PGPBL02 Continuous Distributions Practice Questions Merged

CONTINUOUS PROBABILITY DISTRIBUTIONS
TRUE/FALSE
1. Since there is an infinite number of values a continuous random variable can assume, the probability of
each individual value is virtually 0.
ANS: T
2. A continuous probability distribution represents a random variable having an infinite number of

outcomes which may assume any number of values within an interval.
ANS: T
3. Continuous probability distributions describe probabilities associated with random variables that are
able to assume any finite number of values along an interval.
ANS: F
4. A continuous random variable X has a uniform distribution between 10 and 20 (inclusive), then the
probability that X falls between 12 and 15 is 0.30.
ANS: T
5. A continuous random variable is one that can assume an uncountable number of values.
ANS: T
6. A continuous random variable X has a uniform distribution between 5 and 15 (inclusive), then the
probability that X falls between 10 and 20 is 1.0.
ANS: F
7. A continuous random variable X has a uniform distribution between 5 and 25 (inclusive), then P(X =
15) = 0.05.
ANS: F
8. We distinguish between discrete and continuous random variables by noting whether the number of
possible values is countable or uncountable.
ANS: T
9. In practice, we frequently use a continuous distribution to approximate a discrete one when the number
of values the variable can assume is countable but very large.
ANS: T
10. Let X represent weekly income expressed in dollars. Since there is no set upper limit, we cannot
identify (and thus cannot count) all the possible values. Consequently, weekly income is regarded as a
continuous random variable.
ANS: T
11. To be a legitimate probability density function, all possible values of f(x) must be non-negative.
ANS: T
12. To be a legitimate probability density function, all possible values of f(x) must lie between 0 and 1
(inclusive).
ANS: F
13. The sum of all values of f(x) over the range of [a, b] must equal one.
ANS: F
14. A probability density function shows the probability for each value of X.
ANS: F
15. If X is a continuous random variable on the interval [0, 10], then P(X > 5) = P(X ≥ 5).
ANS: T
16. If X is a continuous random variable on the interval [0, 10], then P(X = 5) = f(5) = 1/10.
ANS: F
17. If a point y lies outside the range of the possible values of a random variable X, then f(y) must equal
zero.
ANS: T
MULTIPLE CHOICE
18. Which of the following is always true for all probability density functions of continuous random
variables?
a. The probability at any single point is zero.
b. They contain an uncountable number of possible values.
c. The total area under the density function f(x) equals 1.
d. All of these choices are true.
ANS: D
19. The probability density function, f(x), for any continuous random variable X, represents:
a. all possible values that X will assume within some interval a ≤ x ≤ b.
b. the probability that X takes on a specific value x.
c. the height of the density function at x.
d. None of these choices.
ANS: C
20. Which of the following represents a difference between continuous and discrete random variables?
a. Continuous random variables assume an uncountable number of values, and discrete
random variables do not.
b. The probability for any individual value of a continuous random variable is zero, but for
discrete random variables it is not.
c. Probability for continuous random variables means finding the area under a curve, while
for discrete random variables it means summing individual probabilities.
ANS: D
21. Suppose f(x) = 0.25. What range of possible values can X take on and still have the density function be
legitimate?
a. [0, 4]
b. [4, 8]
c. [−2, +2]
ANS: D
22. What is the shape of the probability density function for a uniform random variable on the interval
[a, b]?
a. A rectangle whose X values go from a to b.
b. A straight line whose height is 1/(b − a) over the range [a, b].
c. A continuous probability density function with the same value of f(x) from a to b.
ANS: D
23. Which of the following is true about f(x) when X has a uniform distribution over the interval [a, b]?
a. The values of f(x) are different for various values of the random variable X.
b. f(x) equals one for each possible value of X.
c. f(x) equals one divided by the length of the interval from a to b.
ANS: C
24. Suppose f(x) = 1/4 over the range a ≤ x ≤ b, and suppose P(X > 4) = 1/2. What are the values for a and
b?
a. 0 and 4
b. 2 and 6
c. Can be any range of x values whose length (b − a) equals 4.
d. Cannot answer with the information given.
ANS: B
25. The probability density function f(x) for a uniform random variable X defined over the interval [2, 10]
is
a. 0.20
b. 8
c. 4
ANS: A
26. If the random variable X has a uniform distribution between 40 and 50, then P(35 ≤ X ≤ 45) is:
a. 1.0
b. 0.5
c. 0.1
d. undefined.
ANS: B
27. The probability density function f(x) of a random variable X that has a uniform distribution between a
and b is
a. (b + a)/2
b. 1/b − 1/a
c. (a − b)/2
ANS: D
28. Which of the following does not represent a continuous uniform random variable?
a. f(x) = 1/2 for x between −1 and 1, inclusive.
b. f(x) = 10 for x between 0 and 1/10, inclusive.
c. f(x) = 1/3 for x = 4, 5, 6.
d. None of these choices represents a continuous uniform random variable.
ANS: C
COMPLETION
29. A(n) ____________________ random variable is one that assumes an uncountable number of possible
values.
ANS: continuous
30. For a continuous random variable, the probability for each individual value of X is
____________________.
ANS: zero
31. Probability for continuous random variables is found by finding the ____________________ under a
curve.
ANS: area
32. A(n) ____________________ random variable has a density function that looks like a rectangle and
you can use areas of a rectangle to find probabilities for it.
ANS: uniform
33. Suppose X is a continuous random variable for X between a and b. Then its probability
____________________ function must non-negative for all values of X between a and b.
ANS: density
34. The total area under f(x) for a continuous random variable must equal ____________________.
ANS: one
35. The probability density function of a uniform random variable on the interval [0, 5] must be
____________________ for 0 ≤ x ≤ 5.
ANS: 1/5
36. To find the probability for a uniform random variable you take the ____________________ times the
____________________ of its corresponding rectangle.
ANS: base; height
37. You can use a continuous random variable to ____________________ a discrete random variable that
takes on a countable, but very large, number of possible values.
ANS: approximate
SHORT ANSWER
38. A continuous random variable X has the following probability density function:
f(x) = 1/4, 0 ≤ x ≤ 4
Find the following probabilities:
a. P(X ≤ 1)
b. P(X ≥ 2)
c. P(1 ≤ X ≤ 2)
d. P(X = 3)
ANS:
a. 0.25
b. 0.50
c. 0.25
d. 0
Waiting Time
The length of time patients must wait to see a doctor at an emergency room in a large hospital has a
uniform distribution between 40 minutes and 3 hours.
39. {Waiting Time Narrative} What is the probability density function for this uniform distribution?
ANS: f(x) = 1/140, 40 ≤ x ≤ 180 (minutes)
40. {Waiting Time Narrative} What is the probability that a patient would have to wait between one and
two hours?
ANS: 0.43
41. {Waiting Time Narrative} What is the probability that a patient would have to wait exactly one hour?
ANS: 0
42. {Waiting Time Narrative} What is the probability that a patient would have to wait no more than one
hour?
ANS: 0.143
43. The time required to complete a particular assembly operation has a uniform distribution between 25
and 50 minutes.
a. What is the probability density function for this uniform distribution?
b. What is the probability that the assembly operation will require more than 40 minutes to
complete?
c. Suppose more time was allowed to complete the operation, and the values of X were
extended to the range from 25 to 60 minutes. What would f(x) be in this case?
ANS:
a. f(x) = 1/25, 25 ≤ x ≤ 50
b. 0.40
c. f(x) = 1/35, 25 ≤ x ≤ 60
44. Suppose f(x) equals 1/50 on the interval [0, 50].

a. What is the distribution of X?
b. What does the graph of f(x) look like?
c. Find P(X ≤ 25)
d. Find P(X ≥ 25)
e. Find P(X = 25)
f. Find P(0 < X < 3)
g. Find P(−3 < X < 0)
h. Find P(0 < X < 50)
ANS:
a. X has a uniform distribution on the interval [0, 50].
b. f(x) forms a rectangle of height 1/50 from x = 0 to x = 50.
c. 0.50
d. 0.50
e. 0
f. 0.06
g. 0.06
h. 1.00
Electronics Test
The time it takes a student to finish a electronics test has a uniform distribution between 50 and 70
minutes.
45. {Electronics Test Narrative} What is the probability density function for this uniform distribution?
ANS: f(x) = 1/20, 50 ≤ x ≤ 70
46. {Electronics Test Narrative} Find the probability that a student will take more than 60 minutes to
finish the test.
ANS: 0.50
47. {Electronics Test Narrative} Find the probability that a student will take no less than 55 minutes to
finish the test.
ANS: 0.75
48. {Electronics Test Narrative} Find the probability that a student will take exactly one hour to finish the
test.
ANS: 0
49. {Electronics Test Narrative} What is the median amount of time it takes a student to finish the test?
ANS: 60 minutes
50. {Electronics Test Narrative} What is the mean amount of time it takes a student to finish the test?
ANS: 60 minutes
Subway Waiting Time
At a subway station the waiting time for a subway is found to be uniformly distributed between 1 and
5 minutes.
51. {Subway Waiting Time Narrative} What is the probability density function for this uniform
distribution?
ANS: f(x) = 1/4, 1 ≤ x ≤ 5
52. {Subway Waiting Time Narrative} What is the probability of waiting no more than 3 minutes?
ANS: 0.50
53. {Subway Waiting Time Narrative} What is the probability that the subway arrives in the first minute
and a half?
ANS: 0.125
54. {Subway Waiting Time Narrative} What is the median waiting time for this subway?
ANS: 3 minutes
TRUE/FALSE
55. A national standardized testing company can tell you your relative standing on an exam without
divulging the mean or the standard deviation of the exam scores.
ANS: T
56. If your golf score is 3 standard deviations below the mean, its corresponding value on the Z
distribution is −3.
ANS: T
57. If we standardize the normal curve, we express the original X values in terms of their number of
standard deviations away from the mean.
ANS: T
58. A normal distribution is symmetric; therefore the probability of being below the mean is 0.50 and the
probability of being above the mean is 0.50.
ANS: T
59. A random variable X is standardized by subtracting the mean and dividing by the variance.
ANS: F
60. A random variable X has a normal distribution with mean 132 and variance 36. If x = 120, its
corresponding value of Z is 2.0.
ANS: F
61. A random variable X has a normal distribution with a mean of 250 and a standard deviation of 50.
Given that X = 175, its corresponding value of Z is −1.50.
ANS: T
62. Given that Z is a standard normal random variable, a negative value of Z indicates that the standard
deviation of Z is negative.
ANS: F
63. In the standard normal distribution, z0.05 = 1.645 means that 5% of all values of z are below 1.645 and
95% are above it.
ANS: F
64. The probability that a standard normal random variable Z is less than −3.5 is approximately 0.
ANS: T
65. If the value of Z is z = 99, that means you are at the 99th percentile on the Z distribution.
ANS: F
66. The 10th percentile of a Z distribution has 10% of the Z-values lying above it.
ANS: F
67. The probability that Z is less than −2 is the same as one minus the probability that Z is greater than +2.
ANS: F
68. Suppose X has a normal distribution with mean 70 and standard deviation 5. The 50th percentile of X is
70.
ANS: T
MULTIPLE CHOICES
69. Which of the following is not a characteristic for a normal distribution?

a. It is symmetrical.
b. The mean is always zero.
c. The mean, median, and mode are all equal.
d. It is a bell-shaped distribution.
ANS: B
70. If X has a normal distribution with mean 60 and standard deviation 6, which value of X corresponds
with the value z = 1.96?
a. x = 71.76
b. x = 67.96
c. x = 61.96
d. x = 48.24
ANS: A
71. A standard normal distribution is a normal distribution with:

a. a mean of zero and a standard deviation of one.
b. a mean of one and a standard deviation of zero.
c. a mean always larger than the standard deviation.
ANS: A
72. What proportion of the data from a normal distribution is within two standard deviations from the
mean?
a. 0.3413
b. 0.4772
c. 0.6826
d. 0.9544
ANS: D
73. Given that Z is a standard normal random variable, the area to the left of a value z is expressed as
a. P(Z ≥ z)
b. P(Z ≤ z)
c. P(0 ≤ Z ≤ z)
d. P(Z ≥ −z)
ANS: B
74. Given that Z is a standard normal variable, the variance of Z:

a. is always greater than 2.0.
b. is always greater than 1.0.
c. is always equal to 1.0.
d. cannot assume a specific value.
ANS: C
75. Given that Z is a standard normal random variable, a negative value (z) on its distribution would
indicate:
a. z is to the left of the mean.
b. the standard deviation of this Z distribution is negative.
c. the area between zero and the value z is negative.
ANS: A
76. A larger standard deviation of a normal distribution indicates that the distribution becomes:
a. narrower and more peaked.
b. flatter and wider.
c. more skewed to the right.
d. more skewed to the left.
ANS: B
77. In its standardized form, the normal distribution:

a. has a mean of 0 and a standard deviation of 1.
b. has a mean of 1 and a variance of 0.
c. has an area equal to 0.5.
d. cannot be used to approximate discrete probability distributions.
ANS: A
78. Most values of a standard normal distribution lie between:

a. 0 and 1
b. −3 and 3
c. 0 and 3
d. minus infinity and plus infinity
ANS: B
79. Stacy took a math test whose mean was 70 and standard deviation was 5. The total points possible was
100. Stacey's results were reported to be at the 95th percentile. What was Stacey's actual exam score,
rounded to the nearest whole number?
a. 95
b. 78
c. 75
d. 62
ANS: B
80. Tanner took a statistics test whose mean was 80 and standard deviation was 5. The total points
possible were 100. Tanner's score was 2 standard deviations below the mean. What was Tanner's
score, rounded to the nearest whole number?
a. 78
b. 70
c. 90
ANS: B
81. Lamont took a psychology exam whose mean was 70 with standard deviation 5. He also took a
calculus exam whose mean was 80 with standard deviation 10. He scored 85 on both exams. On which
exam did he do better compared to the other students who took the exam?
a. He did better on the psychology exam, comparatively speaking.
b. He did better on the calculus exam, comparatively speaking.
c. He did the same on both exams, relatively speaking.
d. Cannot tell without more information.
ANS: A
82. Suppose Lamont's exam score was at the 80th percentile on an exam whose mean was 90. What was
Lamont's exam score?
a. 76.81
b. 72.00
c. 80.00
d. Cannot tell without more information.
ANS: D
COMPLETION
83. Suppose X has a normal distribution with mean 40 and standard deviation 2. Shifting all the X values
to the right 10 units results in a normal distribution with mean ____________________ and standard
deviation ____________________.
ANS: 50; 2 (fifty; two)
84. ____________________ the value of σ in a normal distribution will make it wider.

ANS: Increasing
85. We standardize a random variable by subtracting its ____________________ and dividing by its
____________________.
ANS: mean; standard deviation
86. Suppose X has a normal distribution with mean 10 and standard deviation 2. The probability that X is
less than 8 is equal to the probability that Z is less than ____________________.
ANS: −1
87. P(Z > 1.9) = ____________________ P(Z < 1.9).

ANS: 1 −
88. P(1 < Z < 2) = P(Z < 2) − ____________________.

ANS: P(Z < 1)
89. The mean of the standard normal distribution is ____________________ and the standard deviation is
____________________.
ANS: zero; one
90. P(Z > 3.00) is approximately ____________________.

ANS: zero
91. P(Z < 3.00) is approximately ____________________.

ANS: one
92. Suppose X is a normal random variable with mean 70 and standard deviation 3. Then P(X = 3) =
____________________.
ANS: zero
93. Z.025 is the value of Z such that the area to the ____________________ of Z is .9750.
ANS: left
SHORT ANSWER
Battery Life
A certain brand of batteries has a lifetime that has a normal distribution with a mean of 3,750 hours
and a standard deviation of 300 hours.
94. {Battery Life Narrative} What proportion of these batteries will last for more than 4,000 hours?
ANS: 0.2033
95. {Battery Life Narrative} What proportion of these batteries will last less than 3,600 hours?
ANS: 0.3085
96. {Battery Life Narrative} What proportion of these batteries will last between 3,800 and 4,100 hours?
ANS: 0.3115
97. {Battery Life Narrative} What lifetime should the manufacturer advertise for these batteries in order
that only 2% of the lamps will wear out before the advertised lifetime?
ANS: 3135
Diet
Researchers studying the effects of a new diet found that the weight loss over a one-month period by
those on the diet was normally distributed with a mean of 10 pounds and a standard deviation of 5
pounds.
98. {Diet Narrative} What proportion of the dieters lost more than 12 pounds?
ANS: 0.3446
99. {Diet Narrative} What proportion of the dieters gained weight?

ANS: 0.0028
100. {Diet Narrative} If a dieter is selected at random, what is the probability that the dieter lost more than
7.5 pounds?
ANS: 0.6915
101. Let X be a normally distributed random variable with a mean of 12 and a standard deviation of 1.5.
What proportions of the values of X are:
a. less than 14
b. more than 8
c. between 10 and 13
ANS:
a. 0.9082
b. 0.9962
c. 0.6568
102. If Z is a standard normal random variable, find the value z for which:
a. the area between 0 and z is 0.3729

b. the area to the right of z is 0.7123
c. the area to the left of z is 0.1736
d. the area between −z and z is 0.6630
ANS:
a. 1.14
b. −.56
c. −.94
d. 0.96
103. If Z is a standard normal random variable, find the following probabilities:
a. P(Z ≤ −1.77)
b. P(Z ≥ −1.96)
c. P(0.35 ≤ Z ≤ 0.85)
d. P(−2.88 ≤ Z ≤ −2.15)
e. P(Z ≤ 1.45)
ANS:
a. 0.0384
b. 0.9750
c. 0.1655
d. 0.0138
e. 0.9265
Calculus Scores
Scores of high school students on a national calculus exam were normally distributed with a mean of
86 and a standard deviation of 4. (Total possible points = 100.)
NARREND
104. {Calculus Scores Narrative} What is the probability that a randomly selected student will have a score
of 80 or higher?
ANS: 0.9332
between 80 and 90?
ANS: 0.7745
of 94 or lower?
ANS: 0.9772
Checking Accounts
A bank has determined that the monthly balances of the checking accounts of its customers are
normally distributed with an average balance of $1,200 and a standard deviation of $250.
107. {Checking Accounts Narrative} What proportion of customers have monthly balances less than
$1,000?
ANS: 0.2119
108. {Checking Accounts Narrative} What proportion of customers have monthly balances more than
$1,125?
ANS: 0.6179
109. {Checking Accounts Narrative} What proportion of customers have monthly balances between $950
and $1,075?
ANS: 0.1498
IT Graduates Salary
The recent average starting salary for new college graduates in IT systems is $47,500. Assume salaries
are normally distributed with a standard deviation of $4,500.
110. {IT Graduates Salary Narrative} What is the probability of a new graduate receiving a salary between
$45,000 and $50,000?
ANS: 0.4246
111. {IT Graduates Salary Narrative} What is the probability of a new graduate getting a starting salary in
excess of $55,000?
ANS: 0.0475
112. {IT Graduates Salary Narrative} What percent of starting salaries are no more than $42,250?
ANS: 12.10%
113. {IT Graduates Salary Narrative} What is the cutoff for the bottom 5% of the salaries?
ANS: $40,097.50
114. {IT Graduates Salary Narrative} What is the cutoff for the top 3% of the salaries?
ANS: $55,960
115. A worker earns $16 per hour at a plant and is told that only 5% of all workers make a higher wage. If
the wage is assumed to be normally distributed and the standard deviation of wage rates is $5 per hour,
find the average wage for the plant workers per hour.
ANS: P(X > 16) = .05 ⇒ (16 − µ) / 5 = 1.645 ⇒ µ = $7.78
TRUE/FALSE
116. The mean and the variance of an exponential distribution are equal to each other.
ANS: F
117. The exponential distribution is suitable to model the length of time that elapses before the first
telephone call is received by a switchboard.
ANS: T
118. The mean and standard deviation of an exponential random variable are equal to each other.
ANS: T
119. In the exponential distribution, X takes on an infinite number of possible values in the given range.
ANS: T
120. If the mean of an exponential distribution is 2, then the value of the parameter λ is 2.0.
ANS: F
121. If the random variable X is exponentially distributed and the parameter of the distribution λ = 4, then
P(X ≤ 1) = 0.25.
ANS: F
122. If the random variable X is exponentially distributed with parameter λ = 5, then the variance of X, σ2 =
V(X) = 0.04.
ANS: T
123. If the random variable X is exponentially distributed with parameter λ = 0.05, then the variance of X,
σ2 = V(X) = 20.
ANS: F
124. If the random variable X is exponentially distributed with parameter λ = 0.05, then the probability P(X
> 20) = 0.3679.
ANS: T
125. If the random variable X is exponentially distributed with parameter λ = 0.05, then the probability P(X
< 5) = .2865.
ANS: F
126. If the random variable X is exponentially distributed with parameter λ = 2, then the probability that X
is between 1 and 2 equals the probability that X is between 2 and 3.
ANS: F
MULTIPLE CHOICES
127. Which of the following is not true for an exponential distribution with parameter λ?
a. µ = 1/λ
b. σ = 1/λ
c. The Y-intercept of f(x) is λ.
ANS: D
128. If the random variable X is exponentially distributed with parameter λ = 3, then the probability P(X ≥
2) equals:
a. 0.3333
b. 0.5000
c. 0.6667
d. 0.0025
ANS: D
129. If the random variable X is exponentially distributed with parameter λ = 1.5, then the probability P(2 ≤
X ≤ 4), up to 4 decimal places, is
a. 0.6667
b. 0.0473
c. 0.5000
d. 0.2500
ANS: B
130. If the random variable X is exponentially distributed with parameter λ = 4, then the probability P(X ≤
0.25), up to 4 decimal places, is
a. 0.6321
b. 0.3679
c. 0.2500
ANS: A
131. Which of the following can have an exponential distribution?

a. Time between phone calls coming in to a technical support desk.
b. Time until the first customer arrives at the bank in the morning.
c. Lifetime of a new battery.
ANS: D
132. The exponential density function f(x):

a. is bell-shaped.
b. is symmetrical.
c. approaches infinity as x approaches zero.
d. approaches zero as x approaches infinity.
ANS: D
133. If the random variable X is exponentially distributed, then the mean of X will be:
a. greater than the median.
b. less than the median.
c. equal to the median.
d. Cannot tell; the answer depends on what λ is.
ANS: A
134. If the mean of an exponential distribution is 2, then the value of the parameter λ is
a. 0
b. 2.0
c. 0.5
d. 1.0
ANS: C
135. If the parameter of an exponential distribution is 1, then which of the following is not true?
a. The density function is e−x for x ≥ 0.
b. The mean is equal to 1.
c. The standard deviation and variance are both equal to 1.
ANS: D
COMPLETION
136. A random variable with density function e−x for x ≥ 0 has an exponential distribution with λ =
____________________.
ANS: one
137. A random variable with density function e−x for x ≥ 0 has an exponential distribution whose mean is
____________________.
ANS: one
138. A random variable with density function 0.01e−x/100 for x ≥ 0 has an exponential distribution whose
mean is ____________________.
ANS: 100
139. The shape of the density function for an exponential distribution is ____________________.
ANS: positively skewed
140. The mean of an exponential random variable is ____________________ the median.

