Random Variables: Complete Business Statistics, 8/e Instructor's Solutions Manual, Chapter 3

Complete Business Statistics, 8/e Instructor’s Solutions Manual, Chapter 3
CHAPTER 3
RANDOM VARIABLES
3-1. a. ∑ P( x) = 1.0
15
b. ∑ P( x) = 0.20 + 0.15 + 0.10 + 0.05 = 0.50
x =12
c. x F(x)
9 0.05
10 0.20
11 0.50
12 0.70
13 0.85
14 0.95
15 1.00
3-2. a. ∑ P( x) = 1.0
b. 0.85, found by summing the probabilities for 0.75 − 0.78:
P(0.75) + P(0.76) + P(0.77) + P(0.78) = 0.25 + 0.40 + 0.15 + 0.05 = 0.85
c. 0.80 found by: 1 − P(0.77) − P(0.78) = 1 − 0.15 – 0.05 = 0.80
d. 0.36 found by: P(price >0.75) = P(0.76) + P(0.77) + P(0.78) = 0.40 + 0.15 + 0.05 = 0.60
for the price to be above 0.75 for two days in a row: (0.60)2 = 0.36
3-3. a. ∑ P( x) = 1.0
b. x F(x)
0 0.3
1 0.5
2 0.7
3 0.8
4 0.9
5 1.0
c. P(X > 2) = 1 − F(2) = 0.3
3-4. a. ∑ P( x) = 1.0
b. x F(x)
0 0.01
Copyright 2012 by Wohl Publishing, Inc. All rights reserved. 50

1 0.10
2 0.40
3 0.60
4 0.80
5 0.90
6 1.00
c. P( X ≤ 4) = F(4) = 0.80
d. P( X ≥ 2) = 1 − F(1) = 0.90
3-5. a. ∑ P( x) = 1.0
b. x F(x)
0 0.10
10 0.30
20 0.65
30 0.85
40 0.95
50 1.00
c. P(X > 20) = 1 − F(20) = 0.35
3-6. a. P( 2 ≤ X ≤ 4) = 0.2 + 0.2 + 0.3 = 0.7

b. x F(x)
0 0.1
1 0.2
2 0.4
3 0.6
4 0.9
5 1.0
c. ∑ P( x) = 1.0
3-7. first die outcome:
1 2 3 4 5 6
1 • • • • • •
2 • • • • • •
3 • • • • • •
Second 4 • • • • • •

die out- 5 • • • • • •
come: 6 • • • • • •
X = sum of the two dice. Note from the sample space that one outcome leads to a sum of 2, two equally-
likely outcomes lead to a sum of 3, three lead to a sum of 4, four to a sum of 5, five to a sum of 6, and six
(the highest number of outcomes) lead to a sum of 7. Thus, the most likely sum is x = 7. Afterwards, the
probabilities decline: five outcomes lead to a sum of 8, four to a sum of 9, three to a sum of 10, two to a
sum of 11, and one outcome (two “sixes”) leads to a sum of 12. We thus have the following probability
distribution and cumulative distribution function:
X P(x) F(x)
2 1/36 1/36
3 2/36 3/36
4 3/36 6/36
5 4/36 10/36
6 5/36 15/36
7 6/36 21/36
8 5/36 26/36
9 4/36 30/36
10 3/36 33/36
11 2/36 35/36
12 1/36 1.0
3-8. a. ∑ P( x) = 1.0
b. x F(x)
0 0.1
1 0.3
2 0.7
3 0.8
4 0.9
5 1.00
c. P(1 ≤ X ≤ 4) = F(4) − F(0) = 0.9 − 0.1 = 0.8
d. P(extra costs) = P(X > 3) = 1 − F(3) = 0.2
e. P(no orders for 5 days) = (0.1)5 = 0.00001
f. P(extra costs for 2 days) = (0.2)2 = 0.04
3-9. a.
P(400 ≤ X ≤ 1000) = P(400) + P(600) + P(800) + P (1000)
= 0.05 + 0.05 + 0.1 + 0.1 = 0.30
b. x F(x)
400 0.05

600 0.10
800 0.20
1000 0.30
1200 0.60
1500 0.80
1700 1.00
c. P(X ≤ 1000) = F(1000) = 0.30
d. P(600 ≤ X ≤ 1500) = F(1500) − F(600) = 0.8 − 0.1 = 0.7
3-10. a. ∑ P( x) = 1.0
b. P(1 < X ≤ 3) = P(2) + P(3) = 0.6
c. P(1 ≤ X ≤ 4) = 0.7
d. x F(x)
0 0.1
1 0.3
2 0.6
3 0.9
4 1.0
3-11. P(X = 0) is 0.2.

