 0.0080 0.0120 0.0160 0.0199 0.0239 0.0279 0.0319 0.0359
0.4 0.1 0.0398 0.0438 0.0478 0.0517 0.0557 0.0596 0.0636 0.0675 0.0714 0.0753
0.2 0.0793 0.0832 0.0871 0.0910 0.0948 0.0987 0.1026 0.1064 0.1103 0.1141
0.3 0.1179 0.1217 0.1255 0.1293 0.1331 0.1368 0.1406 0.1443 0.1480 0.1517
0.3 0.4 0.1554 0.1591 0.1628 0.1664 0.1700 0.1736 0.1772 0.1808 0.1844 0.1879
0.5 0.1915 0.1950 0.1985 0.2019 0.2054 0.2088 0.2123 0.2157 0.2190 0.2224
0.6 0.2257 0.2291 0.2324 0.2357 0.2389 0.2422 0.2454 0.2486 0.2517 0.2549
f(z)
0.2 0.7 0.2580 0.2611 0.2642 0.2673 0.2704 0.2734 0.2764 0.2794 0.2823 0.2852
0.8 0.2881 0.2910 0.2939 0.2967 0.2995 0.3023 0.3051 0.3078 0.3106 0.3133
0.9 0.3159 0.3186 0.3212 0.3238 0.3264 0.3289 0.3315 0.3340 0.3365 0.3389
0.1 1.0 0.3413 0.3438 0.3461 0.3485 0.3508 0.3531 0.3554 0.3577 0.3599 0.3621
1.56 1.1 0.3643 0.3665 0.3686 0.3708 0.3729 0.3749 0.3770 0.3790 0.3810 0.3830
{
1.2 0.3849 0.3869 0.3888 0.3907 0.3925 0.3944 0.3962 0.3980 0.3997 0.4015
0.0 1.3 0.4032 0.4049 0.4066 0.4082 0.4099 0.4115 0.4131 0.4147 0.4162 0.4177
-5 -4 -3 -2 -1 0 1 2 3 4 5 1.4 0.4192 0.4207 0.4222 0.4236 0.4251 0.4265 0.4279 0.4292 0.4306 0.4319
Z 1.5 0.4332 0.4345 0.4357 0.4370 0.4382 0.4394 0.4406 0.4418 0.4429 0.4441
1.6 0.4452 0.4463 0.4474 0.4484 0.4495 0.4505 0.4515 0.4525 0.4535 0.4545
1.7 0.4554 0.4564 0.4573 0.4582 0.4591 0.4599 0.4608 0.4616 0.4625 0.4633
1.8 0.4641 0.4649 0.4656 0.4664 0.4671 0.4678 0.4686 0.4693 0.4699 0.4706
1.9 0.4713 0.4719 0.4726 0.4732 0.4738 0.4744 0.4750 0.4756 0.4761 0.4767
2.0 0.4772 0.4778 0.4783 0.4788 0.4793 0.4798 0.4803 0.4808 0.4812 0.4817
2.1 0.4821 0.4826 0.4830 0.4834 0.4838 0.4842 0.4846 0.4850 0.4854 0.4857
Look in row labeled 1.5 2.2 0.4861 0.4864 0.4868 0.4871 0.4875 0.4878 0.4881 0.4884 0.4887 0.4890
2.3 0.4893 0.4896 0.4898 0.4901 0.4904 0.4906 0.4909 0.4911 0.4913 0.4916
and column labeled .06 2.4
2.5
0.4918
0.4938
0.4920
0.4940
0.4922
0.4941
0.4925
0.4943
0.4927
0.4945
0.4929
0.4946
0.4931
0.4948
0.4932
0.4949
0.4934
0.4951
0.4936
0.4952
2.6 0.4953 0.4955 0.4956 0.4957 0.4959 0.4960 0.4961 0.4962 0.4963 0.4964
to find 2.7 0.4965 0.4966 0.4967 0.4968 0.4969 0.4970 0.4971 0.4972 0.4973 0.4974
P(0  z  1.56) = .4406

2.8 0.4974 0.4975 0.4976 0.4977 0.4977 0.4978 0.4979 0.4979 0.4980 0.4981
2.9 0.4981 0.4982 0.4982 0.4983 0.4984 0.4984 0.4985 0.4985 0.4986 0.4986
3.0 0.4987 0.4987 0.4987 0.4988 0.4988 0.4989 0.4989 0.4989 0.4990 0.4990


Normal Distribution: P(Z < -2.47)
z ... .06 .07 .08
To find P(Z<-2.47): . . . .
. . . .
Find table area for 2.47 . . . .
P(0 < Z < 2.47) = .4932 2.3 ... 0.4909 0.4911 0.4913
2.4 ... 0.4931 0.4932 0.4934
P(Z < -2.47) = .5 - P(0 < Z < 2.47) 2.5 ... 0.4948 0.4949 0.4951
= .5 - .4932 = 0.0068 .
.
.