ANS: greater than
141. If X has an exponential distribution, the possible values of X are from ____________________ to
infinity.
ANS: zero
142. An exponential random variable is an example of a(n) ____________________ random variable.

ANS: continuous
143. If X has an exponential distribution with parameter λ, then f(0) = ____________________.

ANS: λ
144. If X has an exponential distribution with parameter λ, then the mean of X is ______________.
ANS: 1/λ
145. If X has an exponential distribution, then f(x) approaches ____________________ as x approaches

infinity.
ANS: zero
146. The y-intercept of the density function for an exponential distribution with parameter 10 is
____________________.
ANS: 10
147. If X has an exponential distribution, its ____________________ is equal to its

____________________.
ANS: mean; standard deviation
SHORT ANSWER
148. Let X be an exponential random variable with λ = 1.50. Find the following:
a. P(X ≥ 2)
b. P(X ≤ 4)
c. P(1 ≤ X ≤ 3)
d. P(X = 1)
ANS:
a. 0.0498 (note that f(x) = 1.50e−1.50x for x ≥ 0)
b. 0.9975
c. 0.2120
d. 0
149. Let X be an exponential random variable with λ = 1.50. Find the following:
a. f(x)
b. The y-intercept of f(x)
ANS:
a. f(x) = 1.50e−1.50x for x ≥ 0
b. (0, 1.50)
150. Suppose X has an exponential distribution with mean 2. Find f(x).

ANS: f(x) = 0.50e−0.50x for x ≥ 0
Truck Salesman
A used truck salesman in a small town states that, on the average, it takes him 5 days to sell a truck.
Assume that the probability distribution of the length of time between sales is exponentially
distributed.
151. {Truck Salesman Narrative} What is the probability that he will have to wait at least 8 days before
making another sale?
ANS: 0.2019 (Note λ is 1/5 = 0.20 days.)
152. {Truck Salesman Narrative} What is the probability that he will have to wait between 6 and 10 days
before making another sale?
ANS: 0.1659
Repair Time
The time it takes a technician to fix a telephone problem is exponentially distributed with a mean of 15
minutes.
153. {Repair Time Narrative} What is the probability density function for the time it takes a technician to
fix a telephone problem?
ANS: f(x) = (1/15)e−x/15, x ≥ 0
154. {Repair Time Narrative} What is the probability that it will take a technician less than 10 minutes to
fix a telephone problem?
ANS: 0.4866
155. {Repair Time Narrative} What is the variance of the time it takes a technician to fix a telephone
problem?
ANS: 225
156. {Repair Time Narrative} What is the probability that it will take a technician between 10 to 15 minutes
to fix a telephone problem?
ANS: 0.1455
Light Bulb Lifetime
The lifetime of a light bulb (in hours) is exponentially distributed with λ = 0.008.
157. {Light Bulb Lifetime Narrative} What is the mean and standard deviation of the light bulb's lifetime?
ANS: µ = σ = 1/λ = 1/0.008 = 125 hours
158. {Light Bulb Lifetime Narrative} Find the probability that a light bulb will last between 120 and 140
hours.
ANS: P(120 ≤ X ≤ 140) = e−0.008(120) − e−0.008(140) = 0.3829 − 0.3263 = 0.0566
159. {Light Bulb Lifetime Narrative} Find the probability that a light bulb will last for:
a. more than 125 hours.
b. at most 125 hours.
c. no more than 125 hours.
d. exactly 125 hours.
e. less than 125 hours.
f. at least 125 hours.
g. no less than 125 hours.
ANS:
a. P(X > 125) = 0.3679
b. P(X ≤ 125) = 0.6321
c. P(X ≤ 125) = 0.6321
d. P(X = 125) = 0
e. P(X < 125) = 0.6321
f. P(X ≥ 125) = 0.3679
g. P(X ≥ 125) = 0.3679
Counter Sales
Suppose that customers arrive at a counter at an average rate of three customers per minute and that
their arrivals follow the Poisson model.
160. {Counter Sales Narrative} Write the probability density function of the distribution of the time that
will elapse before the next customer arrives.
ANS:
Let T = Elapsed time before the next customer arrives. The random variable T follows an exponential
distribution where λ = 3; with mean 1/3 minute between customers. Then the probability density
function of T is f(t) = 3e−3t, t ≥ 0 minutes.
161. {Counter Sales Narrative} Use the appropriate exponential distribution to find the probability that the
next customer will arrive within 1.5 minutes.
ANS: 0.9889
162. {Counter Sales Narrative} Use the appropriate exponential distribution to find the probability that the
next customer will not arrive within the next 2 minutes.
ANS: 0.0025
Phone Orders
The L. L. Bean catalog department that receives the majority of its orders by telephone conducted a
study to determine how long customers were willing to wait on hold before ordering a product. The
length of time was found to be a random variable best approximated by an exponential distribution
with a mean equal to 3 minutes.
163. {Phone Orders Narrative} What is the value of λ, the parameter of the exponential distribution in this
situation?
ANS: Since µ = 3, then
164. {Phone Orders Narrative} What proportion of customers having to hold more than 1.5 minutes will
hang up before placing an order?
ANS:
P(X > 1.5) = e−0.5 = 0.6065
165. {Phone Orders Narrative} Find the waiting time at which only 10% of the customers will continue to
hold.
ANS: P(X > x) = e−λx ⇒ e−x/3 = .10 ⇒ x = 6.908 minutes.
166. {Phone Orders Narrative} Find the time at which 50% of the customers will continue to hold?
ANS: P(X > x) = e−λx ⇒ e−x/3 = .50 ⇒ x = 2.079 minutes.
167. {Phone Orders Narrative} What proportion of callers are put on hold longer than 3 minutes?
ANS:P(X > 3) = e−3/3 = e−1 = 0.3679.
168. {Phone Orders Narrative} What is the probability that a randomly selected caller is placed on hold for
fewer than 6 minutes?
ANS: P(X < 6) = 1 − e−6/3 = 1 − e−2 = 0.8647.
169. {Phone Orders Narrative} What is the probability that a randomly selected caller is placed on hold for
3 to 6 minutes?
ANS: P(3 < X < 6) = e−3/3 − e−6/3 = e−1 − e−2 = 0.2325.

Discrete Probability Distributions
True / False Questions
1. A random variable is a function that assigns numerical values to the outcomes of a random
experiment.
True False
2. A discrete random variable X may assume an (infinitely) uncountable number of distinct

values.
True False
3. A continuous random variable X assumes an (infinitely) uncountable number of distinct

values.
True False
4. A probability distribution of a continuous random variable X gives the probability that X takes
on a particular value x, P(X = x).
True False
5. A cumulative probability distribution of a random variable X is the probability P(X = x), where
X is equal to a particular value x.
True False
6. The expected value of a random variable X can be referred to as the population mean.
True False
7. The variance of a random variable X provides us with a measure of central location of the
distribution of X.
True False
8. The relationship between the variance and the standard deviation is such that the standard
deviation is the positive square root of the variance.
True False
9. A risk-averse consumer may decline a risky prospect even if it offers a positive expected
value.
True False
10. A risk averse consumer ignores risk and makes his/her decisions solely on the basis of
expected value.
True False
11. Given two random variables X and Y, the expected value of their sum, E(X+Y), is equal to the
sum of their individual expected values, E(X) and E(Y) .
True False
12. A Bernoulli process consists of a series of n independent and identical trials of an experiment
such that in each trial there are three possible outcomes and the probabilities of each
outcome remain the same.
True False
13. A binomial random variable is defined as the number of successes achieved in n trials of a
Bernoulli process.
True False
14. A Poisson random variable counts the number of successes (occurrences of a certain event)
over a given interval of time or space.
True False
15. We use the hypergeometric distribution in place of the binomial distribution when we are
sampling with replacement from a population whose size N is significantly larger than the
sample size n.
True False
Multiple Choice Questions

16. Which of the following can be represented by a discrete random variable?
A. The number of obtained spots when rolling a six-sided die
B. The height of college students
C. The average outside temperature taken every day for two weeks
D. The finishing time of participants in a cross-country meet

A. The circumference of a randomly generated circle
B. The time of a flight between Chicago and New York
C. The number of defective light bulbs in a sample of five
D. The average distance achieved in a series of long jumps
18. Which of the following can be represented by a continuous random variable?
A. The time of a flight between Chicago and New York
B. The number of defective light bulbs in a sample of 5
C. The number of arrivals to a drive-thru bank window in a four-hour period
D. The score of a randomly selected student on a five-question multiple-choice quiz

A. The average temperature in Tampa, Florida, during a month of July
B. The number of typos found on a randomly selected page of this test bank
C. The number of students who will get financial assistance in a group of 50 randomly
selected students
D. The number of customers who visit a department store between 10:00 am and 11:00 am
on Mondays
20. What is a characteristic of the mass function of a discrete random variable X?

A. The sum of probabilities P(X=x) over all possible values x is 1.
B. For every possible value x, the probability P(X=x) is between 0 and 1.
C. Describes all possible values x with the associated probabilities P(X=x).
D. All of the above.
21. What are the two key properties of a discrete probability distribution?
A.
and
B.
and
C.
and
D.
and
22. Exhibit 5-1. Consider the following discrete probability distribution.
Refer to Exhibit 5-1. What is the probability that X is 0?

A. 0.10
B. 0.35
C. 0.55
D. 0.65
Refer to Exhibit 5-1. What is the probability that X is greater than 0?

A. 0.10
B. 0.35
C. 0.55
D. 0.65
Refer to Exhibit 5-1. What is the probability that X is negative?

A. 0.00
B. 0.10
C. 0.15
D. 0.35
Refer to Exhibit 5-1. What is the probability that X is less than 5?

A. 0.10
B. 0.15
C. 0.35
D. 0.45
26. Exhibit 5-2. Consider the following cumulative distribution function for the discrete random
variable X.
Refer to Exhibit 5-2. What is the probability that X is less than or equal to 2?
A. 0.14
B. 0.30
C. 0.44
D. 0.56
variable X.
Refer to Exhibit 5-2. What is the probability that X equals 2?

A. 0.14
B. 0.30
C. 0.44
D. 0.56
variable X.

A. 0.14
B. 0.30
C. 0.44
D. 0.56
29. We can think of the expected value of a random variable X as ________________.
A. The long-run average of the random variable values generated over 100 independent
repetitions
B. The long-run average of the random variable values generated over 1000 independent
repetitions
C. The long-run average of the random variable values generated over infinitely many
independent repetitions
D. The long-run average of the random variable values generated over a finite number of
30. The expected value of a random variable X can be referred to or denoted as _____.
A. µ
B. E(X)
C. The population mean
D. All of the above
31. Exhibit 5-3. Consider the following probability distribution.
Refer to Exhibit 5-3. The expected value is ___.

A. 0.9
B. 1.5
C. 1.9
D. 2.5
Refer to Exhibit 5-3. The variance is ____.

A. 0.89
B. 0.94
C. 1.65
D. 1.90
Refer to Exhibit 5-3. The standard deviation is _________.

A. 0.89
B. 0.94
C. 1.65
D. 1.90
Refer to Exhibit 5-4. The expected value is _____.

A. -1.0
B. -0.1
C. 0.1
D. 1.0
35. Exhibit 5-4. Consider the following probability distribution.1.14
Refer to Exhibit 5-4. The variance is _____.

A.
B. 1.29
C. 1.65
D. 1.94
Refer to Exhibit 5-4. The standard deviation is ____.

A. 1.14
B. 1.29
C. 1.65
D. 1.94
37. An analyst has constructed the following probability distribution for firm X's predicted return
for the upcoming year.
The expected value and the variance of this distribution are:
A. Option A
B. Option B
C. Option C
D. Option D
38. An analyst believes that a stock's return depends on the state of the economy, for which she
has estimated the following probabilities:
According to the analyst's estimates, the expected return of the stock is ____.
A. 7.8%
B. 11.4%
C. 11.7%
D. 13.0%
39. An analyst estimates that the year-end price of a stock has the following probabilities:
The stock's expected price at the end of the year is _______.
A. $87.50
B. $88.50
C. $89.00
D. $90.00
40. Exhibit 5-5. The number of homes sold by a realtor during a month has the following
probability distribution:
Refer to Exhibit 5-5. What is the probability that the realtor will sell at least one house during
a month?
A. 0.20
B. 0.40
C. 0.60
D. 0.80
Refer to Exhibit 5-5. What is the probability that the realtor sells no more than one house
during a month?
A. 0.20
B. 0.40
C. 0.60
D. 0.80
Refer to Exhibit 5-5. What is the expected number of homes sold by the realtor during a
month?
A. 1
B. 1.2
C. 1.5
D. 2
Refer to Exhibit 5-5. What is the standard deviation of the number of homes sold by the
realtor during a month?
A. 0.56
B. 0.75
C. 1
D. 1.2
44. Exhibit 5-6. The number of cars sold by a car salesman during each of the last 25 weeks is
the following:
Refer to Exhibit 5-6. What is the probability that the salesman will sell one car during a
week?
A. 0.20
B. 0.40
C. 0.60
D. 0.80
the following:
Refer to Exhibit 5-6. What is the probability that the salesman sells no more than one car
during a week?
A. 0.20
B. 0.40
C. 0.60
D. 0.80
the following:
Refer to Exhibit 5-6. What is the expected number of cars sold by the salesman during a
week?
A. 0
B. 0.8
C. 1
D. 1.5
the following:
Refer to Exhibit 5-6. What is the standard deviation of the number of cars sold by the
salesman during a week?
A. 0.56
B. 0.75
C. 0.80
D. 1
48. A consumer who is risk averse is best characterized as _______________.

A. A consumer who may accept a risky prospect even if the expected gain is negative
B. A consumer who demands a positive expected gain as compensation for taking risk
C. A consumer who completely ignores risk and makes his/her decisions based solely on
expected values
D. None of the above
49. A consumer who is risk neutral is best characterized as ______________.

A. A consumer who may accept a risky prospect even if the expected gain is negative
B. A consumer who demands a positive expected gain as compensation for taking risk
C. A consumer who completely ignores risk and makes his/her decisions based solely on
expected values
D. None of the above
50. How would you characterize a consumer who is risk loving?

A. A consumer who may accept a risky prospect even if the expected gain is negative.
B. A consumer who demands a positive expected gain as compensation for taking risk.
C. A consumer who completely ignores risk and makes his/her decisions solely on the basis
of expected values.
D. None of the above.
57. Which of the following statements is most accurate about a binomial random variable?
A. It has a bell-shaped distribution.
B. It is a continuous random variable.
C. It counts the number of successes in a given number of trials.
D. It counts the number of successes in a specified time interval or region.
58. It is known that 10% of the calculators shipped from a particular factory are defective. What
is the probability that exactly three of five chosen calculators are defective?
A. 0.00729
B. 0.0081
C. 0.081
D. 0.03
is the probability that none in a random sample of four calculators is defective?
A. 0.0010
B. 0.2916
C. 0.3439
D. 0.6561
is the probability that at least one in a random sample of four calculators is defective?
A. 0.0010
B. 0.2916
C. 0.3439
D. 0.6561
61. Thirty percent of the CFA candidates have a degree in economics. A random sample of three
CFA candidates is selected. What is the probability that none of them has a degree in
economics?
A. 0.027
B. 0.300
C. 0.343
D. 0.900
62. Thirty percent of the CFA candidates have a degree in economics. A random sample of three
CFA candidates is selected. What is the probability that at least one of them has a degree in
economics?
A. 0.300
B. 0.343
C. 0.657
D. 0.900
63. Exhibit 5-9. On a particular production line, the likelihood that a light bulb is defective is 5%.
Ten light bulbs are randomly selected.
Refer to Exhibit 5-9. What is the probability that two light bulbs will be defective?
A. 0.0105
B. 0.0746
C. 0.3151
D. 0.5987
Refer to Exhibit 5-9. What is the probability that none of the light bulbs will be defective?
A. 0.0105
B. 0.0746
C. 0.3151
D. 0.5987
Refer to Exhibit 5-9. What are the mean and variance of the number of defective bulbs?
A. 0.475 and 0.475
B. 0.475 and 0.6892
C. 0.50 and 0.475
D. 0.50 and 0.6892
66. Exhibit 5-10. According to a study by the Centers for Disease Control and Prevention, about
33% of U.S. births are Caesarean deliveries (National Vital Statistics Report, Volume 60,
Number 2, November 2011). Suppose seven expectant mothers are randomly selected.
Refer to Exhibit 5-10. What is the probability that 2 of the expectant mothers will have a
Caesarean delivery?
A. 0.0147
B. 0.0606
C. 0.2090
D. 0.3088
Refer to Exhibit 5-10. What is the probability that at least 1 of the expectant mothers will
have a Caesarean delivery?
A. 0.0606
B. 0.2090
C. 0.9394
D. 0.9742
Refer to Exhibit 5-10. The expected number of mothers who will not have a Caesarean
delivery is ______.
A. 1.24
B. 2.31
C. 3.50
D. 4.69
Refer to Exhibit 5-10. What is the standard deviation of the number of mothers who will have
a Caesarean delivery?
A. 1.24
B. 1.54
C. 2.31
D. 4.69
70. Exhibit 5-11. For a particular clothing store, a marketing firm finds that 16% of $10-off
coupons delivered by mail are redeemed. Suppose six customers are randomly selected and
are mailed $10-off coupons.
Refer to Exhibit 5-11. What is the probability that three of the customers redeem the
coupon?
A. 0.0486
B. 0.1912
C. 0.3513
D. 0.4015
Refer to Exhibit 5-11. What is the probability that no more than one of the customers
redeems the coupon?
A. 0.2472
B. 0.3513
C. 0.4015
D. 0.7528
Refer to Exhibit 5-11. What is the probability that at least two of the customers redeem the
coupon?
A. 0.2472
B. 0.3513
C. 0.4015
D. 0.7528
Refer to Exhibit 5-11. What is the expected number of coupons that will be redeemed?
A. 0.81
B. 0.96
C. 3.42
D. 5.04
74. Exhibit 5-12. According to a Department of Labor report, the city of Detroit had a 20%
unemployment rate in May of 2011 (Bureau of Labor Statistics, May, 2011). Eight working-
age residents were chosen at random.
Refer to Exhibit 5-12. What is the probability that exactly one of the residents was
unemployed?
A. 0.0419
B. 0.1678
C. 0.2936
D. 0.3355
Refer to Exhibit 5-12. What is the probability that at least two of the residents were
unemployed?
A. 0.1678
B. 0.3355
C. 0.4967
D. 0.5033
Refer to Exhibit 5-12. What is the probability that exactly four residents were unemployed?
A. 0.0013
B. 0.0091
C. 0.0459
D. 0.1468
Refer to Exhibit 5-12. What was the expected number of unemployed residents, when eight
working-age residents were randomly selected?
A. 1.0
B. 1.6
C. 2.0
D. 6.4
78. Exhibit 5-13. Chauncey Billups, a current shooting guard for the Los Angeles Clippers, has a
career free-throw percentage of 89.4%. Suppose he shoots six free throws in tonight's game.
Refer to Exhibit 5-13. What is the probability that Billups makes all six free throws?
A. 0.1070
B. 0.3632
C. 0.5105
D. 0.6530
Refer to Exhibit 5-13. What is the probability that Billups makes five or more of his free
throws?
A. 0.3632
B. 0.5105
C. 0.8737
D. 0.8940
Refer to Exhibit 5-13. What is the expected number of free throws that Billups will make?
A. 0.636
B. 5.364
C. 5.686
D. 6.000
Refer to Exhibit 5-13. What is the standard deviation of the number of free throws that
Billups will make?
A. 0.5364
B. 0.5686
C. 0.7540
D. 5.6860
82. Which of the following statements is most accurate about a Poisson random variable?
A. It counts the number of successes in a given number of trials.
B. It counts the number of successes in a specified time or space interval.
C. It is a continuous random variable.
D. It has a bell-shaped distribution.
83. Exhibit 5-14. The foreclosure crisis has been particularly devastating in housing markets in
much of the south and west United States, but even when analysis is restricted to relatively
strong housing markets the numbers are staggering. For example, in 2011 an average of three
residential properties were auctioned off each weekday in the city of Boston, up from an
average of one per week in 2005.
Refer to Exhibit 5-14. What is the probability that exactly four foreclosure auctions occurred
on a randomly selected weekday of 2011 in Boston?
A. 0.1680
B. 0.1954
C. 0.2240
D. 0.8153
Refer to Exhibit 5-14. What is the probability that at least one foreclosure auction occurred in
Boston on a randomly selected weekday of 2011?
A. 0.0498
B. 0.1494
C. 0.8009
D. 0.9502
Refer to Exhibit 5-14. What is the probability that no more than two foreclosure auctions
occurred on a randomly selected weekday of 2011 in Boston?
A. 0.1991
B. 0.2240
C. 0.4232
D. 0.5768
Refer to Exhibit 5-14. What is the probability that exactly 10 foreclosure auctions occurred
during a randomly selected five-day week in 2011 in Boston?
A. 0.0008
B. 0.0486
C. 0.1185
D. 0.9514
87. Exhibit 5-15. A bank manager estimates that an average of two customers enter the tellers'
queue every five minutes. Assume that the number of customers that enter the tellers' queue
is Poisson-distributed.
Refer to Exhibit 5-15. What is the probability that exactly three customers enter the queue in
a randomly selected five-minute period?
A. 0.0902
B. 0.1804
C. 0.2240
D. 0.2707
Refer to Exhibit 5-15. What is the probability that less than two customers enter the queue in
A. 0.1353
B. 0.2707
C. 0.4060
D. 0.6767
Refer to Exhibit 5-15. What is the probability that at least two customers enter the queue in
A. 0.1353
B. 0.2707
C. 0.4060
D. 0.5940
Refer to Exhibit 5-15. What is the probability that exactly seven customers enter the queue in
a randomly selected 15-minute period?
A. 0.0034
B. 0.1033
C. 0.1377
D. 0.1606
91. Cars arrive randomly at a tollbooth at a rate of 20 cars per 10 minutes during rush hour. What
is the probability that exactly five cars will arrive over a five-minute interval during rush
hour?
A. 0.0378
B. 0.0500
C. 0.1251
D. 0.5000
92. A roll of steel is manufactured on a processing line. The anticipated number of defects in a
10-foot segment of this roll is two. What is the probability of no defects in 10 feet of steel?
A. 0.0002
B. 0.1353
C. 0.1804
D. 0.8647
93. Exhibit 5-16. According to geologists, the San Francisco Bay Area experiences five
earthquakes with a magnitude of 6.5 or greater every 100 years.
Refer to Exhibit 5-16. What is the probability that no earthquakes with a magnitude of 6.5 or
greater strike the San Francisco Bay Area in the next 40 years?
A. 0.0067
B. 0.0337
C. 0.1353
D. 0.2707
Refer to Exhibit 5-16. What is the probability that more than two earthquakes with a
magnitude of 6.5 or greater will strike the San Francisco Bay Area in the next 40 years?
A. 0.1353
B. 0.2706
C. 0.3233
D. 0.8754
Refer to Exhibit 5-16. What is the probability that one or more earthquakes with a magnitude
of 6.5 or greater will strike the San Francisco Bay Area in the next year?
A. 0.0488
B. 0.1353
C. 0.4878
D. 0.9512
Refer to Exhibit 5-16. What is the standard deviation of the number of earthquakes with a
magnitude of 6.5 or greater striking the San Francisco Bay Area in the next 40 years?
A. 1.414
B. 2.000
C. 2.236
D. 5.000
Essay Questions
104.A six-sided, unfair (weighted) die has the following probability distribution.
Find the probability of rolling a 3 or less.
105.Does the following table describe a discrete probability distribution?
106.An analyst estimates that a stock has the following probabilities of year-end prices.
a. Calculate the expected price at year-end.