a. The most likely outcome is $2,000 (prob. = 0.3)
b. Is the venture likely to be successful? Yes: P(X > 0) = 0.6
c. The long-term average is E(X): E(X) = +800
d. A good measure of the risk is the standard deviation.
E(X 2) = 2,800,000 V(X) = 2,160,000 SD(X) = 1,469.69
[Using the template: Random Variables.xls]
Statistics of X
Mean 800
Variance 2160000
Std. Devn. 1469.69
3-12. E(X) = 8.3 V(X) = 2.3

E(Y) = 8.4 V(Y) = 6.4
Y is a riskier stock because V(Y) > V(X) while E(X) is close to E(Y).
3-13. For the random variable in Problem 3-1:

E(X) = 1.8 E(X 2) = 6 V(X) = 2.76 SD(X) = 1.661
Statistics of X

Mean 1.8
Variance 2.76
Std. Devn. 1.66132
Error! Bookmark not defined.Error! Bookmark not defined.
3-14. For Problem 3-2:
E(X) = 3.19 E(X 2) = 12.39 V(X) = 2.2139 SD(X) = 1.4879

E(X) = 21.5 E(X 2) = 625 V(X) = 162.75

E(X) = 2.8 E(X 2) = 10 V(X) = 2.16 SD(X) = 1.47
Statistics of X
Mean 2.8
Variance 2.16
Std. Devn. 1.46969
3-17. E(sum of two dice) = 7. Derived as follows:

x P(x) xP(x)
2 1/36 2/36
3 2/36 6/36
4 3/36 12/36
5 4/36 20/36
6 5/36 30/36
7 6/36 42/36
8 5/36 40/36
9 4/36 36/36
10 3/36 30/36
11 2/36 22/36
12 1/36 12/36
252/36 = 7

E(X) = 2.2
P(X > E(X)) = P(X > 2.2) = P(3) + P(4) + P(5) = 0.3

Mean = 1230, var. = 137100, std. dev. = 370.27
Descriptive Statistics of a Random Variable
x P(x) F(x)
400 0.05 0.05 Statistics of X

600 0.05 0.1 Mean 1230

800 0.1 0.2 Variance 137100
1000 0.1 0.3 Std. Devn. 370.27
1200 0.1 0.6 Skewness -0.50362
1500 0.05 0.8 (Relative) Kurtosis -0.54598
1700 0.05 1
3-20. Mean = 0.7565, std. dev. = 0.01152

x P(x) F(x)
0.73 0.05 0.05 Statistics of X
0.74 0.1 0.15 Mean 0.7565
0.75 0.25 0.4 Variance 0.00013
0.76 0.4 0.8 Std. Devn. 0.01152
0.77 0.15 0.95 Skewness -0.27018
0.78 0.05 1 (Relative) Kurtosis -0.00343
3-21. We use Equation (3-6) for a linear function of a random variable.

E(aX + b) = aE(X) + b
Hence: E(net income of a manager)
= 0.95E(X) - 300 = 0.95(1230) - 300 = $868.5M
[Using the template: Random Variables.xls)]

Enter the formula for h(X) in cell G12 as: = “-300 +0.95*x”, [omitting the “ marks]
Definition of h(X) x
h(X) = 1315 1700
Statistics of h(X)
Mean 868.5
Variance 123733
Std. Devn. 351.757
Skewness -0.50362
(Relative) Kurtosis -0.54598
3-22. The variance is a squared quantity, and thus in applications it has less meaning than its square
root, the standard deviation. The standard deviation is in the original units of the problem.
3-23. 3.11 found by: ∑ P(x)v(x) :

P(x) v(x) P(x)v(x)
0.1 2.0 0.20
0.1 2.5 0.25
0.3 3.0 0.90

0.2 3.25 0.65

0.2 3.40 0.68
0.05 3.60 0.18
0.05 5.00 0.25
3.11
3-24. By Chebyshev’s theorem:

P(|X − µ| < kσ) > 1−1/k2
For k = 4, Probability > 1 − 1/42 = 1 − 1/16 = 0.9375
3-25. The variance is a measure of the spread or uncertainty of the random variable. The variance is the
expected squared deviation of the value of the random variable from its mean. One use of the
variance is as a measure of the risk of an investment.
3-26. Refer to Problem 3-6. Operation cost: C(X) = 300 X

x P(x) C(x) C(x)P(x)
0 0.1 0 0
1 0.1 300 30
2 0.2 424.26 84.85
3 0.2 519.62 103.92
4 0.3 600 180
5 0.1 670.82 67.08
465.85 = E(cost)
3-27. Refer to Problem 3-21:

Cost = 25,000 + 5,000X
By Equation (3-10): V(aX + b) = a2V(X)
From Problem 3-16, we know that V(X) = 2.7475, so:
V(Cost) = (5,000)2(2.7475) = 68,687,500
SD(Cost) = 8,287.79
3-28. The expected value of a random variable is the long-term average. Hence the airline must raise
its fare by the expected value of a claim per passenger. The mean claim is:
E(X) = 0 x P(no claim) + 600 x P(claim) = 0 + 600(0.005) = $3
3-29. In Problem 3-2, penalty = X 2.

Find E(penalty). From Problem 3-11: E(X 2) = $12.39
3-30. Mean = 0.03, var. = 0.9291


x P(x) F(x)
-1 0.45 0.45 Statistics of X
0 0.07 0.52 Mean 0.03
1 0.48 1 Variance 0.9291
Std. Devn. 0.9639
Skewness -0.0599
3-31. Three standard deviations. Because:

8/9 = 1 − 1/32, so k = 3 in Chebyshev’s theorem.
3-32. Strength: measure of the linear relationship between two random variables.
Weakness: doesn’t indicate the strength of that relationship
3-33. a. There is a positive linear relationship in the differences in gold “opening/closing” prices
between the two cities of London and New York.
b. A more useful measure would be correlation.
c. Given the difference in time between the two cities, use the movement in gold in London as
an indicator for the likely movement in New York.
d. Answers will vary
e. Answers will vary.
3-34. Answers will depend on which two stocks are selected and the dates involved.
3-35. X is binomial if sales calls are independent of each other.
3-36. F is not binomial: N/n is not greater than 10 (the trials are not independent and p is not constant).
3-37. Using the Binomial Template, we get the following answers:

a. 0.8889
b. 11
c. 0.55
3-38. Bernoulli trials are a sequence of identical, independent trials each resulting in a success or a
failure with constant success probability, p. A binomial random variable counts the number of
successes in a sequence of n Bernoulli trials.
3-39. a. 0.9981
b. 0.889, 0.935
c. 4, 5
d. increase the reliability of each engine.

3-40. E(X) = np = 100(.10) = 10

SD(X) = npq = 100(.10)(.90) = 3.00
By Chebyshev’s theorem: P(|X − µ| < kσ) > 1 − 1/k2
1 − 1/k2 = 0.75, so k = 2
µ − 2σ < X < µ + 2σ
10 − 2(3) < X < 10 + 2(3)
4 < X < 16 are the desired bounds.
3-41. X is not binomial because members of the same family are related and not independent of each
other.

a) 0.1993
b) 0.7651
c) 0.4955
d) 0.5382
e) 30
f) 0.27859
3-43. a. distribution for n=5, p=0.6 is slightly skewed. Holding p constant, as n is increased from 5 to
20, the distribution becomes more symmetric.
b. Holding n constant, the closer p is to 0.5 the more symmetrical the distribution.

a. 0.5769
b. I) 27
ii) 37
iii) 0.9576
3-45.
x P(x) F(x)
2 0.3 0.9 Mean 1.55
3 0.05 0.95 Variance 0.6475
4 0.05 1 Std. Devn. 0.80467
Skewness 1.5647
(Relative) Kurtosis 1.98438
a. mean = 1.55
b. sd = 0.80467

c. mean number of chest x-rays = (1.55)(350) = 542.5

d. explanations will vary, but should point out how unsafe excess CT scans really are.
3-46. Use template: Poisson.xls

a) 0.1593
b) 0.4916
Poisson Distribution
Mean
0.71
x P(Exactly x) P(At most x) P(At least x)

0 0.4916 0.4916 1.0000
1 0.3491 0.8407 0.5084
2 0.1239 0.9646 0.1593
3 0.0293 0.9940 0.0354
4 0.0052 0.9992 0.0060
5 0.0007 0.9999 0.0008
c) µ = 0.106 by setting D7 to 0.90

Poisson Distribution
Mean
0.106427788

0 0.8990 0.8990 1.0000
1 0.0957 0.9947 0.1010
2 0.0051 0.9998 0.0053
3-47. Use template: Exponential.xls

a) MTBF = mean time between failures = 5.74
Exponential Distribution
λ Mean Var. Stdev.

