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Business Analytics
2013/14 Semester 1 NUS Business School

Questions on Probability Theory

Q1

Suppose that two dice are tossed. For each die, it is equally likely that 1, 2, 3, 4,
5, or 6 dots will turn up. Let S be the sum of the two dice.
(i)
(ii)

What is the probability that S will be 5 or 7? (Ans: 5/18)

What is the probability that S will be some number other than 4 or 8?
(Ans: 7/9)

(iii) Let E1 be the event that the first die shows a 3. Let E2 be the event that
S is 6. Are E1 and E2 independent events? (Ans: No)
(iv) Given that S is 7, what is the probability that the first die showed 4 dots?
(Ans: 1/6)
(v)

Let E3 be the event that S is 7. Are E1 and E3 independent events? (Ans:

Independent)
(vi) Given that the fist die shows a 3, what is the probability that S is an even
number? (Ans: )

Q2 An oil company is drilling for oil at three promising sites. According to geological
tests, the probabilities of finding oil at these three sites are 0.70, 0.85, and 0.80,
respectively. The presence of oil at any one of the sites is presumed to be independent of
the presence of oil at any of the other sites.
(a) What is the probability of finding oil at all three of the sites? (Ans: 0.476)
(b) What is the probability of not finding oil at any of the three sites? (Ans: 0.009)

Q3. A hardware store has received two shipments of halogen lamps. The first shipment
contains 100 lamps, 4% of which are defective. The second shipment contains 50 lamps,
6% of which are defective. Suppose that Emaneul picks a lamp (at random) off the shelf
and purchases it, and he later discovers that the lamp he purchased is defective.
(a) What is the probability that the lamp is from the first shipment? (Ans: 8/14)
(b) What is the probability that the lamp is from the second shipment? (Ans: 6/14)

Q4. A municipal bond service has three rating categories (A,B, and C). Suppose that in
the past year, of the municipal bonds issued throughout the United States, 70% were
rated A, 20% were rated B, and 10% were rated C. Of the municipal bonds rated A, 50%
were issued by cities, 40% by suburbs, and 10% by rural areas. Of the municipal bonds
rated B, 60% were issued by cities, 20% by suburbs, and 20% by rural areas. Of the
municipal bonds rated C, 90% were issued by cities, 5% by suburbs, and 5% by rural
areas.

(a) If a new municipal bond is to be issued by a city, what is the probability that it
will receive an A rating? (Ans: 0.625)
(b) What proportion of municipal bonds are issued by cities? (Ans: 0.56)
(c) What proportion of municipal bounds are issued by suburbs? (Ans: 0.325)

Q5. A sample of purchasing managers was selected to determine information concerning
buying behaviour. Among the questions asked was Do you enjoy your role in the
organization? The results are as follows:


Gender

Male
Female
Yes
X
270
No
20
60

What should X be in order to conclude that whether a manager enjoys his/her role in the
organization is independent of the gender of the manager? Why? (Ans: 90)