b. Calculate the variance and the standard deviation.
107.You have inherited a lottery ticket that may be a $5,000 winner. You have a 35% chance of
winning the $5,000 and a 65% chance of winning $0. You have an opportunity to sell the
lottery for $1500. What should you do if are risk neutral?
108.You have inherited a lottery ticket worth $10,000. You have a 0.25 chance of winning the
$10,000 and a 0.75 chance of winning $0. You have an opportunity to sell the lottery ticket for
$2,500. What should you do if you are risk averse?
111.Suppose your firm is buying five new computers. The manufacturer offers a warranty to
replace any computer that breaks down within three years. Suppose there is a 25% chance
that any given computer breaks down within three years.
a. What is the probability that exactly one of the computers breaks down within five years?
b. What is the probability that at least one of the computers breaks down within five years?
c. Suppose the warranty for five computers costs $700, while a new computer costs $600. Is
the warranty less expensive than the expected cost of replacing the broken computers?
112.Lisa is in a free-throw shooting contest where each contestant attempts 10 free throws. On
average, Lisa makes 77% of the free throws she attempts.
a. What is the probability that she makes exactly eight free throws?
b. What is the probability she makes at least nine free throws?
c. What is the probability she makes less than nine free throws?
d. Lisa is competing against Bill to see who can make the most free throws in 10 attempts.
Suppose Bill goes first and makes seven. Should we expect Lisa to make at least as many as
Bill? Explain.
113.George buys six lottery tickets for $2 each. In addition to the grand prize, there is a 20%
chance that each lottery ticket gives a prize of $4. Assume that these tickets are not grand
prize winners.
a. What is the probability that the tickets pay out more than George spent on them?
b. What is the probability that none of the tickets are winners?
c. What is the probability that at least one of the tickets is a winner?
114.A car salesman has a 5% chance of landing a sale with a random customer on his lot.
Suppose 10 people come on the lot today.
a. What is the probability that he sells exactly three cars today?
b. What is the probability he sells less than two cars today?
c. What is the expected number of cars he is going to sell today?
115.A company is going to release four quarterly reports this year. Suppose the company has a
32% chance of beating analyst expectations each quarter.
a. What is the probability that the company beats analyst expectations every quarter of this
year?
b. What is the probability the company beats analyst expectations more than half the time
this year?
c. What is the probability of the expected number of times the company will beat analyst
expectations this year?
116.Assume that the mean success rate of a Poisson process is six successes per hour.
a. Find the expected number of successes in a 40-minute period.
b. Find the expected number of successes in a three-hour period.
c. Find the probability of at least two successes in a 30-minute period.
118.Due to turnover and promotion, a bank manager knows that, on average, she hires four new
tellers per year. Suppose the number of tellers she hires is Poisson-distributed.
a. What is the probability that in a given year, the manager hires exactly five new tellers?
b. What is the average number of tellers the manager hires in a six-month period?
c. What is the probability that the manager hires at least one new teller in a given six-month
period?
119.A telemarketer knows that, on average, he is able to make three sales in a 30-minute period.
Suppose the number of sales he can make in a given time period is Poisson-distributed.
a. What is the probability that he makes exactly four sales in a 30-minute period?
b. What is the probability that he makes at least two sales in a 30-minute period?
c. What is the probability that he makes five sales in an hour-long period?
120.A construction company found that on average its workers get into four car accidents per
week.
a. What is the probability of exactly six car accidents in a random week?

b. What is the probability that there are less than two car accidents in a random week?
c. What is the probability that there are exactly eight car accidents over the course of three
weeks?
121.During an hour of class, a professor anticipates six questions on average.
a. What is the probability that in a given hour of class, exactly six questions are asked?
b. What is the expected number of questions asked in a 20-minute period?
c. What is the probability that no questions are asked over a 20-minute period?
122.A plane taking off from an airport in New York can expect to run into a flock of birds once out
of every 1,250 take-offs.
a. What is the expected number of bird strikes for 10,000 take-offs?

b. What is the standard deviation of the number of bird strikes for 10,000 take-offs?
c. What is the probability of running into seven flocks of birds in 10,000 take-offs?
Discrete Probability Distributions Answer Key
True / False Questions
1. A random variable is a function that assigns numerical values to the outcomes of a

random experiment.
TRUE
2. A discrete random variable X may assume an (infinitely) uncountable number of distinct

values.
FALSE
A discrete random variable X assumes a countable number of distinct values—that is, the
possible values of X can be put in a finite or infinite sequence.
3. A continuous random variable X assumes an (infinitely) uncountable number of distinct

values.
TRUE
The (infinitely) uncountable values cannot be put in a sequence. In particular, an interval
has an uncountable number of values.
4. A probability distribution of a continuous random variable X gives the probability that X

takes on a particular value x, P(X = x).
FALSE
If X is a continuous random variable, then P(X = x) = 0 for any value x.
5. A cumulative probability distribution of a random variable X is the probability P(X = x),
where X is equal to a particular value x.
FALSE
A cumulative distribution function of a random variable X is the probability P(X ≤ x), where
X is less than or equal to a particular value x.
6. The expected value of a random variable X can be referred to as the population mean.
TRUE
7. The variance of a random variable X provides us with a measure of central location of the
distribution of X.
FALSE
The mean µ provides us with a measure of the central location of the distribution of X,
while the variance is a measure of dispersion around µ.
8. The relationship between the variance and the standard deviation is such that the
standard deviation is the positive square root of the variance.
TRUE
9. A risk-averse consumer may decline a risky prospect even if it offers a positive expected
value.
TRUE
A risk averse consumer also incorporates risk in his/her decision to accept a risky
prospect. Even with a prospect with a positive expected value, the risk averse consumer
must also be compensated for risk.
10. A risk averse consumer ignores risk and makes his/her decisions solely on the basis of
expected value.
FALSE
A risk averse consumer incorporates risk in his/her decision to accept a risky prospect.
11. Given two random variables X and Y, the expected value of their sum, E(X+Y), is equal to
the sum of their individual expected values, E(X) and E(Y).
TRUE
12. A Bernoulli process consists of a series of n independent and identical trials of an

experiment such that in each trial there are three possible outcomes and the probabilities
of each outcome remain the same.
FALSE
A Bernoulli process consists of a series of n independent and identical trials of an
experiment such that in each trial there are only two possible outcomes (success and
failure), and in each trial the probability of a success (and failure) remains the same.
13. A binomial random variable is defined as the number of successes achieved in n trials of a
Bernoulli process.
TRUE
14. A Poisson random variable counts the number of successes (occurrences of a certain
event) over a given interval of time or space.
TRUE
15. We use the hypergeometric distribution in place of the binomial distribution when we are
sampling with replacement from a population whose size N is significantly larger than the
sample size n.
FALSE
We use the hypergeometric distribution in place of the binomial distribution when
sampling without replacement from a population whose size N is not significantly larger
than the sample size n.
A. The number of obtained spots when rolling a six-sided die
B. The height of college students
C. The average outside temperature taken every day for two weeks
D. The finishing time of participants in a cross-country meet
A discrete random variable assumes a countable number of possible values, whereas a
continuous random variable is characterized by uncountable values. The result of rolling a
die in answer a is the only one of the four random variables that assumes a countable
number of possible values. These values are 1, 2, 3, 4, 5, and 6.

A. The circumference of a randomly generated circle
B. The time of a flight between Chicago and New York
C. The number of defective light bulbs in a sample of five
D. The average distance achieved in a series of long jumps
continuous random variable is characterized by uncountable values. The number of
defects in a sample of five light bulbs is the only one of the four random variables with a
countable number of possible values. These values are 0, 1, 2, 3, 4, and 5.
A. The time of a flight between Chicago and New York

B. The number of defective light bulbs in a sample of 5
C. The number of arrivals to a drive-thru bank window in a four-hour period
D. The score of a randomly selected student on a five-question multiple-choice quiz
continuous random variable is characterized by uncountable values. The time of a flight
between Chicago and New York is the only one of the four random variables without a
countable number of possible values; this time may take any value from a time interval.
A. The average temperature in Tampa, Florida, during a month of July

B. The number of typos found on a randomly selected page of this test bank
C. The number of students who will get financial assistance in a group of 50 randomly
selected students
D. The number of customers who visit a department store between 10:00 am and 11:00
am on Mondays
continuous random variable is characterized by uncountable values. The average
temperature is the only one of the four random variables without a countable number of
possible values. (Measured temperatures are typically rounded to a single degree, but the
measurements actually represent a continuous scale.)
20. What is a characteristic of the mass function of a discrete random variable X?
A. The sum of probabilities P(X=x) over all possible values x is 1.

B. For every possible value x, the probability P(X=x) is between 0 and 1.
C. Describes all possible values x with the associated probabilities P(X=x).
D. All of the above.
21. What are the two key properties of a discrete probability distribution?
A.
and
B.
and
C.
and
D.
and
The two key properties are and .

Refer to Exhibit 5-1. What is the probability that X is 0?
A. 0.10
B. 0.35
C. 0.55
D. 0.65
Distractors: Wrong answers include the probability that X is -10, more than 0, and is at
least 0.
A. 0.10
B. 0.35
C. 0.55
D. 0.65
Distractors: Wrong answers include the probability that X is -10, 0, and at least 0.
Refer to Exhibit 5-1. What is the probability that X is negative?
A. 0.00
B. 0.10
C. 0.15
D. 0.35
Distractors: Wrong answers include the probability that X is 0 and X is 10.
Refer to Exhibit 5-1. What is the probability that X is less than 5?
A. 0.10
B. 0.15
C. 0.35
D. 0.45
Distractors: Wrong answers include the probability that X is -10, 0, or 10.

26. Exhibit 5-2. Consider the following cumulative distribution function for the discrete
random variable X.
Refer to Exhibit 5-2. What is the probability that X is less than or equal to 2?
A. 0.14
B. 0.30
C. 0.44
D. 0.56
Distractors: Wrong answers include , , and .
random variable X.
Refer to Exhibit 5-2. What is the probability that X equals 2?
A. 0.14
B. 0.30
C. 0.44
D. 0.56

random variable X.
A. 0.14
B. 0.30
C. 0.44
D. 0.56

29. We can think of the expected value of a random variable X as ________________.
A. The long-run average of the random variable values generated over 100 independent
repetitions
B. The long-run average of the random variable values generated over 1000 independent
repetitions
C. The long-run average of the random variable values generated over infinitely many
D. The long-run average of the random variable values generated over a finite number of
30. The expected value of a random variable X can be referred to or denoted as _____.
A. µ
B. E(X)
C. The population mean
D. All of the above
The expected value of a random variable X is denoted by E(X), and can be referred to as
the population mean for which the typical notation is μ.
Refer to Exhibit 5-3. The expected value is ___.
A. 0.9
B. 1.5
C. 1.9
D. 2.5
= 0(0.1) + 1(0.2) + 2(0.4) + 3(0.3) = 1.9

Refer to Exhibit 5-3. The variance is ____.
A. 0.89
B. 0.94
C. 1.65
D. 1.90
= 0(0.1) + 1(0.2) + 2(0.4) + 3(0.3) = 1.9
= (0 - 1.9)2(0.1) + (1 - 1.9)2(0.2) + (2 -
1.9)2(0.4) + (3 - 1.9)2(0.3) = 0.361 + 0.162 + 0.004 + 0.363 = 0.890
Distractors: Wrong answers include the mean and the standard deviation.
Refer to Exhibit 5-3. The standard deviation is _________.
A. 0.89
B. 0.94
C. 1.65
D. 1.90
= 0(0.1) + 1(0.2) + 2(0.4) + 3(0.3) = 1.9
= (0 - 1.9)2(0.1) + (1 - 1.9)2(0.2) + (2 - 1.9)2(0.4)

+ (3 - 1.9)2(0.3) = 0.361 + 0.162 + 0.004 + 0.363 = 0.890
Distractors: Wrong answers include the mean and the variance.
Refer to Exhibit 5-4. The expected value is _____.
A. -1.0
B. -0.1
C. 0.1
D. 1.0
= -2(0.2) + -1(0.1) + 0(0.3) + 1(0.4) = -0.1

Refer to Exhibit 5-4. The variance is _____.
A. 1.14
B. 1.29
C. 1.65
D. 1.94
= -2(0.2) + -1(0.1) + 0(0.3) + 1(0.4) = -0.1
= (-2 + 0.1)2(0.2) + (-1 + 0.1)2(0.1) + (0 +

0.1)2(0.3) + (1 + 0.1)2(0.4) = 0.722 + 0.081 + 0.003 + 0.484 = 1.290
Distractors: Wrong answers include the standard deviation.
Refer to Exhibit 5-4. The standard deviation is ____.
A. 1.14
B. 1.29
C. 1.65
D. 1.94
= -2(0.2) + -1(0.1) + 0(0.3) + 1(0.4) = -0.1
= (-2 + 0.1)2(0.2) + (-1 + 0.1)2(0.1) + (0 +

0.1)2(0.3) + (1 + 0.1)2(0.4) = 0.722 + 0.081 + 0.003 + 0.484 = 1.290
Distractors: Wrong answers include the variance.

37. An analyst has constructed the following probability distribution for firm X's predicted
return for the upcoming year.
The expected value and the variance of this distribution are:
A. Option A
B. Option B
C. Option C
D. Option D
Distractors: Wrong answers include the unweighted average and the standard deviation.
38. An analyst believes that a stock's return depends on the state of the economy, for which
she has estimated the following probabilities:
According to the analyst's estimates, the expected return of the stock is ____.
A. 7.8%
B. 11.4%
C. 11.7%
D. 13.0%
= 0.15(0.1) + 0.13(0.6) + 0.07(0.3) = 0.114

39. An analyst estimates that the year-end price of a stock has the following probabilities:
The stock's expected price at the end of the year is _______.
A. $87.50
B. $88.50
C. $89.00
D. $90.00
= 80(0.1) + 85(0.3) + 90(0.4) + 95(0.02) = 88.50

Refer to Exhibit 5-5. What is the probability that the realtor will sell at least one house
during a month?
A. 0.20
B. 0.40
C. 0.60
D. 0.80
Refer to Exhibit 5-5. What is the probability that the realtor sells no more than one house
during a month?
A. 0.20
B. 0.40
C. 0.60
D. 0.80

Refer to Exhibit 5-5. What is the expected number of homes sold by the realtor during a
month?
A. 1
B. 1.2
C. 1.5
D. 2
= 0(0.2) + 1(0.4) + 2(0.4) = 1.

Distractors: Wrong answers include the unweighted mean
Refer to Exhibit 5-5. What is the standard deviation of the number of homes sold by the
realtor during a month?
A. 0.56
B. 0.75
C. 1
D. 1.2
Distractors: Wrong answers include the variance, expected value, and unweighted mean.
44. Exhibit 5-6. The number of cars sold by a car salesman during each of the last 25 weeks
is the following:
Refer to Exhibit 5-6. What is the probability that the salesman will sell one car during a
week?
A. 0.20
B. 0.40
C. 0.60
D. 0.80

is the following:
Refer to Exhibit 5-6. What is the probability that the salesman sells no more than one car
during a week?
A. 0.20
B. 0.40
C. 0.60
D. 0.80
is the following:
Refer to Exhibit 5-6. What is the expected number of cars sold by the salesman during a
week?
A. 0
B. 0.8
C. 1
D. 1.5
= 0(0.4) + 1(0.4) + 2(0.2) = 0.