0.1742 5.74053 32.9537 5.74053
b) 0.1599, P(x≤= 1) = 0.1599

P(<=x) x
0.0834 0.5
0.2942 2
0.1599 1
c) 0.1599
d) p(x=> 5) = 0.4185
x P(>=x)

5 0.4185
3-48. X is geometric.
3-49.
a) for n=5 using formula for data table in cells F29:O38:
=BINOMDIST($F31,$F$29,G$30,TRUE)
5 cummulative binomial
0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9
0 0.5905 0.3277 0.1681 0.0778 0.0313 0.0102 0.0024 0.0003 0.0000
1 0.9185 0.7373 0.5282 0.3370 0.1875 0.0870 0.0308 0.0067 0.0005
2 0.9914 0.9421 0.8369 0.6826 0.5000 0.3174 0.1631 0.0579 0.0086
3 0.9995 0.9933 0.9692 0.9130 0.8125 0.6630 0.4718 0.2627 0.0815
4 1.0000 0.9997 0.9976 0.9898 0.9688 0.9222 0.8319 0.6723 0.4095
b) for n = 7
7 cummulative binomial
0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9
0 0.4783 0.2097 0.0824 0.0280 0.0078 0.0016 0.0002 0.0000 0.0000
1 0.8503 0.5767 0.3294 0.1586 0.0625 0.0188 0.0038 0.0004 0.0000
2 0.9743 0.8520 0.6471 0.4199 0.2266 0.0963 0.0288 0.0047 0.0002
3 0.9973 0.9667 0.8740 0.7102 0.5000 0.2898 0.1260 0.0333 0.0027
4 0.9998 0.9953 0.9712 0.9037 0.7734 0.5801 0.3529 0.1480 0.0257
5 1.0000 0.9996 0.9962 0.9812 0.9375 0.8414 0.6706 0.4233 0.1497
6 1.0000 1.0000 0.9998 0.9984 0.9922 0.9720 0.9176 0.7903 0.5217
3-50. The candidate needs the votes of at least 5 of the remaining 10 members.
P(X ≥ 5) = 0.623
Use template: Binomial.xls
Binomial Distribution
n p
10 0.5

0 0.0010 0.0010 1.0000
1 0.0098 0.0107 0.9990
2 0.0439 0.0547 0.9893
3 0.1172 0.1719 0.9453
4 0.2051 0.3770 0.8281
5 0.2461 0.6230 0.6230

P(x =>2) = 0.5134

λ Mean Var.
0.3333 3 9
P(<=x) x x P(>=x)
0.1535 0.5 0.5 0.8465
0.4866 2 2 0.5134
3-52. Using template: Negative Binomial.xls

Negative Binomial Distribution
s p
4 0.2400

4 0.0033 0.0033 1.0000
5 0.0101 0.0134 0.9967
6 0.0192 0.0326 0.9866
7 0.0291 0.0617 0.9674
8 0.0387 0.1004 0.9383
9 0.0471 0.1475 0.8996
10 0.0537 0.2012 0.8525
11 0.0583 0.2596 0.7988
12 0.0609 0.3205 0.7404
13 0.0617 0.3822 0.6795
14 0.0610 0.4432 0.6178
15 0.0590 0.5022 0.5568
16 0.0561 0.5583 0.4978
17 0.0524 0.6107 0.4417
18 0.0484 0.6591 0.3893
19 0.0441 0.7032 0.3409
20 0.0398 0.7431 0.2968
a) 0.5022
b) 19
a) 0.2987
s p
4 0.2987

4 0.0080 0.0080 1.0000
5 0.0223 0.0303 0.9920
6 0.0391 0.0694 0.9697

7 0.0549 0.1243 0.9306

8 0.0674 0.1917 0.8757
9 0.0756 0.2673 0.8083
10 0.0795 0.3468 0.7327
11 0.0797 0.4265 0.6532
12 0.0768 0.5034 0.5735
13 0.0719 0.5752 0.4966
14 0.0655 0.6407 0.4248
15 0.0585 0.6992 0.3593
16 0.0513 0.7505 0.3008

d)
s p P(At most 15)
4 0.2000 0.3518
0.2500 0.5387
0.3000 0.7031
0.3500 0.8273
0.4000 0.9095
0.4500 0.9576
0.5000 0.9824
0.5500 0.9937
0.6000 0.9981
3-53. X is not approximated well by a binomial random variable because N/n is less than 10. X is
hypergeometric.

a) 0.522
λ Mean Var. Stdev.