Area to the left of -2.47
0.4
P(Z < -2.47) = .5 - 0.4932
= 0.0068 0.3 Table area for 2.47
P(0 < Z < 2.47) = 0.4932
f(z)
0.2
0.1
0.0
-5 -4 -3 -2 -1 0 1 2 3 4 5
Z


Normal Distribution: P(1< Z < 2)
To find P(1  Z  2): z
.
.00
.
...
. .
1. Find table area for 2.00 .
0.9
.
0.3159 ...
F(2) = P(Z  2.00) = .5 + .4772 =.9772

1.0 0.3413 ...
1.1 0.3643 ...
. .
. .
2. Find table area for 1.00 . .
1.9 0.4713 ...
F(1) = P(Z  1.00) = .5 + .3413 = .8413 2.0
2.1
0.4772
0.4821
...
...
. .
3. P(1  Z  2.00) = P(Z  2.00) - P(Z  1.00) .
.
.
.
= .9772 - .8413 = .1359

0.4
0.3
Area between 1 and 2
P(1  Z  2) = .4772 - .8413 = 0.1359
f(z)
0.2
0.1
0.0
-5 -4 -3 -2 -1 0 1 2 3 4 5
Z

Finding Values of the Standard Normal

Random Variable: P(0 < Z < z) = 0.40
z .00 .01 .02 .03 .04 .05 .06 .07 .08 .09
To find z such that 0.0
0.1
0.0000
0.0398
0.0040
0.0438
0.0080
0.0478
0.0120
0.0517
0.0160
0.0557
0.0199
0.0596
0.0239
0.0636
0.0279
0.0675
0.0319
0.0714
0.0359
0.0753
0.2 0.0793 0.0832 0.0871 0.0910 0.0948 0.0987 0.1026 0.1064 0.1103 0.1141
0.3 0.1179 0.1217 0.1255 0.1293 0.1331 0.1368 0.1406 0.1443 0.1480 0.1517
P(0  Z  z) = .40: 0.4

0.5
0.1554
0.1915
0.1591
0.1950
0.1628
0.1985
0.1664
0.2019
0.1700
0.2054
0.1736
0.2088
0.1772
0.2123
0.1808
0.2157
0.1844
0.2190
0.1879
0.2224
0.6 0.2257 0.2291 0.2324 0.2357 0.2389 0.2422 0.2454 0.2486 0.2517 0.2549
0.7 0.2580 0.2611 0.2642 0.2673 0.2704 0.2734 0.2764 0.2794 0.2823 0.2852
0.8 0.2881 0.2910 0.2939 0.2967 0.2995 0.3023 0.3051 0.3078 0.3106 0.3133
1. Find a probability as close as 0.9
1.0
0.3159
0.3413
0.3186
0.3438
0.3212
0.3461
0.3238
0.3485
0.3264
0.3508
0.3289
0.3531
0.3315
0.3554
0.3340
0.3577
0.3365
0.3599
0.3389
0.3621
possible to .40 in the table of 1.1
1.2
0.3643
0.3849
0.3665
0.3869
0.3686
0.3888
0.3708
0.3907
0.3729
0.3925
0.3749
0.3944
0.3770
0.3962
0.3790
0.3980
0.3810
0.3997
0.3830
0.4015
1.3 0.4032 0.4049 0.4066 0.4082 0.4099 0.4115 0.4131 0.4147 0.4162 0.4177
standard normal probabilities. . . . . . . . . . . .
. . . . . . . . . . .
. . . . . . . . . . .
2. Then determine the value of z Standard Normal Distribution

from the corresponding row
0.4
and column. Area to the left of 0 = .50 Area = .40 (.3997)
P(z  0) = .50 0.3
P(0  Z  1.28)  .40

f(z)
0.2
Also, since P(Z  0) = .50

0.1
0.0
P(Z  1.28)  .90

-5 -4 -3 -2 -1 0 1 2 3 4 5
Z Z = 1.28

99% Interval around the Mean:

P(-z.005< Z < z.005) = 0.99
To have .99 in the center of the distribution, there
z .04 .05 .06 .07 .08 .09
should be (1/2)(1-.99) = (1/2)(.01) = .005 in each . . . . . . .
. . . . . . .
tail of the distribution, and (1/2)(.99) = .495 in . . . . . . .
2.4 ... 0.4927 0.4929 0.4931 0.4932 0.4934 0.4936
each half of the .99 interval. That is: 2.5 ... 0.4945 0.4946 0.4948 0.4949 0.4951 0.4952
2.6 ... 0.4959 0.4960 0.4961 0.4962 0.4963 0.4964
. . . . . . .
P(0  Z  z.005) = .495

. . . . . . .
. . . . . . .
Look to the table of standard normal probabilities

Area in center = .99
to find that: Area in center left = .495
0.4
 z.005   Area in center right = .495

z.005   0.3
f(z)
0.2
P(-.2575 Z  ) = .99 Area in right tail = .005

0.1
Area in left tail = .005
0.0
-5 -4 -3 -2 -1 0 1 2 3 4 5
Z
-z.005 z.005
-2.575 2.575

The Transformation of Normal Random

Variables
The area within k of the mean is the same for all normal random variables. So an area
under any normal distribution is equivalent to an area under the standard normal. In this
example: P(40  X  P(-1  Z     since and 
The transformation of X to Z:
X x Normal Distribution:  =50, =10
Z
x 0.07
0.06
Transformation 0.05
f(x)
0.04
(1) Subtraction: (X - x) 0.03
0.02 =10
{
Standard Normal Distribution 0.01
0.4 0.00
0 10 20 30 40 50 60 70 80 90 100
X
0.3
f(z)
0.2
(2) Division by x)

{
0.1 1.0 The inverse transformation of Z to X:

0.0
-5 -4 -3 -2 -1 0 1 2 3 4 5
X  x  Z x
Z

Using the Normal Transformation
Example 4-1 Example 4-2

X~N(160,302) X~N(127,222)
P (100  X  180) P ( X  150)
 P
 100    X    180     X    150   
  P 
        
 100  160 180  160 
P Z 
150  127 
 P Z   
 30 30   22 

 P 2  Z  .6667 
 P Z  1.045 
 0.4772  0.2475  0.7247  0.5  0.3520  0.8520

The Transformation of Normal Random

Variables
The transformation of X to Z: The inverse transformation of Z to X:
X  x X    Z
Z  x x
x
The transformation of X to Z, where a and b are numbers::

 a  
P( X  a)  P Z  
  
 b  
P( X  b)  P Z  
  
a b  
P(a  X  b)  P Z 
   

Normal Probabilities
S ta n d a rd N o rm a l D is trib utio n
• The probability that a normal 0.4
random variable will be within 1
standard deviation from its mean 0.3
(on either side) is 0.6826, or
f(z)
0.2
approximately 0.68.
•
0.1
The probability that a normal

random variable will be within 2 0.0
-5 -4 -3 -2 -1 0 1 2 3 4 5
standard deviations from its mean Z
is 0.9544, or approximately 0.95.

• The probability that a normal
random variable will be within 3
standard deviation from its mean is
0.9974.

The Inverse Transformation

The area within k of the mean is the same for all normal random variables. To find a
probability associated with any interval of values for any normal random variable, all that
is needed is to express the interval in terms of numbers of standard deviations from the
mean. That is the purpose of the standard normal transformation. If X~N(50,102),
 x   70     70  50 
P( X  70)  P    P Z    P( Z  2)
     10 
That is, P(X >70) can be found easily because 70 is 2 standard deviations above the mean
of X: 70 =  + 2. P(X > 70) is equivalent to P(Z > 2), an area under the standard normal
distribution.
Example 4-4 X~N(124,122) Normal Distribution:  = 124,  = 12
P(X > x) = 0.10 and P(Z > 1.28) 0.10 0.04
x =  + z = 124 + (1.28)(12) = 139.36

0.03
z .07 .08 .09
f(x)
. . . . . 0.02
. . . . .
. . . . .
1.1 ... 0.3790 0.3810 0.3830 0.01
1.2 ... 0.3980 0.3997 0.4015
1.3 ... 0.4147 0.4162 0.4177
. . . . . 0.00
. . . . . 80 130 180
. . . . .
X

The Inverse Transformation (2)