Distractors: Wrong answers include unweighted mean.
is the following:
Refer to Exhibit 5-6. What is the standard deviation of the number of cars sold by the
salesman during a week?
A. 0.56
B. 0.75
C. 0.80
D. 1
Distractors: Wrong answers include the variance, expected value, and unweighted mean.
57. Which of the following statements is most accurate about a binomial random variable?
A. It has a bell-shaped distribution.
B. It is a continuous random variable.
C. It counts the number of successes in a given number of trials.
D. It counts the number of successes in a specified time interval or region.
58. It is known that 10% of the calculators shipped from a particular factory are defective.
What is the probability that exactly three of five chosen calculators are defective?
A. 0.00729
B. 0.0081
C. 0.081
D. 0.03
There are n = 5 trials, and a defect is considered a success with p = 0.10 and q = 1 - p =
0.90. The probability of getting exactly x = 3 successes is
= = 0.0081. This result can also

be found using Excel's BINOM.DIST function. (See the text for details.)
What is the probability that none in a random sample of four calculators is defective?
A. 0.0010
B. 0.2916
C. 0.3439
D. 0.6561

Distractors: Wrong answers include the probability of exactly one calculator being
defective, and at least one calculator being defective.
What is the probability that at least one in a random sample of four calculators is
defective?
A. 0.0010
B. 0.2916
C. 0.3439
D. 0.6561
0.90. The probability of getting at least one success is
. This result can also be found using
Excel's BINOM.DIST function. (See the text for details.)
Distractors: Wrong answer choices include the probabilities of exactly 0 calculators and of
exactly 1 calculator being defective.
61. Thirty percent of the CFA candidates have a degree in economics. A random sample of
three CFA candidates is selected. What is the probability that none of them has a degree
in economics?
A. 0.027
B. 0.300
C. 0.343
D. 0.900
There are n = 3 trials, with p = 0.30 and q = 1 - p = 0.70. The probability of getting exactly
x = 0 successes is

Distractors: Wrong answer choices include the probability that all three have a degree in
economics.
62. Thirty percent of the CFA candidates have a degree in economics. A random sample of
three CFA candidates is selected. What is the probability that at least one of them has a
degree in economics?
A. 0.300
B. 0.343
C. 0.657
D. 0.900
There are n = 3 trials, with p = 0.30 and q = 1 - p = 0.70. The probability of getting at least
one success is

Distractors: Wrong answer choices include the probability that exactly 0 have a degree in
economics.
63. Exhibit 5-9. On a particular production line, the likelihood that a light bulb is defective is
5%. Ten light bulbs are randomly selected.
Refer to Exhibit 5-9. What is the probability that two light bulbs will be defective?
A. 0.0105
B. 0.0746
C. 0.3151
D. 0.5987
= = 0.0746. This result can

also be found using Excel's BINOM.DIST function. (See the text for details.)
Distractors: Wrong answer choices include the probabilities that exactly zero, one, and
three light bulbs are defective.
Refer to Exhibit 5-9. What is the probability that none of the light bulbs will be defective?
A. 0.0105
B. 0.0746
C. 0.3151
D. 0.5987
= = 0.5987. This result can

also be found using Excel's BINOM.DIST function. (See the text for details.)
Distractors: Wrong answer choices include the probabilities that exactly one, two, and
three light bulbs are defective.
Refer to Exhibit 5-9. What are the mean and variance of the number of defective bulbs?
A. 0.475 and 0.475

B. 0.475 and 0.6892
C. 0.50 and 0.475
D. 0.50 and 0.6892
66. Exhibit 5-10. According to a study by the Centers for Disease Control and Prevention,
about 33% of U.S. births are Caesarean deliveries ( National Vital Statistics Report, Volume
60, Number 2, November 2011). Suppose seven expectant mothers are randomly selected.
Refer to Exhibit 5-10. What is the probability that 2 of the expectant mothers will have a
Caesarean delivery?
A. 0.0147
B. 0.0606
C. 0.2090
D. 0.3088
The probability of two successes in seven Bernoulli trials is
. This result can also be found using Excel's

BINOM.DIST function. (See the text for details.)
Distractors: Wrong answers include the probability of zero and one Caesarean deliveries
as well as
about 33% of U.S. births are Caesarean deliveries (National Vital Statistics Report, Volume
Refer to Exhibit 5-10. What is the probability that at least 1 of the expectant mothers will
A. 0.0606
B. 0.2090
C. 0.9394
D. 0.9742
The probability of zero successes in seven Bernoulli trials is
. The probability of at least one success is

Distractors: Wrong answers include the probability of exactly zero and one Caesarean
deliveries.
Refer to Exhibit 5-10. The expected number of mothers who will not have a Caesarean
delivery is ______.
A. 1.24
B. 2.31
C. 3.50
D. 4.69
The probability that a randomly selected mother will not have a Caesarean delivery is 0.67.
The expected number of mothers who will not have a Caesarean delivery is (0.67)(7) =
4.69.
Distractors: Wrong answers include the expected number of mothers who will have a
Caesarean delivery.
Refer to Exhibit 5-10. What is the standard deviation of the number of mothers who will
A. 1.24
B. 1.54
C. 2.31
D. 4.69
The variance of the probability distribution is (7)(0.33)(0.67) = 1.54. The standard
deviation is
Distractors: Wrong answers include the variance, the expected number of mothers who
will have a Caesarean delivery, and the expected number of mothers who will not have a
Caesarean delivery.
coupons delivered by mail are redeemed. Suppose six customers are randomly selected
and are mailed $10-off coupons.
Refer to Exhibit 5-11. What is the probability that three of the customers redeem the
coupon?
A. 0.0486
B. 0.1912
C. 0.3513
D. 0.4015
The probability of three successes in six Bernoulli trials is
This result can also be found using Excel's

BINOM.DIST function. (See the text for details.)
Distractors: Wrong answers include the probability of exactly 1 success and exactly 0
successes.
Refer to Exhibit 5-11. What is the probability that no more than one of the customers
redeems the coupon?
A. 0.2472
B. 0.3513
C. 0.4015
D. 0.7528
The probability of no more than one success in six Bernoulli trials is
. This
result can also be found using Excel's BINOM.DIST function. (See the text for details.)
Distractors: Wrong answers include the probability of exactly one success, exactly zero
successes, and more than one success.
Refer to Exhibit 5-11. What is the probability that at least two of the customers redeem
the coupon?
A. 0.2472
B. 0.3513
C. 0.4015
D. 0.7528
The probability of at least two successes in six Bernoulli trials is
. Where,
.
Therefore, . This result can also be
found using Excel's BINOM.DIST function. (See the text for details.)
Distractors: Wrong answers include the probability of exactly one success, exactly zero
successes, and no more than one success.
Refer to Exhibit 5-11. What is the expected number of coupons that will be redeemed?
A. 0.81
B. 0.96
C. 3.42
D. 5.04
The expected number of coupons is (0.16)(6) = 0.96.
Distractors: Wrong answers include the expected number of coupons that will not be
redeemed and the variance of the probability distribution.
Refer to Exhibit 5-12. What is the probability that exactly one of the residents was
unemployed?
A. 0.0419
B. 0.1678
C. 0.2936
D. 0.3355
The probability of one success in eight Bernoulli trials is
This result can also be found using

Excel's BINOM.DIST function. (See the text for details.
Distractors: Wrong answers include the probability of zero and two unemployed workers
as well as
Refer to Exhibit 5-12. What is the probability that at least two of the residents were
unemployed?
A. 0.1678
B. 0.3355
C. 0.4967
D. 0.5033
The probability of zero successes in eight Bernoulli trials and one success in eight trials
are and
The probability of at least two successes is
This result can

also be found using Excel's BINOM.DIST function. (See the text for details.
Distractors: Wrong answers include the probability of exactly zero, one, and two people
unemployed.
Refer to Exhibit 5-12. What is the probability that exactly four residents were
unemployed?
A. 0.0013
B. 0.0091
C. 0.0459
D. 0.1468
The probability of four successes in eight Bernoulli trials is

Distractors: Wrong answers include the probability of exactly three and five people
unemployed.
Refer to Exhibit 5-12. What was the expected number of unemployed residents, when
eight working-age residents were randomly selected?
A. 1.0
B. 1.6
C. 2.0
D. 6.4
The Expected value is .

Distractors: Wrong answers include the correct answer rounded up, rounded down, and q
times eight.
78. Exhibit 5-13. Chauncey Billups, a current shooting guard for the Los Angeles Clippers, has
a career free-throw percentage of 89.4%. Suppose he shoots six free throws in tonight's
game.
Refer to Exhibit 5-13. What is the probability that Billups makes all six free throws?
A. 0.1070
B. 0.3632
C. 0.5105
D. 0.6530
The probability of six successes in six Bernoulli trials is

Distractors: Wrong answers include the probability of exactly five and four successful free
throws.
game.
Refer to Exhibit 5-13. What is the probability that Billups makes five or more of his free
throws?
A. 0.3632
B. 0.5105
C. 0.8737
D. 0.8940
The probability of five or more successes in six Bernoulli trials is
. This result
can also be found using Excel's BINOM.DIST function. (See the text for details.)
Distractors: Wrong answers include the probability of exactly five successes and exactly
six successes.
game.
Refer to Exhibit 5-13. What is the expected number of free throws that Billups will make?
A. 0.636
B. 5.364
C. 5.686
D. 6.000
The expected number of coupons is (0.894)(6) = 5.364.
Distractors: Wrong answers include the expected number of free throws that will not be
made, and the variance of the probability distribution off one decimal place.
game.
Refer to Exhibit 5-13. What is the standard deviation of the number of free throws that
Billups will make?
A. 0.5364
B. 0.5686
C. 0.7540
D. 5.6860
The variance of the probability distribution is (6)(0.894)(1 - 0.894) = 0.5686. The standard
deviation is .
Distractors: Wrong answers include the variance, the expected value off a decimal place,
and the variance off a decimal place.
82. Which of the following statements is most accurate about a Poisson random variable?
A. It counts the number of successes in a given number of trials.
B. It counts the number of successes in a specified time or space interval.
C. It is a continuous random variable.
D. It has a bell-shaped distribution.
83. Exhibit 5-14. The foreclosure crisis has been particularly devastating in housing markets
in much of the south and west United States, but even when analysis is restricted to
relatively strong housing markets the numbers are staggering. For example, in 2011 an
average of three residential properties were auctioned off each weekday in the city of
Boston, up from an average of one per week in 2005.
Refer to Exhibit 5-14. What is the probability that exactly four foreclosure auctions
A. 0.1680
B. 0.1954
C. 0.2240
D. 0.8153
The probability that exactly four auctions occur is .

This result can also be found using Excel's POISSON.DIST function. (See the text for
details.)
Distractors: Wrong answers include the probability that two auctions occur, and the
probability that no more than four auctions occur.
Exhibit 5-14. The foreclosure crisis has been particularly devastating in housing markets
Refer to Exhibit 5-14. What is the probability that at least one foreclosure auction
occurred in Boston on a randomly selected weekday of 2011?
A. 0.0498
B. 0.1494
C. 0.8009
D. 0.9502
The probability that at least one success occurs is
This result can also be found using

Excel's POISSON.DIST function. (See the text for details.)
Distractors: Wrong answers include the probability that exactly zero auctions occur,
exactly one auction occurs, and more than one auction occurs.
Refer to Exhibit 5-14. What is the probability that no more than two foreclosure auctions
A. 0.1991
B. 0.2240
C. 0.4232
D. 0.5768
The probability of no more than two successes is
. Using the Poisson probability distribution
function, . This result can also be found using

Distractors: Wrong answers include the probability that no more than one auction occurs,
that two auctions occur, and that more than two auctions occur.
Refer to Exhibit 5-14. What is the probability that exactly 10 foreclosure auctions occurred
during a randomly selected five-day week in 2011 in Boston?
A. 0.0008
B. 0.0486
C. 0.1185
D. 0.9514
The mean over a four-day period is . The probability that exactly 10
successes occur over a four-day period is This result can

also be found using Excel's POISSON.DIST function. (See the text for details.)
Distractors: Wrong answers include the probability that at most 10 successes occur, and
the probability that 10 successes occur with mean 3.
87. Exhibit 5-15. A bank manager estimates that an average of two customers enter the
tellers' queue every five minutes. Assume that the number of customers that enter the
tellers' queue is Poisson-distributed.
Refer to Exhibit 5-15. What is the probability that exactly three customers enter the queue
in a randomly selected five-minute period?
A. 0.0902
B. 0.1804
C. 0.2240
D. 0.2707
The probability that exactly three customers enter the queue is
. This result can also be found using Excel's POISSON.DIST

function. (See the text for details.)
Distractors: Wrong answers include the probability that exactly two customers enter the
queue and exactly four customers enter the queue.
Refer to Exhibit 5-15. What is the probability that less than two customers enter the
queue in a randomly selected five-minute period?
A. 0.1353
B. 0.2707
C. 0.4060
D. 0.6767
The probability that less than two customers enter the queue is
This result can also be

found using Excel's POISSON.DIST function. (See the text for details.)
Distractors: Wrong answers include the probability that exactly zero customers enter the
queue, exactly one customer enters the queue, and no more than two customers enter the
queue.
Refer to Exhibit 5-15. What is the probability that at least two customers enter the queue
in a randomly selected five-minute period?
A. 0.1353
B. 0.2707
C. 0.4060
D. 0.5940
The probability that at least two customers enter the queue is
. This result can

also be found using Excel's POISSON.DIST function. (See the text for details.)
Distractors: Wrong answers include the probability that exactly zero customers enter the
queue, exactly one customer enters the queue, and no more than one customer enters the
queue.
Refer to Exhibit 5-15. What is the probability that exactly seven customers enter the
queue in a randomly selected 15-minute period?
A. 0.0034
B. 0.1033
C. 0.1377
D. 0.1606
Over a 15-minute period, . The probability that exactly seven customers enter
the queue is . This result can also be found using Excel's

POISSON.DIST function. (See the text for details.)
Distractors: Wrong answers include the probability that exactly six customers enter the
queue, the probability that exactly eight customers enter the queue, and the probability of
seven customers enter the queue with an unadjusted mean of two.
91. Cars arrive randomly at a tollbooth at a rate of 20 cars per 10 minutes during rush hour.
What is the probability that exactly five cars will arrive over a five-minute interval during
rush hour?
A. 0.0378
B. 0.0500
C. 0.1251
D. 0.5000
Over a five-minute period, . The probability that exactly five cars arrive
over a five-minute interval is . This result can also be found

using Excel's POISSON.DIST function. (See the text for details.)
92. A roll of steel is manufactured on a processing line. The anticipated number of defects in a
10-foot segment of this roll is two. What is the probability of no defects in 10 feet of
steel?
A. 0.0002
B. 0.1353
C. 0.1804
D. 0.8647
The probability of no defects in 10 feet of steel is . This result

can also be found using Excel's POISSON.DIST function. (See the text for details.)
Distractors: Wrong answers include the probability that one defect and at least one defect
is found in 10 feet of steel.
Refer to Exhibit 5-16. What is the probability that no earthquakes with a magnitude of 6.5
or greater strike the San Francisco Bay Area in the next 40 years?
A. 0.0067
B. 0.0337
C. 0.1353
D. 0.2707
The mean number of successes in 40 years is equal to . Using the Poisson
probability distribution function, . This result can also be

found using Excel's POISSON.DIST function. (See the text for details.)
Distractors: Wrong answers include the probability of one earthquake and the probability
of no earthquakes given the mean number of earthquakes was equal to five.
Refer to Exhibit 5-16. What is the probability that more than two earthquakes with a
magnitude of 6.5 or greater will strike the San Francisco Bay Area in the next 40 years?
A. 0.1353
B. 0.2706
C. 0.3233
D. 0.8754
The probability of more than two earthquakes occurring is
. Using the Poisson probability
distribution function, . This result can

also be found using Excel's POISSON.DIST function. (See text for details.)
Distractors: Wrong answers include the probability that 2 earthquakes occur, the
probability that more than two earthquakes occur given the mean number of successes
was five, and the probability of no earthquakes.
Refer to Exhibit 5-16. What is the probability that one or more earthquakes with a
magnitude of 6.5 or greater will strike the San Francisco Bay Area in the next year?
A. 0.0488
B. 0.1353
C. 0.4878
D. 0.9512
The mean number of earthquakes in one year is equal to . Using the

Poisson probability distribution function,
. This result can also be found

using Excel's POISSON.DIST function. (See text for details.)
Distractors: Wrong answers include the probability of no earthquakes in the next year.
Refer to Exhibit 5-16. What is the standard deviation of the number of earthquakes with a
magnitude of 6.5 or greater striking the San Francisco Bay Area in the next 40 years?
A. 1.414
B. 2.000
C. 2.236
D. 5.000
The mean number of earthquakes in 40 years is equal to . The standard
deviation is equal to the square root of the mean number of successes: .

Distractors: Wrong answers include the variance, the variance if the mean number of
successes is equal to five, and the standard deviation if the mean number of successes is
equal to five.
Essay Questions
104. A six-sided, unfair (weighted) die has the following probability distribution.
Find the probability of rolling a 3 or less.
0.6667
Feedback: The probability of rolling a 3 or less is the sum of the probabilities of rolling a 1,
2, and 3. Therefore, the answer is P(X = 1) + P(X = 2) + P(X = 3) = 1/4 + 1/12 + 1/3 =
8/12 = 0.6667.
105. Does the following table describe a discrete probability distribution?
No, the sum of probabilities is 0.9 rather than 1.
Feedback: The two properties that must be met are:
• The probability of each outcome is a number between 0 and 1, or equivalently,
.
• The sum of the probabilities over all mutually exclusive and exhaustive values of X
equals 1. In other words, where the represent an exhaustive list

of all distinct outcomes of X.
106. An analyst estimates that a stock has the following probabilities of year-end prices.
a. Calculate the expected price at year-end.

b. Calculate the variance and the standard deviation.
E(X) = 88, Var(X) = 21, and SD(X) = 4.58
Feedback:
= -80(0.1) + 85(0.4) + 1(0.3) + 2(0.2) = 88
= (80 - 88)2(0.1) + (80 - 88)2(0.4) + (80 -

88)2(0.3) + (80 - 88)2(0.2) = 21.
107. You have inherited a lottery ticket that may be a $5,000 winner. You have a 35% chance of
winning the $5,000 and a 65% chance of winning $0. You have an opportunity to sell the
lottery for $1500. What should you do if are risk neutral?
E(X) = $1750. Therefore, keep the ticket, since the expected value is greater than the sale
price ($1500).
Feedback: A risk neutral consumer completely ignores risk and always accepts a prospect
that offers a positive expected gain. Using the expected value formula, we find
= 5000(0.35) + 0(0.65) = $1750.
The expected value ($1750) is greater than the sale price of the lottery ($1500); therefore,
you expect to gain more by keeping the lottery ticket.
108. You have inherited a lottery ticket worth $10,000. You have a 0.25 chance of winning the
$10,000 and a 0.75 chance of winning $0. You have an opportunity to sell the lottery ticket
for $2,500. What should you do if you are risk averse?
Sell the lottery ticket.
Feedback: A risk averse consumer may decline a risky prospect even if it offers a positive
expected gain; he/she will definitely decline a risky prospect if there is no positive
expected gain. Using the expected value formula, we find =

10,000(0.25) + 0(0.75) = $2500. Here, the expected value of $2500 is the same as the sale
price of $2,500 of the lottery. Since the risky prospect does not offer a positive expected
gain, a risk averse person would sell the ticket rather than hold out to have a chance of
winning $10,000.
111. Suppose your firm is buying five new computers. The manufacturer offers a warranty to
replace any computer that breaks down within three years. Suppose there is a 25% chance
that any given computer breaks down within three years.
a. What is the probability that exactly one of the computers breaks down within five years?
b. What is the probability that at least one of the computers breaks down within five
years?
c. Suppose the warranty for five computers costs $700, while a new computer costs $600.
Is the warranty less expensive than the expected cost of replacing the broken
computers?
a. ; b. ; c. Yes.
Feedback: a. The probability of one success in five trials
is .
b.
c. The expected number of computers that will break down is np = (5)(0.25) =

1.25. Since to replace a broken computer, the firm must pay $600, the expected cost of
replacing the broken computers is (1.25)($600) = $750. The warranty, which costs $700, is
less expensive.
These results can also be found using Excel's BINOM.DIST function. (See the text for
details.)
112 Lisa is in a free-throw shooting contest where each contestant attempts 10 free throws. On
. average, Lisa makes 77% of the free throws she attempts.
a. What is the probability that she makes exactly eight free throws?
b. What is the probability she makes at least nine free throws?
c. What is the probability she makes less than nine free throws?
d. Lisa is competing against Bill to see who can make the most free throws in 10 attempts.
Suppose Bill goes first and makes seven. Should we expect Lisa to make at least as many as
Bill? Explain.
a. ; b. ; c. ;
d. Yes, on average we expect Lisa to make as many free throws as Bill since 7.7 > 7.
Feedback: a. ;
b. ,
where and
Therefore,
c. The probability of less than nine successes is From part b, we

know that Therefore,
Results a-c can also be found using Excel's BINOM.DIST function. (See the text for details.)
d. The expected value of a binomial probability distribution is The expected

number of free throws that Lisa can expect to make is (0.77)(10) = 7.7. Since this is greater
than seven, Lisa will, on average, make seven or more free throws.
11 George buys six lottery tickets for $2 each. In addition to the grand prize, there is a 20%
3. chance that each lottery ticket gives a prize of $4. Assume that these tickets are not grand
prize winners.
a. What is the probability that the tickets pay out more than George spent on them?
b. What is the probability that none of the tickets are winners?
c. What is the probability that at least one of the tickets is a winner?
a. ; b. ; c. .
Feedback: a. The tickets cost $12 total. In order for George to make more than $12, more
than three of them need to be winners. ,

where
and
Therefore, .
b. The probability that none of the tickets are winners
is
c. The probability that at least one of the tickets is a winner
is
These results can also be found using Excel's BINOM.DIST function. (See the text for details.)
114. A car salesman has a 5% chance of landing a sale with a random customer on his lot.
Suppose 10 people come on the lot today.
a. What is the probability that he sells exactly three cars today?

b. What is the probability he sells less than two cars today?
c. What is the expected number of cars he is going to sell today?
a. 0.0105; b. 0.9139; c. 0.5
Feedback: a. The probability that he sells exactly three cars today
is ; .
b. The probability he sells less than two cars is equal
to
Results a and b can also be found using Excel's BINOM.DIST function. (See the text for
details.)
c. The expected number of cars he is going to sell is np = (10)(0.05) = 0.5.
115. A company is going to release four quarterly reports this year. Suppose the company has a
32% chance of beating analyst expectations each quarter.
a. What is the probability that the company beats analyst expectations every quarter of
this year?
b. What is the probability the company beats analyst expectations more than half the time
this year?
c. What is the probability of the expected number of times the company will beat analyst
expectations this year?
a. ; b. ; c. 1.28
Feedback: a. The probability of beating analyst expectations every quarter
is .
b. The probability of beating analyst expectations more than half the time is equal
to .
Results a and b can also be found using Excel's BINOM.DIST function. (See the text for
details.)
c. The expected number of times the company will beat analyst expectations is equal to
np = (4)(0.32) = 1.28.
116. Assume that the mean success rate of a Poisson process is six successes per hour.
a. Find the expected number of successes in a 40-minute period.

b. Find the expected number of successes in a three-hour period.
c. Find the probability of at least two successes in a 30-minute period.
a. 4; b. 18; c. 0.8008
Feedback: a. Since there are six successes expected in an hour, and 40 minutes is two-
thirds of an hour, there will be 6 × (2/3) = 4 expected successes in 40 minutes.
b. Since there are six successes expected in an hour, the expected number of successes
in three hours is 3 × 6 = 18.
c. Since we are looking at a half-hour period, the mean number of successes is 3 per this
period. P(X ≥ 2) = 1 -[P(X = 0) + P(X = 1)] = = 1 - 0.0498 - 0.1494