0.01 100 10000 100
x P(>=x)
65 0.5220
b) std dev = 100 = mean
3-55. a. ∑ P( x) = 1.00
b. x F(x)
0 0.05
1 0.10
2 0.20
3 0.35
4 0.55
5 0.70
6 0.85
7 0.95
8 1.00
c. P(3 < X < 7) = F(6) – F(2) = .85 – .20 = 0.65
d. P(at most 5 tables will be sold) = F(5) = 0.70
e. E(X) = 4.25

f. E(X 2) = 22.25 V(X) = 4.1875 SD(X) = 2.0463

g. Using Chebyshev’s theorem, 0.75 probability bounds on the number of tables sold daily:
1 – 1/k2 = 0.75, thus k = 2 and the bounds are µ ± 2σ = 4.25 ± 2(2.0463) =
[0.1574, 8.3426]. By comparison, from the actual distribution: P(1 < X < 8) = 0.95
3-56. a. P(12) + P(13) + P(14) = 0.31

b. E(X) = weighted sum is 10.980
c. E(X 2) = 122.080 V(X) = 1.520 SD(X) = 1.233
3-57. λ = 1/ µ = 1 F(X < 1/2) = 1 – e − λ / 2 = 1 – e −0.5 = 0.3935

Use template: Exponential.xls
λ
1
P(<=x) x
0.3935 0.5
3-58. Use template: Hypergeometric.xls

a) 0.8391
Hypergeometric Distribution
n S N
15 5 100
x P(exactly x) P(at most x) P(al least x)

0 0.4357 0.4357 1.0000
1 0.4034 0.8391 0.5643
b) 0.6565
n S N
15 8 100

0 0.2586 0.2586 1.0000
1 0.3979 0.6565 0.7414
c) Probabilities of acceptance for various defective percentages between 0 and 15%:

0 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09
1 0.0000 1.0000 0.9788 0.9420 0.8942 0.8391 0.7796 0.7182 0.6565 0.5959

0.1 0.11 0.12 0.13 0.14 0.15

0.5375 0.4820 0.4299 0.3814 0.3368 0.2960
d) graph of c)
1.2
0.8
0.6
0.4
0.2
0
0 0.02 0.04 0.06 0.08 0.1 0.12 0.14 0.16
3-59. Use template: Poisson.xls

a) 0.8430
b) 6
Poisson
Mean
2.83

0 0.0590 0.0590 1.0000
1 0.1670 0.2260 0.9410
2 0.2363 0.4623 0.7740
3 0.2229 0.6853 0.5377
4 0.1577 0.8430 0.3147
5 0.0893 0.9322 0.1570
6 0.0421 0.9743 0.0678
7 0.0170 0.9914 0.0257
c) µ = 1.972 by setting D11 to 0.95
Mean
1.971752056

0 0.1392 0.1392 1.0000

1 0.2745 0.4137 0.8608
2 0.2706 0.6843 0.5863
3 0.1779 0.8622 0.3157
4 0.0877 0.9499 0.1378
5 0.0346 0.9844 0.0501
6 0.0114 0.9958 0.0156
7 0.0032 0.9990 0.0042
3-60. Use template: Uniform.xls

Uniform Distribution
Min Max Mean Var. Stdev.

0 15 7.5 18.75 4.33013
P(<=x) x x P(>=x) x1 P(x1<X<x2) x2

0.6667 10 12 0.2000 4 0.1333 6
11 0.0667 12
1.0000 22 22 0.0000 11 0.2667 22
0.1333 2 5 0.6667 21 0.0000 22
Inverse Calculations
P(<=x) x x P(>=x)
0.95 14.25 10.5 0.3
15 0
0 0
0 1
Using the above information from the Uniform Distribution template:

a) mean waiting time: 7.5 minutes; variance = 18.75
b) P(4<= x <=6) = 0.1333
c) on time for class: P(Wait <=10) = 0.667
d) 95% confident, set cell B20 to 0.95: needs to wait 14.25 minutes.
3-61. Use template: Hypergeometric.xls

a) 0.5000

n S N
7 5 14

0 0.0105 0.0105 1.0000
1 0.1224 0.1329 0.9895
2 0.3671 0.5000 0.8671
3 0.3671 0.8671 0.5000
4 0.1224 0.9895 0.1329
5 0.0105 1.0000 0.0105
b) to reach 80% chance of at least 3 women, need to add 4 more women for a total pool of 18
candidates
to reach 80% chance of at least 3 women, need to remove 3 men from the pool of 11
candidates.
3-62. a. Based on the given data, P(closing date is May 26, 27, or 28)
= (1 + 2 + 1)/18 = 0.222
8
b. The weighted sum is 23 9 = 23.889
3-63. n = 15 p = 0.05 P(X < 3 ) = 0.9945
3-64. The average expected return is 9.2%

x P(x) F(x)
5 0.2 0.4 Mean 9.2
12 0.2 0.6 Variance 10.96
7 0.2 0.8 Std. Devn. 3.31059
14 0.2 1 Skewness 0.254
The average standard deviation is 7.4%
x P(x) F(x)
2 0.2 0.4 Mean 7.4
8 0.2 0.6 Variance 21.84
9 0.2 0.8 Std. Devn. 4.67333
15 0.2 1 Skewness 0.39316