Example 4-6 X~N(2450,4002)
Example 4-5 X~N(5.7,0.52) P(a<X<b)=0.95 and P(-1.96<Z<1.96)0.95
P(X > x)=0.01 and P(Z > 2.33) 0.01 x =   z = 2450 ± (1.96)(400) = 2450
x =  + z = 5.7 + (2.33)(0.5) = 6.865 ±784=(1666,3234)
P(1666 < X < 3234) = 0.95
z .02 .03 .04
. . . . .
z .05 .06 .07
. . . . .
. . . . .
. . . . .
. . . . .
2.2 ... 0.4868 0.4871 0.4875
. . . . .
2.3 ... 0.4898 0.4901 0.4904
1.8 ... 0.4678 0.4686 0.4693
2.4 ... 0.4922 0.4925 0.4927
1.9 ... 0.4744 0.4750 0.4756
. . . . .
2.0 ... 0.4798 0.4803 0.4808
. . . . .
. . . . .
. . . . .
. . . . .
Normal Distribution:  = 5.7 = 0.5 Normal Distribution:  = 2450  = 400

0.8
0.0015
Area = 0.49
0.7
0.6 .4750 .4750
0.5 0.0010
f(x)
f(x)
0.4
0.3 X.01 = +z = 5.7 + (2.33)(0.5) = 6.865
0.0005
0.2 .0250 .0250
0.1 Area = 0.01
0.0 0.0000
3.2 4.2 5.2 6.2 7.2 8.2 1000 2000 3000 4000
X X
-5 -4 -3 -2 -1 0 1 2 3 4 5 -5 -4 -3 -2 -1 0 1 2 3 4 5
z Z.01 = 2.33 -1.96 Z 1.96

Finding Values of a Normal Random

Variable, Given a Probability
1. Draw pictures of Normal Distribution:  = 2450,  = 400
the normal 0.0012

.
0.0010
.
distribution in 0.0008
.
question and of the
f(x)
0.0006
.
standard normal 0.0004

.
0.0002
.
distribution.
0.0000
1000 2000 3000 4000
X
S tand ard Norm al D istrib utio n

0.4
0.3
f(z)
0.2
0.1
0.0
-5 -4 -3 -2 -1 0 1 2 3 4 5
Z


1. Draw pictures of Normal Distribution:  = 2450,  = 400
the normal 0.0012

.
0.0010
. .4750 .4750
.
question and of the
f(x)
0.0006
.

.
0.0002
. .9500
distribution.
0.0000
1000 2000 3000 4000
X
2. Shade the area S tand ard Norm al D istrib utio n

corresponding to 0.4
.4750
the desired 0.3
.4750
probability.
f(z)
0.2
0.1
.9500
0.0
-5 -4 -3 -2 -1 0 1 2 3 4 5
Z


Normal Distribution:  = 2450,  = 400
1. Draw pictures of
0.0012
. 3. From the table
the normal .4750 .4750
0.0010
.
of the standard
.
normal
f(x)
question and of the 0.0006
.
0.0004
. distribution,
. .9500 find the z value
distribution. 0.0000
1000 2000 3000 4000 or values.
X
2. Shade the area S tand ard Norm al D istrib utio n
corresponding 0.4
to the desired .4750 .4750
0.3
probability.
f(z)
0.2
z .05 .06 .07

. . . . . 0.1
. . . . . .9500
. . . . .
1.8 ... 0.4678 0.4686 0.4693 0.0
1.9 ... 0.4744 0.4750 0.4756 -5 -4 -3 -2 -1 0 1 2 3 4 5
2.0 ... 0.4798 0.4803 0.4808 Z
. . . . .
. . . . .
-1.96 1.96


Normal Distribution:  = 2450,  = 400
1. Draw pictures of
0.0012
. 3. From the table
the normal .4750 .4750
0.0010
.
of the standard
.
normal
f(x)
question and of the 0.0006
.
0.0004
. distribution,
. .9500 find the z value
distribution. 0.0000
1000 2000 3000 4000 or values.
X
2. Shade the area S tand ard Norm al D istrib utio n 4. Use the
corresponding 0.4
transformation
to the desired .4750 .4750 from z to x to get
0.3
probability. value(s) of the
original random
f(z)
0.2
z .05 .06 .07

0.1
variable.
. . . . .
. . . . . .9500
. . . . .
0.0
x =   z = 2450 ± (1.96)(400)
1.8 ... 0.4678 0.4686 0.4693
1.9 ... 0.4744 0.4750 0.4756 -5 -4 -3 -2 -1 0 1 2 3 4 5
2.0 ... 0.4798 0.4803 0.4808 Z = 2450 ±784=(1666,3234)
. . . . .
. . . . .
-1.96 1.96

Finding Values of a Normal Random Variable,

Given a Probability
The normal distribution with  = 3.5 and  = 1.323 is a close
approximation to the binomial with n = 7 and p = 0.50.
P(x<4.5) = 0.7749 Normal Distribution:  = 3.5,  = 1.323 Binomial Distribution: n = 7, p = 0.50
0.3 0.3
P( x 4) = 0.7734
0.2 0.2
P(x)
f(x)
0.1 0.1
0.0 0.0
0 5 10 0 1 2 3 4 5 6 7
X X
MTB > cdf 4.5; MTB > cdf 4;