= 0.8008. This result can also be found using Excel's POISSON.DIST function. (See the
text for details.)
117. Sam is a trucker and believes that for every 60 miles he drives on the freeway in Indiana,
there is an average of 2 state troopers checking his speed with a radar gun.
a. What is the probability that at least one trooper is checking his speed on a randomly
selected 60-mile stretch?
b. What is the probability that exactly three troopers are checking his speed on a randomly
selected 60-mile stretch?
c. Sam drives 240 miles a day. What is the average number of state troopers that check his
speed on a given day?
d. Sam drives 240 miles a day. What is the probability that exactly five troopers check
Sam's speed on a randomly selected day?
a. ; b. ; c. Eight troopers;
d.
Feedback: a. The probability that at least one trooper is checking his speed
is .
b. The probability that exactly three troopers are checking his speed
is .
c. Since two troopers, on average, check his speed every 60 miles, eight troopers, on
average, will check his speed every 240 miles; d. The probability that exactly five troopers
check his speed over 240 miles is

These results can also be found using Excel's POISSON.DIST function. (See the text for
details.)
118. Due to turnover and promotion, a bank manager knows that, on average, she hires four
new tellers per year. Suppose the number of tellers she hires is Poisson-distributed.
a. What is the probability that in a given year, the manager hires exactly five new tellers?
b. What is the average number of tellers the manager hires in a six-month period?
c. What is the probability that the manager hires at least one new teller in a given six-
month period?
a. ; b. Two tellers; c.
Feedback: a. The probability that the manager must hire five tellers
is .
b. In a given six-month period, the manager hires an average of 2 (4/2) new tellers.
c. The probability that the manager hires at least one teller
is
details.)
1 A telemarketer knows that, on average, he is able to make three sales in a 30-minute period.
1 Suppose the number of sales he can make in a given time period is Poisson-distributed.
9.
a. What is the probability that he makes exactly four sales in a 30-minute period?
b. What is the probability that he makes at least two sales in a 30-minute period?
c. What is the probability that he makes five sales in an hour-long period?
a. ; b. ; c.
Feedback: a. The probability that the telemarketer makes exactly four sales
is .
b. The probability that he makes at least two sales
is where and
Therefore, ; c. The
probability that he makes five sales in one hour is

details.)
120. A construction company found that on average its workers get into four car accidents per
week.
a. What is the probability of exactly six car accidents in a random week?

b. What is the probability that there are less than two car accidents in a random week?
c. What is the probability that there are exactly eight car accidents over the course of
three weeks?
a. 0.1042; b. 0.0916; c. 0.0655
Feedback: a. The probability of exactly six car accidents in a week is equal
to .
b. The probability of less than two accidents in a week is equal
to .
c. The mean number of accidents over the course of three weeks is equal to 4 × 3 = 12.
The probability of exactly eight accidents over the course of three weeks is equal
to .
details.)
121. During an hour of class, a professor anticipates six questions on average.
a. What is the probability that in a given hour of class, exactly six questions are asked?
b. What is the expected number of questions asked in a 20-minute period?
c. What is the probability that no questions are asked over a 20-minute period?
a. 0.1606; b. 2; c. 0.1353
Feedback: a. The probability that in a given hour of class, exactly six questions are asked
is equal to .
b. In a 20-minute period, the expected number of questions asked is equal to the number
of questions per hour divided by 3: 6/3 = 2.
c. The probability that no questions are asked over a 20-minute period is equal
to .
details.)
122. A plane taking off from an airport in New York can expect to run into a flock of birds once
out of every 1,250 take-offs.
a. What is the expected number of bird strikes for 10,000 take-offs?

b. What is the standard deviation of the number of bird strikes for 10,000 take-offs?
c. What is the probability of running into seven flocks of birds in 10,000 take-offs?
a. 8; b. 2.8284; c. 0.1396
Feedback: a. The expected number of bird strikes for 10,000 take-offs is equal to the
expected number of bird strikes per take-off times 10,000 .

b. The standard deviation of the number of bird strikes for 10,000 take-offs is equal to the
square root of the expected value .

c. The probability of striking seven flocks of birds in 10,000 take-offs is equal to

DESCRPITIVE STATISTICS
TRUE/FALSE
1. Your age group (1-9; 10-19; 20-29; 30-39; etc.) is an interval variable.
ANS: F
2. Your gender is a nominal variable.

ANS: T
3. Your final grade in a course (A, B, C, D, E) is a nominal variable.

ANS: F
4. Your age is an interval variable.

ANS: T
5. Interval data may be treated as ordinal or nominal.

ANS: T
6. Whether or not you are over the age of 21 is a nominal variable.

ANS: T
7. The values of quantitative data are categories.

ANS: F
8. Interval data, such as heights, weights, and incomes, are also referred to as quantitative or
numerical data.
ANS: T
9. All calculations are permitted on interval data.

ANS: T
10. Nominal data are also called qualitative or categorical data.

ANS: T
11. A variable is some characteristic of a population or sample.

ANS: T
12. With nominal data, there is one and only one way the possible values can be ordered.
ANS: F
13. You cannot calculate and interpret differences between numbers assigned to nominal data.
ANS: T
MULTIPLE CHOICE
14. The classification of student major (accounting, economics, management, marketing, other)
is an example of a(n)
a. nominal random variable.
b. interval random variable.
c. continuous random variable.
d. parameter.
15. The classification of student class designation (freshman, sophomore, junior, senior) is an
example of
a. nominal scale
b. interval scale
c. ordinal scale.
d. a parameter scale.
16. A researcher wishes to estimate the textbook costs of first-year students at Barry University.
To do so, he recorded the textbook cost of 300 first-year students and found that their
average textbook cost was $195 per semester. The variable of interest to the researcher is
a. textbook cost.
b. class rank.
c. number of students.
d. name of university.
17. All calculations are permitted on what type of data?

a. Interval data
b. Nominal data
c. Ordinal data
18. Values must represent ordered rankings for what type of data?
a. Interval data
b. Nominal data
c. Ordinal data
19. For what type of data are frequencies the only calculations that can be done?
a. Interval data
b. Nominal data
c. Ordinal data
20. For which type of data are the values arbitrary numbers?
a. Interval data
b. Nominal data
c. Ordinal data
SHORT ANSWER
21. At the end of a safari, the tour guide asks the vacationers to respond to the questions listed
below. For each question, determine whether the possible responses are interval, nominal,
or ordinal.
a. How many safaris have you taken prior to this one?
b. Do you feel that your tour safari lasted sufficiently long (yes/no)?
c. Which of the following features of the accommodations did you find most
attractive: location, facilities, room size, service, or price?
d. What is the maximum number of hours per day that you would like to spend
traveling?
e. Is your overall rating of this safari: excellent, good, fair, or poor?
ANS:
a. Interval
b. Nominal
c. Nominal
d. Interval
e. Ordinal
22. Before leaving a particular restaurant, customers are asked to respond to the questions
listed below. For each question, determine whether the possible responses are interval,
nominal, or ordinal.
a. What is the approximate distance (in miles) between this restaurant and your
residence?
b. Have you ever eaten at this restaurant before?
c. On how many occasions have you eaten at the restaurant before?
d. Which of the following attributes of this restaurant do you find most attractive:
service, prices, quality of the food, or the menu?
e. What is your overall rating of the restaurant: excellent, good, fair, or poor?
ANS:
a. Interval
b. Nominal
c. Interval
d. Nominal
e. Ordinal
23. For each of the following examples, identify the data type as nominal, ordinal, or interval.
a. The final grade received by a student in a neuro-science class.
b. The number of students in a Physics course.
c. The starting salary of a PhD graduate.
d. The size of an order of fries (small, medium, large, super-size) purchased by a
Burger King customer.
e. The college you are enrolled in (Arts and Sciences, Business, Education, etc.).
ANS:
a. Ordinal
b. Interval
c. Interval
d. Ordinal
e. Nominal
24. For each of the following, indicate whether the variable of interest is nominal or interval.
a. Your marital status.
b. Whether you are a U.S. citizen.
c. Sally's travel time from her dorm to the student union on campus.
d. The amount of time you spent last week on your homework.
e. The number of cars parked in a certain parking lot at any given time.
f. Kate’s favorite brand of sneakers.
ANS:
a. Nominal
b. Nominal
c. Interval
d. Interval
e. Interval
f. Nominal
25. Provide one example of ordinal data; one example of nominal data; and one example of
interval data.
Ordinal data example: Response to a market research survey question measured on the
Likert scale using the code: 1 = strongly agree, 2 = agree, 3 = neutral, 4 = disagree, and 5 =
strongly disagree.
Nominal data example: Voters’ political party affiliation for using the code: 1 = Democrat, 2
= Republican, and 3 = Independent.
Interval data example: The temperature on a golf course during the U.S. Master’s
Tournament. (Degrees Fahrenheit).
26. Explain why religious preference is not an ordinal variable.

ANS:
The values of religious preference cannot be ranked in order in any way.
27. Explain the difference between ordinal data and interval data.
ANS:
The critical difference between them is that the intervals or differences between values of
interval data are consistent and meaningful. That is, we can calculate the difference and
interpret the results. Because the codes representing ordinal data are arbitrarily assigned
except for the order, we cannot calculate and interpret differences.
28. Give an example of interval data that can also be treated as ordinal data and nominal data.
ANS:
Example: Your actual age is interval data; your age group (1-17; 18-24; 25-30; etc) is ordinal
data; and whether or not you are over age 25 is nominal data.
PROBABILITY
TRUE/FALSE
29. The relative frequency approach to probability uses long term frequencies, often based on
past data.
ANS: T
30. Predicting the outcome of a football game is using the subjective approach to probability.
ANS: T
31. You think you have a 90% chance of passing your next advanced financial accounting exam.
This is an example of subjective approach to probability.
ANS: T
32. P(A) + P(B) = 1 for any events A and B that are mutually exclusive.
ANS: F
33. The collection of all the possible outcomes of a random experiment is called a sample space.
ANS: T
34. If events A and B cannot occur at the same time, they are called mutually exclusive.
ANS: T
35. If either event A or event B must occur, they are called mutually exclusive.
ANS: F
36. If either event A or event B must occur, then A and B are mutually exclusive and collectively
exhaustive events.
ANS: T
37. If P(A) = 0.4 and P(B) = 0.6, then A and B must be collectively exhaustive.
ANS: F
38. If P(A) = 0.4 and P(B) = 0.6, then A and B must be mutually exclusive.
ANS: F
MULTIPLE CHOICE
39. Of the last 500 customers entering a supermarket, 50 have purchased a wireless phone. If
the relative frequency approach for assigning probabilities is used, the probability that the
next customer will purchase a wireless phone is
a. 0.10
b. 0.90
c. 0.50
40. If A and B are mutually exclusive events with P(A) = 0.75, then P(B):
a. can be any value between 0 and 1.
b. can be any value between 0 and 0.75.
c. cannot be larger than 0.25.
d. equals 0.25.
41. If you roll a balanced die 50 times, you should expect an even number to appear:
a. on every other roll.
b. exactly 50 times out of 100 rolls.
c. 25 times on average, over the long term.
42. An approach of assigning probabilities which assumes that all outcomes of the experiment
are equally likely is referred to as the:
a. subjective approach
b. objective approach
c. classical approach
d. relative frequency approach
43. The collection of all possible outcomes of an experiment is called:

a. a simple event
b. a sample space
c. a sample
d. a population
44. Which of the following is an approach to assigning probabilities?

a. Classical approach
b. Relative frequency approach
c. Subjective approach
45. A sample space of an experiment consists of the following outcomes: 1, 2, 3, 4, and 5. Which
of the following is a simple event?
a. At least 3
b. At most 2
c. 3
d. 15
46. Which of the following is a requirement of the probabilities assigned to outcome Oi?
a. P(Oi) ≤ 0 for each i
b. P(Oi) ≥ 1 for each i
c. 0 ≤ P(Oi) ≤ 1 for each i
d. P(Oi) = 1 for each i
47. If an experiment consists of five outcomes with P(O1) = 0.10, P(O2) = 0.20, P(O3) = 0.30, P(O4) =
0.25, then P(O5) is
a. 0.75
b. 0.15
c. 0.50
d. Cannot be determined from the information given.
48. If two events are collectively exhaustive, what is the probability that one or the other
occurs?
a. 0.00
b. 0.50
c. 1.00
49. If two events are mutually exclusive, what is the probability that both occur at the same
time?
a. 0.00
b. 0.50
c. 1.00
50. If two events are collectively exhaustive, what is the probability that both occur at the same
time?
a. 0.00
b. 0.50
c. 1.00
51. If two events are mutually exclusive and collectively exhaustive, what is the probability that
both occur?
a. 0.00
b. 0.50
c. 1.00
52. If the two events are mutually exclusive and collectively exhaustive, what is the probability
that one or the other occurs?
a. 0.00
b. 0.50
c. 1.00
53. If events A and B are mutually exclusive and collectively exhaustive, what is the probability
that event A occurs?
a. 0.25
b. 0.50
c. 1.00
54. If two equally likely events A and B are mutually exclusive and collectively exhaustive, what is
the probability that event A occurs?
a. 0.00
b. 0.50
c. 1.00
55. If event A and event B cannot occur at the same time, then A and B are said to be
a. mutually exclusive
b. independent
c. collectively exhaustive
56. The collection of all possible events is called

a. an outcome
b. a sample space
c. an event
SHORT ANSWER
57. Alana, Eva, and Stephanie, three candidates for the presidency of a college's student body,
are to address a student forum. The forum's organizer is to select the order in which the
candidates will give their speeches, and must do so in such a way that each possible order is
equally likely to be selected.
a. What is the random experiment?
b. List the outcomes in the sample space.
c. Assign probabilities to the outcomes.
d. What is the probability that Stephanie will speak first?
e. What is the probability that Alana will speak before Stephanie does?
ANS:
a. The random experiment is to observe the order in which the three candidates
give their speeches.
b. S = {ABC, ACB, BAC, BCA, CAB, CBA}, where A = Alana, B = Eva, and C = Stephanie.
c. The probability assigned to each outcome is 1/6.
d. P(CAB, CBA) = 1/3
e. P(ABC, ACB, BAC) = 1/2
58. There are three approaches to determining the probability that an outcome will occur:
classical, relative frequency, and subjective. For each situation that follows, determine which
approach is most appropriate.
a. A Russian will win the French Open Tennis Tournament next year.
b. The probability of getting any single number on a balanced die is 1/6.
c. Based on the past, it's reasonable to assume the average book sales for a certain
textbook is 6,500 copies per month.
ANS:
a. subjective
b. classical
c. relative frequency
NARRBEGIN: Hobby Shop Sales

Hobby Shop Sales
Sales records of a hobby shop showed the following number of radio controlled trucks sold
weekly for each of the last 50 weeks.
Number of Trucks Sold Number of Weeks
0 20
1 15
2 10
3 4
4 1
NARREND
59. {Hobby Shop Sales Narrative} Define the random experiment of interest to the store.
ANS:
The random experiment consists of observing the number of trucks sold in any given week.
60. {Hobby Shop Sales Narrative} List the outcomes in the sample space.
ANS:
S = {0, 1, 2, 3, 4}
61. {Hobby Shop Sales Narrative} What approach would you use in determining the probabilities
for next week's sales? Assign probabilities to the outcomes.
ANS:
The relative frequency approach was used.
Number of Trucks Prob.
0 0.40
1 0.30
2 0.20
3 0.08
4 0.02
62. {Hobby Shop Sales Narrative} What is the probability of selling at least two trucks in any
given week?
ANS:
P{2, 3, 4} = 0.30
63. {Hobby Shop Sales Narrative} What is the probability of selling between 1 and 3 (inclusive)
trucks in any given week?
ANS:
P{1,2,3} = 0.58
NARRBEGIN: Mutual Fund Price

Mutual Fund Price
An investor estimates that there is a 75% chance that a particular mutual fund’s price will
increase to $100 per share over the next three weeks, based past data.
64. {Mutual Fund Price Narrative} Which approach was used to produce this figure?
ANS:
The relative frequency approach
65. {Mutual Fund Price Narrative} Interpret the 75% probability.

ANS:
We interpret the 75% figure to mean that if we had an infinite number of funds with exactly
the same economic and market characteristics as the one the investor will buy, 75% of them
will increase in price to $100 over the next three weeks.
66. The sample space of the toss of a balanced coin is S = {1, 2, 3, 4, 5, 6}. If the die is balanced,
each simple event (outcome) has the same probability. Find the probability of the following
events:
a. Rolling an odd number
b. Rolling a number less than or equal to 3
c. Rolling a number greater than or equal to 5
d. Rolling a number between 2 and 5, inclusive.
ANS:
a. 3/6
b. 3/6
c. 2/6
d. 4/6
NARRBEGIN: Equity Loan Rates
Equity Loan Rates
A survey of banks estimated the following probabilities for the interest rate being charged on
a equity loan based on a 30-year loan, based on past records.
Interest Rate 6.0% 6.5% 7.0% 7.5% >7.5%
Probability 0.20 0.23 0.25 0.28 .04
NARREND
67. {Equity Loan Rates Narrative} if a bank is selected at random from this distribution, what is
the probability that the interest rate charged on a home loan exceeds 7.0%?
ANS:
0.32
68. {Equity Loan Rates Narrative} what is the most common interest rate?
ANS:
7.5%, since it occurred 28% of the time.
69. {Equity Loan Rates Narrative} what approach was used in estimating the probabilities for the
interest rates?
ANS:
Relative frequency approach
TRUE/FALSE
70. The probability of the intersection is called a joint probability.

ANS: T
71. Two or more events are said to be independent when the occurrence of one event has no
effect on the probability that another will occur.
ANS: T
72. The union of events A and B is the event that occurs when either A or B or both occur. It is
denoted as 'A or B'.
ANS: T
73. If A and B are independent events with P(A) = 0.35 and P(B) = 0.55, then P(A|B) is 0.35/0.55 =
.64.
ANS: F
74. Two events A and B are said to be independent if P(A|B) = P(B).

ANS: F
75. The conditional probability of event B given event A is denoted by P(A|B).

ANS: F
76. If A and B are independent events with P(A) = .40 and P(B) = .50, then P(A and B) = .20.
ANS: T
77. The intersection of two events A and B is the event that occurs when both A and B occur.
ANS: T
78. Two events A and B are independent if P(A and B) = 0.

ANS: F
79. The union of events A and B is the event that occurs when either A or B occurs but not both.
ANS: F
80. If A and B are independent, then P(A|B) = P(A) or P(B|A) = P(B).

ANS: T
81. If P(A) = .30, P(B) = .60, and P(A and B) = .20, then P(A|B) = .40.
ANS: F
82. Suppose the probability that a person owns both a cat and a dog is 0.10. Also suppose the
probability that a person owns a cat but not a dog is 0.20. The marginal probability that
someone owns a cat is 0.30.
ANS: T
MULTIPLE CHOICE
83. The probability of the intersection of two events A and B is denoted by P(A and B)
and is called the:
a. marginal probability
b. joint probability
c. conditional probability of A given B
d. conditional probability of B given A
84. The intersection of events A and B is the event that occurs when:
a. either A or B occurs but not both
b. neither A nor B occur
c. both A and B occur
85. The probability of event A given event B is denoted by

a. P(A and B)
b. P(A or B)
c. P(A|B)
d. P(B|A)
86. Which of the following best describes the concept of marginal probability?
a. It is a measure of the likelihood that a particular event will occur, regardless of
whether another event occurs.
b. It is a measure of the likelihood that a particular event will occur, if another
event has already occurred.
c. It is a measure of the likelihood of the simultaneous occurrence of two or more
events.
87. If two events are independent, what is the probability that they both occur?
a. 0
b. 0.50
c. 1.00
d. Cannot be determined from the information given
88. If the outcome of event A is not affected by event B, then events A and B are said to
be
b. independent
89. If A and B are disjoint events with P(A) = 0.70, then P(B):
a. can be any value between 0 and 1
b. can be any value between 0 and 0.70
c. cannot be larger than 0.30
d. cannot be determined with the information given
If P(A) = 0.65, P(B) = 0.58, and P(A and B) = 0.76, then P(A or B) is:
a. 1.23
b. 0.47
c. 0.18
d. 0.11
90. A and B are disjoint events, with P(A) = 0.20 and P(B) = 0.30. Then P(A and B) is:
a. 0.50
b. 0.10
c. 0.00
d. 0.06
91. If P(A) = 0.35, P(B) = 0.45, and P(A and B) = 0.25, then P(A|B) is:
a. 1.4
b. 1.8
c. 0.714
d. 0.556
92. If A and B are independent events with P(A) = 0.60 and P(A|B) = 0.60, then P(B) is:
a. 1.20
b. 0.60
c. 0.36
93. If A and B are independent events with P(A) = 0.20 and P(B) = 0.60, then P(A|B) is:
a. 0.20
b. 0.60
c. 0.40
d. 0.80
94. If P(A) = 0.25 and P(B) = 0.65, then P(A and B) is:
a. 0.25
b. 0.40
c. 0.90
d. cannot be determined from the information given
Suppose X = the number of cars owned by a family in the U.S. The probability
distribution of X is shown in the table below.
X 0 1 2 3
Probability 0.56 0.23 0.12 0.09
95. {Car Narrative} what is the chance that a family owns more than one car?
a. 0.23
b. 0.21
c. 0.44
96. {Cars Narrative} suppose you choose two families at random. What is the
chance that they each own one car? (That means family A owns a car and family B
owns a car.)
a. 0.23
b. 0.23 + 0.23 = 0.46
c. 0.23 + 0.23  (0.23)*(0.23) = .4071
d. (0.23)*(0.23) = 0.0529
SHORT ANSWER
Suppose 55 percent of adults drink tea, 45 percent drink seltzer, and 10 percent drink both
97. {Tea and Seltzer Narrative} What is the probability that a randomly chosen adult does not
drink seltzer?
ANS: 0.55
98. {Tea and Seltzer Narrative} What is the probability that a randomly chosen adult drinks seltzer
or tea or both?
ANS: 0.90
99. {Tea and Seltzer Narrative} What is the probability that a randomly chosen adult doesn't drink
tea or seltzer?
ANS: 0.10
Club Members
A survey of a club’s members indicates that 50% own a home, 80% own a car, and 90% of the
homeowners who subscribe also own a car.
100. {Club Members Narrative} What is the probability that a subscriber owns both a car and a
house? ANS: 0.45
101. {Club Members Narrative} What is the probability that a club member owns a car or a house,
or both? ANS: 0.85
102. {Club Members Narrative} What is the probability that a club member owns neither a car nor a
house? ANS: 0.15
Business Majors
Suppose 30% of business majors major in accounting. You take a random sample of 3 business
majors.
103. {Business Majors Narrative} What is the chance that they all major in accounting?
ANS: 0.027
104. {Business Majors Narrative} What is the chance that at least one majors in accounting?
ANS: 0.657
105. {Business Majors Narrative} What is the chance that exactly one majors in accounting?
ANS: 0.441
106. {Business Majors Narrative} What is the chance that none of them major in accounting?
ANS: 0.343
Drunk Drivers
Five hundred accidents that occurred on a Saturday night were analyzed. Two items noted were
the number of vehicles involved and whether alcohol played a role in the accident. The numbers
are shown below:
Number of Vehicles Involved
Did alcohol play a role? 1 2 3 Totals
Yes 75 125 50 250
No 50 225 75 350
Totals 125 350 125 600
107. {Drunk Drivers Narrative} What proportion of accidents involved more than one vehicle?
ANS: 475/600 or 0.79
108. {Drunk Drivers Narrative} What proportion of accidents involved alcohol and single vehicle?
ANS: 75/600 or 0.125
109. {Drunk Drivers Narrative} What proportion of accidents involved alcohol or a single vehicle?
ANS: 300/600 or 0.50
110. {Drunk Drivers Narrative} Given alcohol was involved, what proportion of accidents involved a
single vehicle?
ANS: 75/250 or 0.30
111. {Drunk Drivers Narrative} If multiple vehicles were involved, what proportion of accidents
involved alcohol?
ANS: 175/475 or 0.37
112. {Drunk Drivers Narrative} If 3 vehicles were involved, what proportion of accidents involved
alcohol?
ANS: 50/125 or 0.40
113. {Drunk Drivers Narrative} If alcohol was not involved, what proportion of the accidents were
single vehicle?
ANS: 50/350 or 0.142
114. {Drunk Drivers Narrative} If alcohol was not involved, what proportion of the accidents were
multiple vehicle?
ANS: 300/350 or 0.857
115. Suppose A and B are two independent events for which P(A) = 0.20 and P(B) = 0.60.
a. Find P(A|B).
b. Find P(B|A).
ANS:
a. 0.20
b. 0.60
GPA and Class