3-65. a. f(x)
1/2
x
0 1 2 3 4 5 6
b. The area under f (x) is the area of the triangle = (base)(height)/2

= (7 – 3)(1/2)(1/2) = 1
c. P(X > 5) = area of trapezoid from 5 to 7 = 1 – area of triangle from 3 to 5
= 1 – 2 f (5)/2 = 1 – 2(1/4)(1/2) = 1 – 1/4 = 3/4 = 0.75
3-66. (Use template: Binomial.xls)

For parts (i) & (ii):
λ= 1/μ= 1/6.55 = 0.1527
λ
0.1527
(i) Probability that the time interval is more than 10 seconds:

x P(>=x)
10 0.2172
(ii) Probability the time interval is between 10 and 20 seconds:

x1 P(x1<X<x2) x2
10 0.1700 20
For parts (iii) & (iv):

(Use template: Exponential.xls)
λ= 1/μ=1/0.75=1.333
λ
1.333
(iii) Probability of missing a customer: 26.37%
x P(>=x)
1 0.2637

(iv) How quick should the camera be to capture 95% of the customers: 0.04 seconds
x P(>=x)
0.03848 0.95
3-67. Use template: Binomial.xls

a) 0.7807 for n = 80, p = 0.03
n p
80 0.03

0 0.0874 0.0874 1.0000
1 0.2164 0.3038 0.9126
2 0.2643 0.5681 0.6962
3 0.2125 0.7807 0.4319
b) 0.2858 for n = 80, p = 0.06

n p
80 0.06

0 0.0071 0.0071 1.0000
1 0.0362 0.0433 0.9929
2 0.0912 0.1344 0.9567
3 0.1513 0.2858 0.8656
c) Probabilities of acceptance for various defective percentages between 0 and 15%:
0 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09

3 0.0000 0.9913 0.9231 0.7807 0.6016 0.4284 0.2858 0.1805 0.1089 0.0631
0.1 0.11 0.12 0.13 0.14 0.15

0.0353 0.0192 0.0101 0.0052 0.0026 0.0013
d) graph of c)

1.2
0.8
0.6
0.4
0.2
0
0 0.02 0.04 0.06 0.08 0.1 0.12 0.14 0.16
3-68. a. f (x) = {1/40

for 5 < x < 9
otherwise
b. P(X < 8) = 3/4 = 0.75
c. E(X) = 7
Use template: Uniform.xls
Uniform Distribution
Min Max Mean Var. Stdev.

5 9 7 1.333333333 1.1547
P(<=x) x x P(>=x) x1 P(x1<X<x2) x2

0.7500 8

a) P(x = 5) = 0.2061 for n = 15, p = 0.30
n p
15 0.3

0 0.0047 0.0047 1.0000
1 0.0305 0.0353 0.9953
2 0.0916 0.1268 0.9647

3 0.1700 0.2969 0.8732

4 0.2186 0.5155 0.7031
5 0.2061 0.7216 0.4845
b) P( x = 4) = 0.2252 for n = 15, p = 0.25

n p
15 0.25

0 0.0134 0.0134 1.0000
1 0.0668 0.0802 0.9866
2 0.1559 0.2361 0.9198
3 0.2252 0.4613 0.7639
4 0.2252 0.6865 0.5387
c) P(x = 3) = 0.2501 for n = 15, p = 0.20

n p
15 0.2

0 0.0352 0.0352 1.0000
1 0.1319 0.1671 0.9648
2 0.2309 0.3980 0.8329
3 0.2501 0.6482 0.6020
d) P(x = 2) = 0.2903 for n = 15, p = 0.13

n p
15 0.13

0 0.1238 0.1238 1.0000
1 0.2775 0.4013 0.8762
2 0.2903 0.6916 0.5987
e) P(x = 1) = 0.3006 for n = 15, p = 0.12

N p
15 0.12

0 0.1470 0.1470 1.0000

1 0.3006 0.4476 0.8530
3-70. a. Y is binomial: the number of “successes”—no orders—in n = 52 trials, where p =