SUBC> normal 3.5 1.323. SUBC> binomial 7,.5.
Cumulative Distribution Function Cumulative Distribution Function
Normal with mean = 3.50000 and standard deviation = 1.32300 Binomial with n = 7 and p = 0.500000
x P( X <= x) x P( X <= x)
4.5000 0.7751 4.00 0.7734

The Normal Distribution as an Approximation to

Other Probability Distributions (2)
The normal distribution with  = 5.5 and  = 1.6583 is a closer
approximation to the binomial with n = 11 and p = 0.50.
P(x<4.5) = 0.2732
Binomial Distribution: n = 11, p = 0.50
Normal Distribution:  = 5.5,  = 1.6583
P(x4) = 0.2744
0.3
0.2
0.2
P(x)
f(x)
0.1
0.1
0.0
0.0
0 1 2 3 4 5 6 7 8 9 10 11
0 5 10
X
X
MTB > cdf 4;

MTB > cdf 4.5;
SUBC> binomial 11,.5.
SUBC> normal 5.5 1.6583.
Binomial with n = 11 and p = 0.500000
Normal with mean = 5.50000 and standard deviation = 1.65830
x P( X <= x)
x P( X <= x)
4.00 0.2744
4.5000 0.2732

Approximating a Binomial Probability

Using the Normal Distribution
 a  np b  np 
P( a  X  b)  P Z 
 np(1  p) np(1  p) 
for n large (n  50) and p not too close to 0 or 1.00

Or:
 a  0.5  np b  0.5  np 
P(a  X  b)  P Z 
 np(1  p) np(1  p) 
for n moderately large (20  n < 50).
If p is either small (close to 0) or large (close to 1), use the Poisson

approximation.

Example 3.2: Given Probability Distribution

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Example 3.2: Given Probability Distribution

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BUSINESS STATISTICS 3-1

Probability of more than 2:

Discrete and Continuous Random

A continuous random variable:

International University – School of Business Assoc. Prof. Ho Thanh Phong

Discrete Probability Distributions -

The probability distribution of a discrete random

International University – School of Business Assoc. Prof. Ho Thanh Phong

Cumulative Distribution Function

The cumulative distribution function, F(x), of a discrete

Cumulative Probability Distribution of the Number of Switches

International University – School of Business Assoc. Prof. Ho Thanh Phong

3 0.2 0.8 P(X 3)  F(3)

International University – School of Business Assoc. Prof. Ho Thanh Phong

3-2 Expected Values of Discrete Random Variables

International University – School of Business Assoc. Prof. Ho Thanh Phong

Variance and Standard Deviation of a Random Variable

The Binomial Distribution

International University – School of Business Assoc. Prof. Ho Thanh Phong

Binomial Probabilities (Continued)

1. The probability of a given 2. The number of different sequences

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The Binomial Probability Distribution

The binomial probability distribution: N u m b er o f

International University – School of Business Assoc. Prof. Ho Thanh Phong

The Cumulative Binomial Probability Table

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Calculating Binomial Probabilities

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Mean, Variance, and Standard Deviation

Mean of a binomial distribution:

  E ( X )  np For example, if H counts the number of

Standard deviation of a binomial distribution:  H  SD(H )  05

International University – School of Business Assoc. Prof. Ho Thanh Phong

Shape of the Binomial Distribution

0.6 0.6 0.6

0.5 0.5 0.5

n=4 0.4 0.4 0.4

0.2 0.2 0.2

0.1 0.1 0.1

0.0 0.0 0.0

0.5 0.5 0.5

0.4 0.4 0.4

0.3 0.3 0.3

0.1 0.1 0.1

0.0 0.0 0.0

0.2 0.2 0.2

0.0 0.0 0.0

Binomial distributions become more symmetric as n increases and as p .5.

International University – School of Business Assoc. Prof. Ho Thanh Phong

Other Discrete Probability

The hypergeometric probability distribution is useful for determining the

International University – School of Business Assoc. Prof. Ho Thanh Phong

Other Discrete Probability Distributions:

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Other Discrete Probability Distributions:

Hypergeometric Distribution N = 10, S = 2, n = 5

X P(X = x) P(X <= x)

International University – School of Business Assoc. Prof. Ho Thanh Phong

The Normal Probability Distribution

• The normal is a family of

International University – School of Business Assoc. Prof. Ho Thanh Phong

Normal Probability Distributions