A college professor classifies his students according to their grade point average (GPA) and their
class rank. GPA is on a 0.0-4.0 scale, and class rank is defined as the underclass (freshmen and
sophomores) and the upper class (juniors and seniors). One student is selected at random.
GPA
Class Under 2.0 2.0 - 3.0 Over 3.0
Under 0.05 0.25 0.10
Upper 0.10 0.30 0.20
116. {GPA and Class Narrative} If the student selected is in the upper class, what is the probability
that her GPA is between 2.0 and 3.0?
ANS: 0.50
117. {GPA and Class Narrative} If the GPA of the student selected is over 3.0, what is the probability
that the student is in the lower class?
ANS: 0.333
118. {GPA and Class Narrative} What is the probability that the student is in the upper class?
ANS: 0.60
119. {GPA and Class Narrative} What is the probability that the student has GPA over 3.0?
ANS: 0.30
120. {GPA and Class Narrative} What is the probability that the student is in the lower class?
ANS: 0.40.
121. {GPA and Class Narrative} What is the probability that the student is in the lower class and has
GPA over 3.0?
ANS: 0.10
122. {GPA and Class Narrative} What is the probability that the student is in the upper class and has
GPA under 2.0?
ANS: 10
123. {GPA and Class Narrative} Are being in the upper class and having a GPA over 3.0 related?
Explain.
ANS: Yes, since the product of the probabilities of the two events is not equal to the joint
probability.
Marital Status
An insurance company has collected the following data on the gender and marital status of
600 customers.
Marital Status
Gender Single Married Divorced
Male 50 250 30
Female 100 100 40
Suppose that a customer is selected at random.
124. {Marital Status Narrative} Develop the joint probability table.

ANS:
Male .083 .417 .100
Female .167 .167 .067
125. {Marital Status Narrative} Find the probability that the customer selected is a married female.
ANS: 0.167
126. {Marital Status Narrative} Find the probability that the customer selected is
a. female and single
b. Married if the customer is male.
c. not single
ANS:
a. 0.167
b. 0.695
c. 0.750
Financial Consultants
A Financial Consultant has classified his clients according to their gender and the composition of
their investment portfolio (primarily bonds, primarily stocks, or a balanced mix of bonds and stocks).
The proportions of clients falling into the various categories are shown in the following table:
Portfolio Composition
Gender Bonds Stocks Balanced
Male 0.18 0.20 0.25
Female 0.12 0.10 0.15
One client is selected at random, and two events A and B are defined as follows:
A: The client selected is male.
B: The client selected has a balanced portfolio.
127. {Financial Consultants Narrative} Find the following probabilities:

a. P(A)
b. P(B)
ANS:
a. 0.63
b. 0.40
128. {Financial Consultants Narrative} Express each of the following events in words:
a. A or B
b. A and B
ANS:
a. The client selected either is male or has a balanced portfolio or both.
b. The client selected is male and has a balanced portfolio.
TRUE/FALSE
129. Julius and Gabe go to a show during their Spring break and toss a balanced coin to see who
will pay for the tickets. The probability that Gabe will pay three days in a row is 0.125.
ANS: T
130. If events A and B have nonzero probabilities, then they can be both independent and mutually
exclusive.
ANS: F
131. If the event of interest is A, the probability that A will not occur is the complement of A.
ANS: T
132. Assume that A and B are independent events with P(A) = 0.30 and P(B) = 0.50. The
probability that both events will occur simultaneously is 0.80.
ANS: F
133. Two events A and B are said to be independent if P(A) = P(A|B).

ANS: T
134. When A and B are mutually exclusive, P(A or B) can be found by adding P(A) and P(B).
ANS: T

ANS: F
136. If A and B are two independent events with P(A) = 0.9 and P(B|A) = 0.5, then P(A and B) =
0.45.
ANS: T
137. Two events A and B are said to be independent if P(A|B) = P(B|A).

ANS: F
138. The probability of the union of two mutually exclusive events A and B is 0.
ANS: F
139. Two events A and B are said to be mutually exclusive if P(A and B) = 1.0.
ANS: F
140. If P(A and B) = 1, then A and B must be mutually exclusive.

ANS: F
141. Events A and B are either independent or mutually exclusive.

ANS: F
142. If P(B) = .7 and P(B|A) = .4, then P(A and B) must be .28.
ANS: F
143. If P(B) = .7 and P(A|B) = .7, then P(A and B) = 0.

ANS: F
MULTIPLE CHOICE
144. If the events A and B are independent with P(A) = 0.35 and P(B) = 0.45, then the probability
that both events will occur simultaneously is:
a. 0
b. 0.16
c. 0.80
d. Not enough information to tell.
145. Two events A and B are said to be mutually exclusive if:

a. P(A|B) = 1
b. P(A|B) = P(A)
c. P(A and B) =1
d. P(A and B) = 0
146. If P(A) = 0.84, P(B) = 0.76, and P(A or B) = 0.90, then P(A and B) is:
a. 0.06
b. 0.14
c. 0.70
d. 0.83
147. Which of the following statements is always correct?

a. P(A and B) = P(A) * P(B)
b. P(A or B) = P(A) + P(B)
c. P(A) = 1 − P(Ac)
148. If P(A) = 0.20, P(B) = 0.30, and P(A and B) = 0, then A and B are:
a. dependent events
b. independent events
c. mutually exclusive events
d. complementary events
149. If P(A) = 0.65, P(B) = 0.58, and P(A and B) = 0.76, then P(A or B) is:
a. 1.23
b. 0.47
c. 0.24
150. Suppose P(A) = 0.30. The probability of the complement of A is:

a. 0.30
b. 0.70
c. −0.30
151. If events A and B are independent then:

b. P(A and B) = P(A) + P(B)
c. P(B|A) = P(A)
152. If A and B are mutually exclusive events, with P(A) = 0.20 and P(B) = 0.30, then the
probability that both events will occur simultaneously is:
a. 0.50
b. 0.06
c. 0
153. If A and B are independent events with P(A) = 0.60 and P(B) = 0.70, then P(A or B) equals:
a. 1.30
b. 0.88
c. 0.42
d. Cannot tell from the given information.
154. If A and B are mutually exclusive events with P(A) = 0.30 and P(B) = 0.40, then P(A or B) is:
a. 0.10
b. 0.12
c. 0.70
d. None of these choices
155. If A and B are any two events with P(A) = .8 and P(B|A) = .4, then P(A and B) is:
a. .40
b. .32
c. 1.20
156. If A and B are any two events with P(A) = .8 and P(B|Ac) = .7, then P(Ac and B) is
a. 0.56
b. 0.14
c. 1.50
SHORT ANSWER
a. Find P(A and B).
b. Find P(A or B).
ANS:
a. 0.12
b. 0.68
A Ph.D. graduate has applied for a job with two colleges: A and B. The graduate feels that she
has a 60% chance of receiving an offer from college A and a 50% chance of receiving an offer
from college B. If she receives an offer from college B, she believes that she has an 80%
chance of receiving an offer from college A. Let A = receiving an offer from college A, and let
B = receiving an offer from college B.
168. {College Professorship Narrative} What is the probability that both colleges will make her an
offer?
ANS: (.5)(.8) = 0.40
169. {College Professorship Narrative} What is the probability that at least one college will make
her an offer?
ANS: 6 + .5 − .4 = 0.7
170. {College Professorship Narrative} If she receives an offer from college B, what is the
probability that she will not receive an offer from college A?
ANS: 1 − 0.8 = 0.2.
171. Suppose P(A) = 0.50, P(B) = 0.40, and P(B|A) = 0.30.

a. Find P(A and B).
b. Find P(A or B).
c. Find P(A|B).
ANS:
a. 0.15
b. 0.75
c. 0.375
172. A survey of a magazine's subscribers indicates that 50% own a house, 80% own a car, and
90% of the homeowners also own a car. What proportion of subscribers:
a. own both a car and a house?
b. own a car or a house, or both?
c. own neither a car nor a house?
ANS:
a. 0.45
b. 0.85
c. 0.15
173. Suppose A and B are two mutually exclusive events for which P(A) = 0.30 and P(B) = 0.40.
a. Find P(A and B).
b. Find P(A or B).
c. Are A and B independent events? Explain using probabilities.
ANS:
a. 0
b. 0.70
c. No. P(A and B) = 0 because they are mutually exclusive events. If they were
independent events, you would have P(A and B) = P(A) * P(B) = 0.12.

a. Find P(A and B).
b. Find P(A or B).
c. Find P(A|B).
ANS:
a. 0.18
b. 0.62
c. 0.36
175. Is it possible to have two events for which P(A) = 0.40, P(B) = 0.50, and P(A or B) = 0.30?
Explain.
ANS: Yes. In this situation, if P(A and B) = 0.60 it works.
176. A pharmaceutical firm has discovered a new diagnostic test for a certain disease that has
infected 1% of the population. The firm has announced that 95% of those infected will show a
positive test result, while 98% of those not infected will show a negative test result.
a. What proportion of people don't have the disease?
b. What proportion who have the disease test negative?
c. What proportion of those who don't have the disease test positive?
d. What proportion of test results are incorrect?
e. What proportion of test results are correct?
ANS:
a. 0.99
b. 0.05
c. 0.02
d. 0.0203
e. 0.9797
Marital Status
An insurance company has collected the following data on the gender and marital status of
300 customers.
Marital Status
Male 25 125 30
Female 50 50 20
177. {Marital Status Narrative} Find the probability that the customer selected is female or
divorced.
ANS: 0.50
178. {Marital Status Narrative} Are gender and marital status mutually exclusive? Explain using
probabilities.
ANS: No, since P(female and married) = 0.167 > 0. (Any other combination shows this also.)
179. {Marital Status Narrative} Is marital status independent of gender? Explain using
probabilities.
ANS: No, since P(married / male) = 0.694 ≠ P(married) = 0.583. (Any other combination
shows this also.)
Construction Bids
A construction company has submitted bids on two separate state contracts, A and B. The
company feels that it has a 60% chance of winning contract A, and a 50% chance of winning
contract B. Furthermore, the company believes that it has an 80% chance of winning contract
A if it wins contract B.
180. {Construction Bids Narrative} What is the probability that the company will win both
contracts?
ANS: P(B and A) = P(B) * P(A|B) = (.50)(.80) = .40
181. {Construction Bids Narrative} What is the probability that the company will win at least one
of the two contracts?
ANS: P(A or B) = P(A) + P(B) − P(A and B) = .60 + .50 − .40 = .70
182. {Construction Bids Narrative} If the company wins contract B, what is the probability that it
will not win contract A?
ANS: P(Ac|B) = 1 − P(A|B) = 1 − .80 = .20
183. {Construction Bids Narrative} What is the probability that the company will win at most one
of the two contracts?
ANS: 1 − P(A and B) = 0.60
184. {Construction Bids Narrative} What is the probability that the company will win neither
contract?
ANS: 1 − P(A or B) = 0.30
Condo Sales and Interest Rates

The probability that condo sales will increase in the next 6 months is estimated to be 0.30. The
probability that the interest rates on condo loans will go up in the same period is estimated to
be 0.75. The probability that condo sales or interest rates will go up during the next 6 months
is estimated to be 0.90.
185. {Condo Sales and Interest Rates Narrative} What is the probability that both condo sales and
interest rates will increase during the next six months?
ANS: 0.15
186. {Condo Sales and Interest Rates Narrative} What is the probability that neither condo sales
nor interest rates will increase during the next six months?
187. {Condo Sales and Interest Rates Narrative} What is the probability that condo sales will
increase but interest rates will not during the next six months?
ANS: 0.15
TRUE/FALSE
188. Bayes' Law is a formula for revising an initial subjective (prior) probability value on the basis
of new results, thus obtaining a new (posterior) probability value.
ANS: T
189. Although there is a formula defining Bayes' law, you can also use a probability tree to conduct
calculations.
ANS: T
190. Bayes' Law allows us to compute conditional probabilities from other forms of probability.
ANS: T
191. Bayes' Law says that P(A|B) = P(B|A)P(A).

ANS: F
192. Conditional probabilities are also called likelihood probabilities.

ANS: T
193. In applying Bayes' Law, as the prior probabilities increase, the posterior probabilities
decrease.
ANS: F
194. Prior probability of an event is the probability of the event before any information affecting it
is given.
ANS: T
195. Bayes' Law can be used to calculate posterior probabilities, prior probabilities, as well as new
conditional probabilities.
ANS: F
196. Posterior probability of an event is the revised probability of the event after new information
is available.
ANS: T
197. Prior probability is also called likelihood probability.

ANS: F
198. In general, a posterior probability is calculated by adding the prior and likelihood
probabilities.
ANS: F
199. We can use the joint and marginal probabilities to compute conditional probabilities, for
which a formula is available.
ANS: T
200. In problems where the joint probabilities are given, we can compute marginal probabilities by
adding across rows and down columns.
ANS: T
201. If joint, marginal, and conditional probabilities are available, only joint probabilities can be
used to determine whether two events are dependent or independent.
ANS: F
202. Suppose we have two events A and B. We can apply the addition rule to compute the
probability that at least one of these events occurs.
ANS: T
203. Posterior probabilities can be calculated using the addition rule for mutually exclusive events.
ANS: F
204. Prior probabilities can be calculated using the multiplication rule for mutually exclusive
events.
ANS: F
205. We can apply the multiplication rule to compute the probability that two events occur at the
same time.
ANS: T
MULTIPLE CHOICE
206. Which of the following statements is false?

a. Thomas Bayes first employed the calculation of conditional probability in the
eighteenth century.
b. There is no formula defining Bayes' Law.
c. We use a probability tree to conduct all necessary calculations for Bayes' Law.
207. A posterior probability value is a prior probability value that has been:
a. modified on the basis of new information.
b. multiplied by a conditional probability value.
c. divided by a conditional probability value.
d. added to a conditional probability value.
208. Initial estimates of the probabilities of events are known as:

a. joint probabilities
b. posterior probabilities
c. prior probabilities
d. conditional probabilities
209. Which of the following statements is false regarding a scenario using Bayes' Law?
a. Prior probabilities are called likelihood probabilities.
b. Conditional probabilities are called posterior probabilities.
c. Posterior probabilities are calculated by using prior probabilities that have been
modified based on new information.
210. Bayes' Law is used to compute:

a. prior probabilities.
b. joint probabilities.
c. union probabilities.
d. posterior probabilities.
COMPLETION
211. Thomas ____________________ first employed the calculation of conditional probability.

ANS: Bayes
212. Bayes' Law involves three different types of probabilities: 1) prior probabilities; 2) likelihood
probabilities; and 3) ____________________ probabilities.
ANS: posterior
213. Bayes' Law involves three different types of probabilities: 1) ____________________
probabilities; 2) likelihood probabilities; and 3) posterior probabilities.
ANS: prior
214. Bayes' Law involves three different types of probabilities: 1) prior probabilities;
2) ____________________ probabilities; and 3) posterior probabilities.
ANS: likelihood
215. There are situations where we witness a particular event and we need to compute the
probability of one of its possible causes. ____________________ is the technique we use to
do this.
ANS:
Bayes' Law
216. In the scenario of Bayes' Law, P(A|B) is a(n) ____________________ probability, while
P(B|A) is a posterior probability.
ANS: likelihood
217. In the scenario of Bayes' Law, P(A|B) is a posterior probability, while P(B|A) is a(n)
____________________ probability.
ANS: likelihood
218. ____________________ can find the probability that someone with a disease tests positive by
using (among other things) the probability that someone who actually has the disease tests
positive for it.
ANS: Bayes' Law
SHORT ANSWER
Certification Test
A standard certification test was given at three locations. 1,000 candidates took the test at location A,
600 candidates at location B, and 400 candidates at location C. The percentages of candidates from
locations A, B, and C who passed the test were 70%, 68%, and 77%, respectively. One candidate is
selected at random from among those who took the test.
219. {Certification Test Narrative} What is the probability that the selected candidate passed the
test?
ANS: (.5)(.7) + (.3)(.68) + (.2)(.77) = 0.708
220. {Certification Test Narrative} If the selected candidate passed the test, what is the probability
that the candidate took the test at location B?
ANS: (.3)(.68) / .708 = 0.288
221. {Certification Test Narrative} What is the probability that the selected candidate took the test
at location C and failed?
ANS: (.2)(.23) = 0.046
Cysts
After researching cysts of a particular type, a doctor learns that out of 10,000 such cysts examined,
1,500 are malignant and 8,500 are benign. A diagnostic test is available which is accurate 80% of the
time (whether the cyst is malignant or not). The doctor has discovered the same type of cyst in a
patient.
222. {Cysts Narrative} In the absence of any test, what is the probability that the cyst is malignant?
ANS: M = Malignant, P(M) = .15
223. {Cysts Narrative} In the absence of any test, what is the probability that the cyst is benign?
ANS:B = Benign, P(B) = .85
224. {Cysts Narrative} What is the probability that the patient will test positive?
ANS:
P(+) = P(+ and M) + P(+ and B) = P(+/M) · P(M) + P(+/B) · P(B)
= (.80)(.15) + (.20)(.85) = .29
225. {Cysts Narrative} What is the probability that the patient will test negative?
ANS:
P(−) = 1 − P(+) = 1 − .29 = .71 or
P(−) = P(− and M) + P(− and B) = P(−/M) · P(M) + P(−/B) · P(B)
= (.20)(.15) + (.80)(.85) = .71
226. {Cysts Narrative} What is the probability that the patient has a benign tumor if he or she tests
positive?
ANS: P(B/+) = P(+ and B) / P(+) = P(+/B) · P(B) / P(+) = (.20)(.85) / (.29) = .586
227. {Cysts Narrative} What is the probability that the patient has a malignant cyst if he or she
tests negative?
ANS: P(M/−) = P(− and M) / P(−) = P(−/M) · P(M) / P(−) = (.20)(.15) / (.71) = .042
Messenger Service
Three messenger services deliver to a small town in Oregon. Service A has 60% of all the scheduled
deliveries, service B has 30%, and service C has the remaining 10%. Their on-time rates are 80%,
60%, and 40% respectively. Define event O as a service delivers a package on time.
228. {Messenger Service Narrative} Calculate P(A and O).

ANS: P(A and O) = P(A)P(O|A) = (.60)(.80) = 0.48
229. {Messenger Service Narrative} Calculate P(B and O).