0.10 and
trials are independent.
b. E(Y) = np = 52(.10) = 5.2
3-71. a. Mean = 41.5

x P(x) F(x)
25 0.2 0.3 Mean 41.5
40 0.3 0.6 Variance 290.25
55 0.3 0.9 Std. Devn. 17.0367
-
70 0.1 1 Skewness 0.19657
-
b. The mean is a weighted expected price of the IPO. Expect the opening price to be $41.50
c. Var = 290.25, SD = 17.0367
d. Using Chebyshev’s theorem (k = 3) the bounds are µ ± 3σ = 41.5 ± 3(17.0367) = [-9.61,
92.61]
e. In this case using a k = 3, the probability included the opening and final price of the day, but it
was just as likely to have lost money.
3-72. Poisson distribution is a discrete distribution similar to the binomial, but where the sample size is
very large and the probability of success is quite small. A uniform distribution is a continuous
distribution with a constant probability density function. The first is used for discrete
distributions while the latter is used for a continuous distribution. Both are useful in determining
the probability of a success. Example: Poisson: number of auto breakdowns on the highway at
rush hour; Uniform: waiting times for an elevator.
3-73. a) Using template: Negative Binomial.xls

s p Mean Variance Stdev.
3 0.4800 6.25 6.77083 2.602082
b) 61.80%
c) 11

3 0.1106 0.1106 1.0000
4 0.1725 0.2831 0.8894
5 0.1794 0.4625 0.7169
6 0.1555 0.6180 0.5375

7 0.1213 0.7393 0.3820

8 0.0883 0.8276 0.2607
9 0.0612 0.8889 0.1724
10 0.0409 0.9298 0.1111
11 0.0266 0.9564 0.0702
d) p= 0.7272 Setting D9 to 0.95 by changing cell C3
s p
3 0.7272

3 0.3846 0.3846 1.0000
4 0.3147 0.6993 0.6154
5 0.1717 0.8710 0.3007
6 0.0781 0.9491 0.1290

λ Mean Var. Stdev.

0.0261 38.36 1471.49 38.36
P(<=x) x x P(>=x) x1 P(x1<X<x2) x2

0.2686 12 0.5 0.9871 1 0.0251 2
0.0508 2 2 0.9492 2 0.0714 5
0.0752 3 1 0.9743
a) probability of failure in 12 month: P(x <=12) = 0.2686

b) approximately 26.86% of the computers will fail within 12 months
c) no, it is too high a number of failures
d) warranty period should be less than 2 months: P(x <=2) = 0.0508
e) 58.5 months by using Goal Seek: setting cell D13 to 0.05 by changing cell B4 gives a mean
of 58.51.
λ Mean Var. Stdev.

0.0171 58.5152 3424.02 58.5152

P(<=x) x x P(>=x) x1 P(x1<X<x2) x2

0.1854 12 0.5 0.9915 1 0.0167 2
0.0336 2 2 0.9664 2 0.0483 5
0.0500 3 1 0.9831

n p
5 0.25

0 0.2373 0.2373 1.0000
1 0.3955 0.6328 0.7627
2 0.2637 0.8965 0.3672
a) P(at least 1) = 0.7627

b) P(x=0) = 0.2373
3-76. (Use template: Negative Binomial.xls)

(i) For pins:
4 0.7200 5.55556 2.16049 1.469862
For shafts:
6 0.6500 9.23077 4.97041 2.229443
Therefore, expected value of the total number of trials is:

E(pins) + E(shafts) = 5.55556 + 9.23077 = 14.78633
Variance of the total number of trials is:

V(pins) + V(shafts) = 2.16049 + 4.97041 = 7.1309
(ii) E(total time) = (12*pins + 25*shafts) = 12*5.55556 + 25*9.23077 = 297.46597 minutes

V(total time) = 122*2.16049 + 252*4.97041 = 3417.61681
3-77. a. E(X) = 17.56875 Since bought at 17.25, profit per share = 0.31875; on 100 shares the
7
profit is $31.875 (= 31 8 )
b. E(X 2) = 308.76016 V(X) = 0.09918 SD(X) = 0.3149
It is a measure of risk.
c. The limitation is in the assumption of the stationarity and independence of the stock prices.