ANS: P(B and O) = P(B) P(O|B) = (.30)(.60) = 0.18
230. {Messenger Service Narrative} Calculate P(C and O).
ANS: P(C and O) = P(C)P(O |C) = (.10)(.40) = 0.04
231. {Messenger Service Narrative} Calculate the probability that a package was delivered on
time.
ANS: P(O) = P(A and O) + P(B and O) + P(C and O) = .48 + .18 + .04 = 0.70
232. {Messenger Service Narrative} If a package was delivered on time, what is the probability
that it was service A?
ANS: P(A|O) = P(A and O) / P(O) = 0.48 / 0.70 = 0.686
that it was service B?
ANS: P(B|O) = P(B and O) / P(O) = 0.18 / 0.70 = 0.257
that it was service C?
ANS: P(C|O) = P(C and O) / P(O) = 0.04 / 0.70 = 0.057
235. {Messenger Service Narrative} If a package was delivered 40 minutes late, what is the
probability that it was service A?
ANS: P(A|Oc) = P(A and Oc) / P(Oc) = (0.60)(0.20) / 0.30 = 0.40
probability that it was service B?
ANS: P(B|Oc) = P(B and Oc) / P(Oc) = (0.30)(0.40) / 0.30 = 0.40
probability that it was service C?
ANS: P(C|Oc) = P(C and Oc) / P(Oc) = (0.10)(0.60) / 0.30 = 0.20
PROBABILITY
TRUE/FALSE
1. The relative frequency approach to probability uses long term relative frequencies, often based on past
data.
ANS: T
2. Predicting the outcome of a football game is using the subjective approach to probability.
ANS: T
3. You think you have a 90% chance of passing your next advanced financial accounting exam. This is
an example of subjective approach to probability.
ANS: T
4. P(A) + P(B) = 1 for any events A and B that are mutually exclusive.
ANS: F
5. The collection of all the possible outcomes of a random experiment is called a sample space.
ANS: T
6. If events A and B cannot occur at the same time, they are called mutually exclusive.
ANS: T
7. If either event A or event B must occur, they are called mutually exclusive.
ANS: F
8. If either event A or event B must occur, then A and B are mutually exclusive and collectively
exhaustive events.
ANS: T
9. If P(A) = 0.4 and P(B) = 0.6, then A and B must be collectively exhaustive.
ANS: F
10. If P(A) = 0.4 and P(B) = 0.6, then A and B must be mutually exclusive.
ANS: F
MULTIPLE CHOICE
1. Of the last 500 customers entering a supermarket, 50 have purchased a wireless phone. If the relative
frequency approach for assigning probabilities is used, the probability that the next customer will
purchase a wireless phone is
a. 0.10 c. 0.50
b. 0.90 d. None of these choices.
ANS: A
2. If A and B are mutually exclusive events with P(A) = 0.75, then P(B):
a. can be any value between 0 and 1. c. cannot be larger than 0.25.
b. can be any value between 0 and 0.75. d. equals 0.25.
ANS: C
3. If you roll a balanced die 50 times, you should expect an even number to appear:
a. on every other roll. c. 25 times on average, over the long term.
b. exactly 50 times out of 100 rolls. d. All of these choices are true.
ANS: C
4. An approach of assigning probabilities which assumes that all outcomes of the experiment are equally
likely is referred to as the:
a. subjective approach c. classical approach
b. objective approach d. relative frequency approach
ANS: C
5. The collection of all possible outcomes of an experiment is called:

a. a simple event c. a sample
b. a sample space d. a population
ANS: B
6. Which of the following is an approach to assigning probabilities?

a. Classical approach c. Subjective approach
b. Relative frequency approach d. All of these choices are true.
ANS: B
7. A sample space of an experiment consists of the following outcomes: 1, 2, 3, 4, and 5. Which of the
following is a simple event?
a. At least 3 c. 3
b. At most 2 d. 15
ANS: C
8. Which of the following is a requirement of the probabilities assigned to outcome Oi?

a. P(Oi)  0 for each i c. 0  P(Oi)  1 for each i
b. P(Oi)  1 for each i d. P(Oi) = 1 for each i
ANS: C
9. If an experiment consists of five outcomes with P(O1) = 0.10, P(O2) = 0.20, P(O3) = 0.30, P(O4) =
0.25, then P(O5) is
a. 0.75
b. 0.15
c. 0.50
ANS: B
10. If two events are collectively exhaustive, what is the probability that one or the other occurs?
a. 0.00
b. 0.50
c. 1.00
ANS: D
11. If two events are collectively exhaustive, what is the probability that both occur at the same time?
a. 0.00
b. 0.50
c. 1.00
ANS: D
12. If two events are mutually exclusive, what is the probability that one or the other occurs?
a. 0.00
b. 0.50
c. 1.00
ANS: D
13. If two events are mutually exclusive, what is the probability that both occur at the same time?
a. 0.00
b. 0.50
c. 1.00
ANS: A
14. If two events are mutually exclusive and collectively exhaustive, what is the probability that both
occur?
a. 0.00
b. 0.50
c. 1.00
ANS: A
15. If the two events are mutually exclusive and collectively exhaustive, what is the probability that one or
the other occurs?
a. 0.00
b. 0.50
c. 1.00
ANS: C
16. If events A and B are mutually exclusive and collectively exhaustive, what is the probability that event
A occurs?
a. 0.25
b. 0.50
c. 1.00
ANS: D
17. If two equally likely events A and B are mutually exclusive and collectively exhaustive, what is the
probability that event A occurs?
a. 0.00
b. 0.50
c. 1.00
ANS: B
18. If event A and event B cannot occur at the same time, then A and B are said to be
a. mutually exclusive c. collectively exhaustive
b. independent d. None of these choices.
ANS: A
19. The collection of all possible events is called
a. an outcome c. an event
b. a sample space d. None of these choices.
ANS: B
COMPLETION
1. A random experiment is an action or process that leads to one of several possible
____________________.
ANS: outcomes
2. The outcomes of a sample space must be ____________________, which means that all possible
outcomes must be included.
ANS: exhaustive
3. The outcomes of a sample space must be ____________________, which means that no two outcomes
can occur at the same time.
ANS: mutually exclusive
4. A(n) ____________________ of a random experiment is a list of all possible outcomes of the

experiment.
ANS: sample space
5. The outcomes of a sample space must be ____________________ and ____________________.

ANS:
exhaustive; mutually exclusive
mutually exclusive; exhaustive
6. There are ____________________ requirements of probabilities for the outcomes of a sample space.
ANS:
two
2
7. An individual outcome of a sample space is called a(n) ____________________ event.

ANS: simple
8. A(n) ____________________ is a collection or set of one or more simple events in a sample space.
ANS: event
9. The probability of an event is the ____________________ of the probabilities of the simple events
that constitute the event.
ANS: sum
10. No matter which approach was used to assign probability (classical, relative frequency, or subjective)
the one that is always used to interpret a probability is the ____________________ approach.
ANS: relative frequency
SHORT ANSWER
1. Alana, Eva, and Stephanie, three candidates for the presidency of a college's student body, are to
address a student forum. The forum's organizer is to select the order in which the candidates will give
their speeches, and must do so in such a way that each possible order is equally likely to be selected.
a. What is the random experiment?
b. List the outcomes in the sample space.
c. Assign probabilities to the outcomes.
d. What is the probability that Stephanie will speak first?
e. What is the probability that Alana will speak before Stephanie does?
ANS:
a. The random experiment is to observe the order in which the three candidates give their
speeches.
b. S = {ABC, ACB, BAC, BCA, CAB, CBA}, where A = Alana, B = Eva, and C = Stephanie.
c. The probability assigned to each outcome is 1/6.
d. P(CAB, CBA) = 1/3
e. P(ABC, ACB, BAC) = 1/2
2. There are three approaches to determining the probability that an outcome will occur: classical,
relative frequency, and subjective. For each situation that follows, determine which approach is most
appropriate.
a. A Russian will win the French Open Tennis Tournament next year.
b. The probability of getting any single number on a balanced die is 1/6.
c. Based on the past, it's reasonable to assume the average book sales for a certain textbook
is 6,500 copies per month.
ANS:
a. subjective
b. classical
c. relative frequency
Hobby Shop Sales

Sales records of a hobby shop showed the following number of radio controlled trucks sold weekly for
each of the last 50 weeks.
Number of Trucks Sold Number of Weeks
0 20
1 15
2 10
3 4
4 1
3. {Hobby Shop Sales Narrative} Define the random experiment of interest to the store.
ANS:
The random experiment consists of observing the number of trucks sold in any given week.
4. {Hobby Shop Sales Narrative} List the outcomes in the sample space.
ANS:
S = {0, 1, 2, 3, 4}
5. {Hobby Shop Sales Narrative} What approach would you use in determining the probabilities for next
week's sales? Assign probabilities to the outcomes.
ANS:
The relative frequency approach was used.
Number of Trucks Prob.
0 0.40
1 0.30
2 0.20
3 0.08
4 0.02
6. {Hobby Shop Sales Narrative} What is the probability of selling at least two trucks in any given week?
ANS:
P{2, 3, 4} = 0.30
7. {Hobby Shop Sales Narrative} What is the probability of selling between 1 and 3 (inclusive) trucks in
any given week?
ANS:
P{1,2,3} = 0.58
Mutual Fund Price

An investor estimates that there is a 75% chance that a particular mutual fund’s price will increase to
$100 per share over the next three weeks, based on past data.
8. {Mutual Fund Price Narrative} Which approach was used to produce this figure?
ANS:
The relative frequency approach
9. {Mutual Fund Price Narrative} Interpret the 75% probability.
ANS:
We interpret the 75% figure to mean that if we had an infinite number of funds with exactly the same
economic and market characteristics as the one the investor will buy, 75% of them will increase in
price to $100 over the next three weeks.
10. The sample space of the toss of a balanced die is S = {1, 2, 3, 4, 5, 6}. If the die is balanced, each
simple event (outcome) has the same probability. Find the probability of the following events:
a. Rolling an odd number
b. Rolling a number less than or equal to 3
c. Rolling a number greater than or equal to 5
d. Rolling a number between 2 and 5, inclusive.
ANS:
a. 3/6
b. 3/6
c. 2/6
d. 4/6
Equity Loan Rates

A survey of banks estimated the following probabilities for the interest rate being charged on a equity
loan based on a 30-year loan, based on past records.
Interest Rate 6.0% 6.5% 7.0% 7.5% >7.5%
Probability 0.20 0.23 0.25 0.28 .04
11. {Equity Loan Rates Narrative} If a bank is selected at random from this distribution, what is the
probability that the interest rate charged on a home loan exceeds 7.0%?
ANS:
0.32
12. {Equity Loan Rates Narrative} What is the most common interest rate?
ANS:
7.5%, since it occurred 28% of the time.
13. {Equity Loan Rates Narrative} What approach was used in estimating the probabilities for the
interest rates?
ANS:
relative frequency approach
14. The probability of the intersection is called a joint probability.

ANS:
T
15. Two or more events are said to be independent when the occurrence of one event has no effect on the
probability that another will occur.
ANS:
T
16. The union of events A and B is the event that occurs when either A or B or both occur. It is denoted as
'A or B'.
ANS:
T
17. If A and B are independent events with P(A) = 0.35 and P(B) = 0.55, then P(A|B) is 0.35/0.55 = .64.
ANS:
F

ANS:
F
19. The conditional probability of event B given event A is denoted by P(A|B).

ANS:
F
20. If A and B are independent events with P(A) = .40 and P(B) = .50, then P(A and B) = .20.
ANS:
T
21. The intersection of two events A and B is the event that occurs when both A and B occur.
ANS:
T
22. Two events A and B are independent if P(A and B) = 0.

ANS:
F
23. The union of events A and B is the event that occurs when either A or B occurs but not both.
ANS:
F
24. If A and B are independent, then P(A|B) = P(A) or P(B|A) = P(B).

ANS:
T
25. If P(A) = .30, P(B) = .60, and P(A and B) = .20, then P(A|B) = .40.
ANS:
F
26. Suppose the probability that a person owns both a cat and a dog is 0.10. Also suppose the probability
that a person owns a cat but not a dog is 0.20. The marginal probability that someone owns a cat is
0.30.
ANS:
T
27. The probability of the intersection of two events A and B is denoted by P(A and B) and is called the:
a. marginal probability
b. joint probability
c. conditional probability of A given B
d. conditional probability of B given A
ANS:
B
28. The intersection of events A and B is the event that occurs when:
a. either A or B occurs but not both
b. neither A nor B occur
c. both A and B occur
ANS:
C
29. The probability of event A given event B is denoted by

a. P(A and B)
b. P(A or B)
c. P(A|B)
d. P(B|A)
ANS:
C
30. Which of the following is equivalent to P(A|B)?

a. P(A and B)
b. P(B|A)
c. P(A)/P(B)
ANS:
C
31. Which of the following best describes the concept of marginal probability?
a. It is a measure of the likelihood that a particular event will occur, regardless of whether
another event occurs.
b. It is a measure of the likelihood that a particular event will occur, if another event has
already occurred.
c. It is a measure of the likelihood of the simultaneous occurrence of two or more events.
ANS:
A
32. If two events are independent, what is the probability that they both occur?
a. 0
b. 0.50
c. 1.00
d. Cannot be determined from the information given
ANS:
D
33. If the outcome of event A is not affected by event B, then events A and B are said to be
b. independent
ANS:
B
34. If A and B are disjoint events with P(A) = 0.70, then P(B):
a. can be any value between 0 and 1
b. can be any value between 0 and 0.70
c. cannot be larger than 0.30
ANS:
C
a. 1.23
b. 0.47
c. 0.18
d. 0.11
ANS:
B
36. Suppose P(A) = 0.60, P(B) = 0.85, and A and B are independent. The probability of the complement of
the event (A and B) is:
a. .4  .15 = .060
b. 0.40 + .15 = .55
c. 1  (.40 + .15) = .45
d. 1  (.6  .85) = .490
ANS:
D
37. Which of the following statements is correct if the events A and B have nonzero probabilities?
a. A and B cannot be both independent and disjoint
b. A and B can be both independent and disjoint
c. A and B are always independent
d. A and B are always disjoint
ANS:
A
38. A and B are disjoint events, with P(A) = 0.20 and P(B) = 0.30. Then P(A and B) is:
a. 0.50
b. 0.10
c. 0.00
d. 0.06
ANS:
C
39. If P(A) = 0.35, P(B) = 0.45, and P(A and B) = 0.25, then P(A|B) is:
a. 1.4
b. 1.8
c. 0.714
d. 0.556
ANS:
D
40. If A and B are independent events with P(A) = 0.60 and P(A|B) = 0.60, then P(B) is:
a. 1.20
b. 0.60
c. 0.36
ANS:
D
41. If A and B are independent events with P(A) = 0.20 and P(B) = 0.60, then P(A|B) is:
a. 0.20
b. 0.60
c. 0.40
d. 0.80
ANS:
A
42. If P(A) = 0.25 and P(B) = 0.65, then P(A and B) is:
a. 0.25
b. 0.40
c. 0.90
d. cannot be determined from the information given
ANS:
D
Cars
Suppose X = the number of cars owned by a family in the U.S. The probability distribution of X is
shown in the table below.
X 0 1 2 3
Probability 0.56 0.23 0.12 0.09
43. {Car Narrative}What is the chance that a family owns more than one car?
a. 0.23
b. 0.21
c. 0.44
ANS:
B
44. {Cars Narrative} Suppose you choose two families at random. What is the chance that they each own
one car? (That means family A owns a car and family B owns a car.)
a. 0.23
b. 0.23 + 0.23 = 0.46
c. 0.23 + 0.23  (0.23)*(0.23) = .4071
d. (0.23)*(0.23) = 0.0529
ANS:
D
45. The ____________________ of events A and B is the event that occurs when both A and B occur.
ANS:
intersection
46. The probability of an intersection of two events is called a(n) ____________________ probability.
ANS:
joint
47. Suppose two events A and B are related. The ____________________ probability of A is the
probability that A occurs, regardless of whether event B occurred or not.
ANS:
marginal
48. If two events are mutually exclusive, their joint probability is ____________________.
ANS:
zero
0
49. A conditional probability of A given B is written in probability notation as ____________________.

ANS:
P(A|B)
50. If A and B are independent, then P(A|B) = ____________________.

ANS:
P(A)
51. The ____________________ of two events A and B is the event that occurs when either A or B or both
occur.
ANS:
union
52. If A and B are mutually exclusive, their joint probability is ____________________.

ANS:
0
zero
53. P(A|B) is the conditional probability of ____________________ given ____________________.

ANS:
A; B
54. If P(A|B) = P(A) then events A and B are ____________________.

ANS:
independent
Tea and Seltzer

Suppose 55 percent of adults drink tea, 45 percent drink seltzer, and 10 percent drink both.
55. {Tea and Seltzer Narrative} What is the probability that a randomly chosen adult does not drink
seltzer?
ANS:
.55
56. {Tea and Seltzer Narrative} What is the probability that a randomly chosen adult drinks seltzer or tea
or both?
ANS:
.90
57. {Tea and Seltzer Narrative} What is the probability that a randomly chosen adult doesn't drink tea or
seltzer?
ANS:
.10
Club Members
A survey of a club’s members indicates that 50% own a home, 80% own a car, and 90% of the
homeowners who subscribe also own a car.
58. {Club Members Narrative} What is the probability that a subscriber owns both a car and a house?
ANS:
.45
59. {Club Members Narrative} What is the probability that a club member owns a car or a house, or both?
ANS:
.85
60. {Club Members Narrative} What is the probability that a club member owns neither a car nor a house?
ANS:
.15
Business Majors
Suppose 30% of business majors major in accounting. You take a random sample of 3 business
majors.
61. {Business Majors Narrative} What is the chance that they all major in accounting?
ANS:
.027
62. {Business Majors Narrative} What is the chance that at least one majors in accounting?
ANS:
.657
63. {Business Majors Narrative} What is the chance that exactly one majors in accounting?
ANS:
.441
64. {Business Majors Narrative} What is the chance that none of them major in accounting?
ANS:
.343
Drunk Drivers
Six hundred accidents that occurred on a Saturday night were analyzed. Two items noted were the
number of vehicles involved and whether alcohol played a role in the accident. The numbers are
shown below:
Number of Vehicles Involved
Did alcohol play a role? 1 2 3 Totals
Yes 75 125 50 250
No 50 225 75 350
Totals 125 350 125 600
65. {Drunk Drivers Narrative} What proportion of accidents involved more than one vehicle?
ANS:
475/600 or .79
66. {Drunk Drivers Narrative} What proportion of accidents involved alcohol and single vehicle?
ANS:
75/600 or .125
67. {Drunk Drivers Narrative} What proportion of accidents involved alcohol or a single vehicle?
ANS:
300/600 or .50
68. {Drunk Drivers Narrative} Given alcohol was involved, what proportion of accidents involved a single
vehicle?
ANS:
75/250 or .30
69. {Drunk Drivers Narrative} If multiple vehicles were involved, what proportion of accidents involved
alcohol?
ANS:
175/475 or .37
70. {Drunk Drivers Narrative} If 3 vehicles were involved, what proportion of accidents involved alcohol?
ANS:
50/125 or .40
71. {Drunk Drivers Narrative} If alcohol was not involved, what proportion of the accidents were single
vehicle?
ANS:
50/350 or .143
72. {Drunk Drivers Narrative} If alcohol was not involved, what proportion of the accidents were multiple
vehicle?
ANS:
300/350 or .857
a. Find P(A|B).
b. Find P(B|A).
ANS:
a. 0.20
b. 0.60
GPA and Class

A college professor classifies his students according to their grade point average (GPA) and their class
rank. GPA is on a 0.0-4.0 scale, and class rank is defined as the under class (freshmen and
sophomores) and the upper class (juniors and seniors). One student is selected at random.
GPA
Class Under 2.0 2.0 - 3.0 Over 3.0
Under 0.05 0.25 0.10
Upper 0.10 0.30 0.20
74. {GPA and Class Narrative} If the student selected is in the upper class, what is the probability that her
GPA is between 2.0 and 3.0?
ANS:
0.50
75. {GPA and Class Narrative} If the GPA of the student selected is over 3.0, what is the probability that
the student is in the lower class?
ANS:
0.333
76. {GPA and Class Narrative} What is the probability that the student is in the upper class?
ANS:
0.60
77. {GPA and Class Narrative} What is the probability that the student has GPA over 3.0?
ANS:
0.30
78. {GPA and Class Narrative} What is the probability that the student is in the lower class?
ANS:
0.40
79. {GPA and Class Narrative} What is the probability that the student is in the lower class and has GPA
over 3.0?
ANS:
0.10
80. {GPA and Class Narrative} What is the probability that the student is in the upper class and has GPA
under 2.0?
ANS:
0.10
81. {GPA and Class Narrative} Are being in the upper class and having a GPA over 3.0 related? Explain.
ANS:
Yes, since the product of the probabilities of the two events is not equal to the joint probability.
Marital Status
An insurance company has collected the following data on the gender and marital status of 570
customers.
Marital Status
Male 50 250 30
Female 100 100 40
82. {Marital Status Narrative} Develop the joint probability table.
ANS:
Male .088 .439 .053
Female .175 .175 .070
83. {Marital Status Narrative} Find the probability that the customer selected is a married female.
ANS:
0.175
84. {Marital Status Narrative} Find the probability that the customer selected is
a. female and single
b. married if the customer is male.
c. not single
ANS:
a. 0.175
b. 0.757
c. 0.737
Financial Consultants
A Financial Consultant has classified his clients according to their gender and the composition of their
investment portfolio (primarily bonds, primarily stocks, or a balanced mix of bonds and stocks). The
proportions of clients falling into the various categories are shown in the following table:
Portfolio Composition
Gender Bonds Stocks Balanced
Male 0.18 0.20 0.25
Female 0.12 0.10 0.15
One client is selected at random, and two events A and B are defined as follows:
A: The client selected is male.
B: The client selected has a balanced portfolio.
a. P(A)
b. P(B)
ANS:
a. 0.63
b. 0.40
86. {Financial Consultants Narrative} Express each of the following events in words:
a. A or B
b. A and B
ANS:
a. The client selected either is male or has a balanced portfolio or both.
b. The client selected is male and has a balanced portfolio.
87. {Financial Consultants Narrative} Find P(A and B).
ANS:
0.25
88. {Financial Consultants Narrative} Express each of the following probabilities in words:
a. P(A|B)
b. P(B|A)
ANS:
a. The probability that the client selected is male, if the client has a balanced portfolio.
b. The probability that the client selected has a balanced portfolio, if the client is male.
a. P(A|B)
b. P(B|A)
ANS:
a. 0.625
b. 0.3968
90. Julius and Gabe go to a show during their Spring break and toss a balanced coin to see who will pay
for the tickets. The probability that Gabe will pay three days in a row is 0.125.
ANS:
T
91. If events A and B have nonzero probabilities, then they can be both independent and mutually
exclusive.
ANS:
F
92. If the event of interest is A, the probability that A will not occur is the complement of A.
ANS:
T
93. Assume that A and B are independent events with P(A) = 0.30 and P(B) = 0.50. The probability that
both events will occur simultaneously is 0.80.
ANS:
F
94. Two events A and B are said to be independent if P(A) = P(A|B).

ANS:
T
95. When A and B are mutually exclusive, P(A or B) can be found by adding P(A) and P(B).
ANS:
T

ANS:
F
97. If A and B are two independent events with P(A) = 0.9 and P(B|A) = 0.5, then P(A and B) = 0.45.
ANS:
T
98. Two events A and B are said to be independent if P(A|B) = P(B|A).

ANS:
F
99. The probability of the union of two mutually exclusive events A and B is 0.
ANS:
F
100. Two events A and B are said to be mutually exclusive if P(A and B) = 1.0.
ANS:
F
101. If P(A and B) = 1, then A and B must be mutually exclusive.

ANS:
F
102. Events A and B are either independent or mutually exclusive.

ANS:
F
103. If P(B) = .7 and P(B|A) = .4, then P(A and B) must be .28.
ANS:
F
104. If P(B) = .7 and P(A|B) = .7, then P(A and B) = 0.

ANS:
F
105. If the events A and B are independent with P(A) = 0.35 and P(B) = 0.45, then the probability that both
events will occur simultaneously is:
a. 0
b. 0.16
c. 0.80
d. Not enough information to tell.
ANS:
B
106. Two events A and B are said to be mutually exclusive if:

a. P(A|B) = 1
b. P(A|B) = P(A)
c. P(A and B) =1
d. P(A and B) = 0
ANS:
D
107. If P(A) = 0.84, P(B) = 0.76, and P(A or B) = 0.90, then P(A and B) is:
a. 0.06
b. 0.14
c. 0.70
d. 0.83
ANS:
C
108. Which of the following statements is always correct?

b. P(A or B) = P(A) + P(B)
c. P(A) = 1  P(Ac)
ANS:
C
109. If P(A) = 0.20, P(B) = 0.30, and P(A and B) = 0, then A and B are:
a. dependent events
b. independent events
c. mutually exclusive events
d. complementary events
ANS:
C
a. 1.23
b. 0.47
c. 0.24
ANS:
B
111. Suppose P(A) = 0.30. The probability of the complement of A is:

a. 0.30
b. 0.70
c. 0.30
ANS:
B
112. If events A and B are independent then:

b. P(A and B) = P(A) + P(B)
c. P(B|A) = P(A)
ANS:
A
113. If A and B are mutually exclusive events, with P(A) = 0.20 and P(B) = 0.30, then the probability that
both events will occur simultaneously is:
a. 0.50
b. 0.06
c. 0
ANS:
C
114. If A and B are independent events with P(A) = 0.60 and P(B) = 0.70, then P(A or B) equals:
a. 1.30
b. 0.88
c. 0.42
d. Cannot tell from the given information.
ANS:
B
115. If A and B are mutually exclusive events with P(A) = 0.30 and P(B) = 0.40, then P(A or B) is:
a. 0.10
b. 0.12
c. 0.70
d. None of these choices
ANS:
C
116. If A and B are any two events with P(A) = .8 and P(B|A) = .4, then P(A and B) is:
a. .40
b. .32
c. 1.20
ANS:
B
117. If A and B are any two events with P(A) = .8 and P(B|Ac) = .7, then P(Ac and B) is
a. 0.56
b. 0.14
c. 1.50
ANS:
B
118. The ____________________ rule says that P(Ac) = 1  P(A).

ANS:
complement
119. The ____________________ rule is used to calculate the joint probability of two events.
ANS:
multiplication
120. If A and B are ____________________ events, the joint probability of A and B is the product of the
probabilities of those two events.
ANS:
independent
121. The ____________________ rule is used to calculate the probability of the union of two events.
ANS:
addition
122. If A and B are ____________________ then the probability of the union of A and B is the sum of their
individual probabilities.
ANS:
mutually exclusive
123. The first set of branches of a probability tree represent ____________________ probabilities.
ANS:
marginal
124. The second set of branches of a probability tree represent ____________________ probabilities.
ANS:
conditional
125. When you multiply a first level branch with a second level branch on a probability tree you get a(n)
____________________ probability.
ANS:
joint
126. If two events are complements, their probabilities sum to ____________________.

ANS:
one
1
127. If two events are mutually exclusive their joint probability is ____________________.
ANS:
zero
0
a. Find P(A and B).
b. Find P(A or B).
ANS:
a. 0.12
b. 0.68
College Professorship
A Ph.D. graduate has applied for a job with two colleges: A and B. The graduate feels that she has a
60% chance of receiving an offer from college A and a 50% chance of receiving an offer from college
B. If she receives an offer from college B, she believes that she has an 80% chance of receiving an
offer from college A. Let A = receiving an offer from college A, and let B = receiving an offer from
college B.
129. {College Professorship Narrative} What is the probability that both colleges will make her an offer?
ANS:
(.5)(.8) = 0.40
130. {College Professorship Narrative} What is the probability that at least one college will make her an
offer?
ANS:
.6 + .5  .4 = 0.7
131. {College Professorship Narrative} If she receives an offer from college B, what is the probability that
she will not receive an offer from college A?
ANS:
1  0.8 = 0.2.

a. Find P(A and B).
b. Find P(A or B).
c. Find P(A|B).
ANS:
a. 0.15
b. 0.75
c. 0.375
133. A survey of a magazine's subscribers indicates that 50% own a house, 80% own a car, and 90% of the
homeowners also own a car. What proportion of subscribers:
a. own both a car and a house?
b. own a car or a house, or both?
c. own neither a car nor a house?
ANS:
a. 0.45
b. 0.85
c. 0.15
134. Suppose A and B are two mutually exclusive events for which P(A) = 0.30 and P(B) = 0.40.
a. Find P(A and B).
b. Find P(A or B).
c. Are A and B independent events? Explain using probabilities.
ANS:
a. 0
b. 0.70
c. No. P(A and B) = 0 because they are mutually exclusive events. If they were independent
events, you would have P(A and B) = P(A) * P(B) = 0.12.

a. Find P(A and B).
b. Find P(A or B).
c. Find P(A|B).
ANS:
a. 0.18
b. 0.62
c. 0.36
136. Is it possible to have two events for which P(A) = 0.40, P(B) = 0.50, and P(A or B) = 0.30? Explain.
ANS:
Yes. In this situation, if P(A and B) = 0.60 it works.
137. A pharmaceutical firm has discovered a new diagnostic test for a certain disease that has infected 1%
of the population. The firm has announced that 95% of those infected will show a positive test result,
while 98% of those not infected will show a negative test result.
a. What proportion of people don't have the disease?
b. What proportion who have the disease test negative?
c. What proportion of those who don't have the disease test positive?
d. What proportion of test results are incorrect?
e. What proportion of test results are correct?
ANS:
a. 0.99
b. 0.05
c. 0.02
d. 0.0203
e. 0.9797
138. {Marital Status Narrative} Find the probability that the customer selected is female or divorced.
ANS:
0.474
139. {Marital Status Narrative} Are gender and marital status mutually exclusive? Explain using
probabilities.
ANS:
No, since P(female and married) = 0.175 > 0. (Any other combination shows this also.)
140. {Marital Status Narrative} Is marital status independent of gender? Explain using probabilities.
ANS:
No, since P(married / male) = 0.757  P(married) = 0.614. (Any other combination shows this also.)
Construction Bids
A construction company has submitted bids on two separate state contracts, A and B. The company
feels that it has a 60% chance of winning contract A, and a 50% chance of winning contract B.
Furthermore, the company believes that it has an 80% chance of winning contract A if it wins contract
B.
141. {Construction Bids Narrative} What is the probability that the company will win both contracts?
ANS:
P(B and A) = P(B) * P(A|B) = (.50)(.80) = .40
142. {Construction Bids Narrative} What is the probability that the company will win at least one of the
two contracts?
ANS:
P(A or B) = P(A) + P(B)  P(A and B) = .60 + .50  .40 = .70
143. {Construction Bids Narrative} If the company wins contract B, what is the probability that it will not
win contract A?
ANS:
P(Ac|B) = 1  P(A|B) = 1  .80 = .20
144. {Construction Bids Narrative} What is the probability that the company will win at most one of the
two contracts?
ANS:
1  P(A and B) = 0.60
145. {Construction Bids Narrative} What is the probability that the company will win neither contract?
ANS:
1  P(A or B) = 0.30
Condo Sales and Interest Rates

The probability that condo sales will increase in the next 6 months is estimated to be 0.30. The
probability that the interest rates on condo loans will go up in the same period is estimated to be 0.75.
The probability that condo sales or interest rates will go up during the next 6 months is estimated to be
0.90.
146. {Condo Sales and Interest Rates Narrative} What is the probability that both condo sales and interest
rates will increase during the next six months?
ANS:
0.15
147. {Condo Sales and Interest Rates Narrative} What is the probability that neither condo sales nor interest
rates will increase during the next six months?
ANS:
0.10
148. {Condo Sales and Interest Rates Narrative} What is the probability that condo sales will increase but
interest rates will not during the next six months?
ANS:
0.15
149. Bayes' Law is a formula for revising an initial subjective (prior) probability value on the basis of new
results, thus obtaining a new (posterior) probability value.
ANS:
T
150. Although there is a formula defining Bayes' law, you can also use a probability tree to conduct
calculations.
ANS:
T
151. Bayes' Law allows us to compute conditional probabilities from other forms of probability.
ANS:
T
152. Bayes' Law says that P(A|B) = P(B|A)P(A).

ANS:
F
153. Conditional probabilities are also called likelihood probabilities.

ANS:
T
154. In applying Bayes' Law, as the prior probabilities increase, the posterior probabilities decrease.
ANS:
F
155. Prior probability of an event is the probability of the event before any information affecting it is given.
ANS:
T
156. Bayes' Law can be used to calculate posterior probabilities, prior probabilities, as well as new
conditional probabilities.
ANS:
F
157. Posterior probability of an event is the revised probability of the event after new information is
available.
ANS:
T
158. Prior probability is also called likelihood probability.
ANS:
F
159. In general, a posterior probability is calculated by adding the prior and likelihood probabilities.
ANS:
F
160. We can use the joint and marginal probabilities to compute conditional probabilities, for which a
formula is available.
ANS:
T
161. In problems where the joint probabilities are given, we can compute marginal probabilities by adding
across rows and down columns.
ANS:
T
162. If joint, marginal, and conditional probabilities are available, only joint probabilities can be used to
determine whether two events are dependent or independent.
ANS:
F
163. Suppose we have two events A and B. We can apply the addition rule to compute the probability that at
least one of these events occurs.
ANS:
T
164. Posterior probabilities can be calculated using the addition rule for mutually exclusive events.
ANS:
F
165. Prior probabilities can be calculated using the multiplication rule for mutually exclusive events.
ANS:
F
166. We can apply the multiplication rule to compute the probability that two events occur at the same time.
ANS:
T
167. Which of the following statements is false?

a. Thomas Bayes first employed the calculation of conditional probability in the eighteenth
century.
b. There is no formula defining Bayes' Law.
c. We use a probability tree to conduct all necessary calculations for Bayes' Law.
ANS:
B
168. A posterior probability value is a prior probability value that has been:
a. modified on the basis of new information.
b. multiplied by a conditional probability value.
c. divided by a conditional probability value.
d. added to a conditional probability value.
ANS:
A
169. Initial estimates of the probabilities of events are known as:

a. joint probabilities
b. posterior probabilities
c. prior probabilities
d. conditional probabilities
ANS:
C
170. Which of the following statements is false regarding a scenario using Bayes' Law?
a. Prior probabilities are called likelihood probabilities.
b. Conditional probabilities are called posterior probabilities.
c. Posterior probabilities are calculated by using prior probabilities that have been modified
based on new information.
ANS:
A
171. Bayes' Law is used to compute:

a. prior probabilities.
b. joint probabilities.
c. union probabilities.
d. posterior probabilities.
ANS:
D
172. Thomas ____________________ first employed the calculation of conditional probability.

ANS:
Bayes
173. Bayes' Law involves three different types of probabilities: 1) prior probabilities; 2) likelihood
probabilities; and 3) ____________________ probabilities.
ANS:
posterior
174. Bayes' Law involves three different types of probabilities: 1) ____________________ probabilities; 2)
likelihood probabilities; and 3) posterior probabilities.
ANS:
prior
175. Bayes' Law involves three different types of probabilities: 1) prior probabilities;
2) ____________________ probabilities; and 3) posterior probabilities.
ANS:
likelihood
176. There are situations where we witness a particular event and we need to compute the probability of one
of its possible causes. ____________________ is the technique we use to do this.
ANS:
Bayes' Law
Bayes Law
Baye's Law
177. In the scenario of Bayes' Law, P(A|B) is a(n) ____________________ probability, while P(B|A) is a
posterior probability.
ANS:
likelihood
178. In the scenario of Bayes' Law, P(A|B) is a posterior probability, while P(B|A) is a(n)
____________________ probability.
ANS:
likelihood
179. ____________________ can find the probability that someone with a disease tests positive by using
(among other things) the probability that someone who actually has the disease tests positive for it.
ANS:
Bayes' Law
Bayes Law
Baye's Law
Certification Test
A standard certification test was given at three locations. 1,000 candidates took the test at location A,
600 candidates at location B, and 400 candidates at location C. The percentages of candidates from
locations A, B, and C who passed the test were 70%, 68%, and 77%, respectively. One candidate is
selected at random from among those who took the test.
180. {Certification Test Narrative} What is the probability that the selected candidate passed the test?
ANS:
(.5)(.7) + (.3)(.68) + (.2)(.77) = 0.708
181. {Certification Test Narrative} If the selected candidate passed the test, what is the probability that the
candidate took the test at location B?
ANS:
(.3)(.68) / .708 = 0.288
182. {Certification Test Narrative} What is the probability that the selected candidate took the test at
location C and failed?
ANS:
(.2)(.23) = 0.046
Cysts
After researching cysts of a particular type, a doctor learns that out of 10,000 such cysts examined,
1,500 are malignant and 8,500 are benign. A diagnostic test is available which is accurate 80% of the
time (whether the cyst is malignant or not). The doctor has discovered the same type of cyst in a
patient.
183. {Cysts Narrative} In the absence of any test, what is the probability that the cyst is malignant?
ANS:
M = Malignant, P(M) = .15
184. {Cysts Narrative} In the absence of any test, what is the probability that the cyst is benign?
ANS:
B = Benign, P(B) = .85
185. {Cysts Narrative} What is the probability that the patient will test positive?
ANS:
P(+) = P(+ and M) + P(+ and B) = P(+/M) · P(M) + P(+/B) · P(B)
= (.80)(.15) + (.20)(.85) = .29
186. {Cysts Narrative} What is the probability that the patient will test negative?
ANS:
P() = 1  P(+) = 1  .29 = .71 or
P() = P( and M) + P( and B) = P(/M) · P(M) + P(/B) · P(B)
= (.20)(.15) + (.80)(.85) = .71
187. {Cysts Narrative} What is the probability that the patient has a benign tumor if he or she tests
positive?
ANS:
P(B/+) = P(+ and B) / P(+) = P(+/B) · P(B) / P(+) = (.20)(.85) / (.29) = .586
188. {Cysts Narrative} What is the probability that the patient has a malignant cyst if he or she tests
negative?
ANS:
P(M/) = P( and M) / P() = P(/M) · P(M) / P() = (.20)(.15) / (.71) = .042
Messenger Service
Three messenger services deliver to a small town in Oregon. Service A has 60% of all the scheduled
deliveries, service B has 30%, and service C has the remaining 10%. Their on-time rates are 80%,
60%, and 40% respectively. Define event O as a service delivers a package on time.
189. {Messenger Service Narrative} Calculate P(A and O).
ANS:
P(A and O) = P(A)P(O|A) = (.60)(.80) = 0.48
190. {Messenger Service Narrative} Calculate P(B and O).
ANS:
P(B and O) = P(B) P(O|B) = (.30)(.60) = 0.18
191. {Messenger Service Narrative} Calculate P(C and O).
ANS:
P(C and O) = P(C)P(O |C) = (.10)(.40) = 0.04
192. {Messenger Service Narrative} Calculate the probability that a package was delivered on time.
ANS:
P(O) = P(A and O) + P(B and O) + P(C and O) = .48 + .18 + .04 = 0.70
193. {Messenger Service Narrative} If a package was delivered on time, what is the probability that it was
service A?
ANS:
P(A|O) = P(A and O) / P(O) = 0.48 / 0.70 = 0.686
service B?
ANS:
P(B|O) = P(B and O) / P(O) = 0.18 / 0.70 = 0.257
service C?
ANS:
P(C|O) = P(C and O) / P(O) = 0.04 / 0.70 = 0.057
196. {Messenger Service Narrative} If a package was delivered 40 minutes late, what is the probability that
it was service A?
ANS:
P(A|Oc) = P(A and Oc) / P(Oc) = (0.60)(0.20) / 0.30 = 0.40
it was service B?
ANS:
P(B|Oc) = P(B and Oc) / P(Oc) = (0.30)(0.40) / 0.30 = 0.40
it was service C?
ANS:
P(C|Oc) = P(C and Oc) / P(Oc) = (0.10)(0.60) / 0.30 = 0.20

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CONTINUOUS PROBABILITY DISTRIBUTIONS

2. A continuous probability distribution represents a random variable having an infinite number of

44. Suppose f(x) equals 1/50 on the interval [0, 50].

Subway Waiting Time

69. Which of the following is not a characteristic for a normal distribution?

71. A standard normal distribution is a normal distribution with:

74. Given that Z is a standard normal variable, the variance of Z:

77. In its standardized form, the normal distribution:

78. Most values of a standard normal distribution lie between:

84. ____________________ the value of σ in a normal distribution will make it wider.

87. P(Z > 1.9) = ____________________ P(Z < 1.9).

88. P(1 < Z < 2) = P(Z < 2) − ____________________.

90. P(Z > 3.00) is approximately ____________________.

91. P(Z < 3.00) is approximately ____________________.

99. {Diet Narrative} What proportion of the dieters gained weight?

a. the area between 0 and z is 0.3729

103. If Z is a standard normal random variable, find the following probabilities:

131. Which of the following can have an exponential distribution?

132. The exponential density function f(x):

140. The mean of an exponential random variable is ____________________ the median.

142. An exponential random variable is an example of a(n) ____________________ random variable.

143. If X has an exponential distribution with parameter λ, then f(0) = ____________________.

145. If X has an exponential distribution, then f(x) approaches ____________________ as x approaches

147. If X has an exponential distribution, its ____________________ is equal to its

150. Suppose X has an exponential distribution with mean 2. Find f(x).

Light Bulb Lifetime

ANS: P(X > x) = e−λx ⇒ e−x/3 = .10 ⇒ x = 6.908 minutes.

ANS: P(X > x) = e−λx ⇒ e−x/3 = .50 ⇒ x = 2.079 minutes.

ANS:P(X > 3) = e−3/3 = e−1 = 0.3679.

ANS: P(X < 6) = 1 − e−6/3 = 1 − e−2 = 0.8647.

ANS: P(3 < X < 6) = e−3/3 − e−6/3 = e−1 − e−2 = 0.2325.

2. A discrete random variable X may assume an (infinitely) uncountable number of distinct

3. A continuous random variable X assumes an (infinitely) uncountable number of distinct

Multiple Choice Questions

17. Which of the following can be represented by a discrete random variable?

19. Which of the following can be represented by a continuous random variable?

20. What is a characteristic of the mass function of a discrete random variable X?

Refer to Exhibit 5-1. What is the probability that X is 0?

Refer to Exhibit 5-1. What is the probability that X is greater than 0?

24. Exhibit 5-1. Consider the following discrete probability distribution.

Refer to Exhibit 5-1. What is the probability that X is negative?

25. Exhibit 5-1. Consider the following discrete probability distribution.

Refer to Exhibit 5-1. What is the probability that X is less than 5?

Refer to Exhibit 5-2. What is the probability that X equals 2?

Refer to Exhibit 5-2. What is the probability that X is greater than 2?

31. Exhibit 5-3. Consider the following probability distribution.

Refer to Exhibit 5-3. The expected value is ___.

Refer to Exhibit 5-3. The variance is ____.

33. Exhibit 5-3. Consider the following probability distribution.

Refer to Exhibit 5-3. The standard deviation is _________.

34. Exhibit 5-4. Consider the following probability distribution.

Refer to Exhibit 5-4. The expected value is _____.

Refer to Exhibit 5-4. The variance is _____.

Refer to Exhibit 5-4. The standard deviation is ____.

The expected value and the variance of this distribution are:

The stock's expected price at the end of the year is _______.

48. A consumer who is risk averse is best characterized as _______________.

49. A consumer who is risk neutral is best characterized as ______________.