3-78. The closer p is to 0.5, the more symmetrical the distribution. For lower values of p (<0.50), the
distribution is concentrated toward to the lower values of x; for larger values of p (>0.50), the
distributions are concentrated toward to the upper values of x.
3-79. (Use template: Exponential.xls)

If the mean = 72, then λ= 1/μ= 1/72 = .0139
(i) Foreman is incorrect. The mean of the exponential distribution is: 103.874
Setting cell C25 = 72 and B25 = 0.50, use Goal Seek to change cell B4:
Mean Var.
103.874 10789.8
3-80. For a Poisson distribution, the mean and variance are equal. Therefore, the expected value of
lunch meals is: E(12*4.85 + 8.50*12.70 + 6*27.61) = $331.81
The variance of the total cost of the lunches is:
V= 122(4.85) + 8.502(12.70) + 62(27.61) = 2609.935
3-81. Use template: Negative Binomial.xls

a) P(first drinker qualifies) = 0.83
s p
1 0.8300

1 0.8300 0.8300 1.0000
b) P(exactly 3 users to find first qualifier) = 0.0240

s p
1 0.8300

1 0.8300 0.8300 1.0000
2 0.1411 0.9711 0.1700
3 0.0240 0.9951 0.0289
3-82. E(Profit) = E(1,200 X – 1,750) = 1,200 E(X) – 1,750 = 1,200(2.4) – 1,750 = $1,130
V(Profit) = (1,200)2V(X) = (1,200)2(2.44) = 3,513,600
SD(Profit) = 1,874.46
3-83. a. The distribution is binomial if the cars are independent of each other. (Use: Binomial.xls)

x P(Exactly x)
0 0.5987
1 0.3151
2 0.0746
3 0.0105
4 0.0010
5 0.0001
6 0.0000
6 through 10 have probabilities smaller than .0001

c. P(X > 2) = 1 – F(1) = 1 – .9139 = .0861
d. E(X) = np = 10(.05) = 1/2 car.
3-84. Using Chebyshev’s theorem, k = 2 and the bounds are µ ± 2σ = 6 ± 2(2) = [2, 10]
75% chance of getting between 2 and 10 jobs per month. While there is a chance that there will
be less than 3 jobs, it might be best to postpone the vacation.
3-85. Holding either s or p constant and increasing the other results in a curve becoming more right
skewed as the value of the input factor is increased: increasing both s and p together decreases
skewness.

0.1732 for P(at least 4) = 0.1732 from the binomial distribution for n = 7, p = 0.3333
n p
7 0.3333

0 0.0585 0.0585 1.0000
1 0.2049 0.2634 0.9415
2 0.3073 0.5707 0.7366
3 0.2560 0.8268 0.4293
4 0.1280 0.9548 0.1732
3-87. P(majority vote) = P(X ≥ 5), where p = .25 and n = 9,

= 1 – P(X ≤ 4) = 1 – 0.9511 = 0.0489 (Using Excel)
3-88. Using template: Hypergeometric.xls

a) 0.7863
n S N
3 2 27


0 0.7863 0.7863 1.0000
1 0.2051 0.9915 0.2137
2 0.0085 1.0000 0.0085
b) add 32 good pins to be assured of at least 90% acceptance

n S N
3 2 59

0 0.9001 0.9001 1.0000
1 0.0982 0.9982 0.0999
c) remove both bad pins to be assured of at least 90% acceptance

n S N
3 1 27

0 0.8889 0.8889 1.0000
1 0.1111 1.0000 0.1111
3-89. Using template: Geometric.xls

a) mean = 2.857, var = 5.306
Geometric Distribution
p Mean Variance Stdev.

0.35 2.857143 5.306122 2.303502
b) 82.15%
c) 7
X P(Exactly x) P(At most x) P(At least x)
1 0.3500 0.3500 1.0000
2 0.2275 0.5775 0.6500
3 0.1479 0.7254 0.4225
4 0.0961 0.8215 0.2746
5 0.0625 0.8840 0.1785
6 0.0406 0.9246 0.1160
7 0.0264 0.9510 0.0754
d) p = 0.5269 Setting cell D10 to 0.95

p
0.526858267

1 0.5269 0.5269 1.0000
2 0.2493 0.7761 0.4731
3 0.1179 0.8941 0.2239

4 0.0558 0.9499 0.1059

5 0.0264 0.9763 0.0501

n p
5 0.78

0 0.0005 0.0005 1.0000
1 0.0091 0.0097 0.9995
2 0.0648 0.0744 0.9903
3 0.2297 0.3041 0.9256
4 0.4072 0.7113 0.6959
5 0.2887 1.0000 0.2887
a) P(at most 1) = 0.0097

b) P(x=5) = 0.2887
3-91.
x P(x) F(x)
1 0.55 0.6 Mean 1.56
2 0.22 0.82 Variance 0.8264
3 0.15 0.97 Std. Devn. 0.90907
4 0.03 1 Skewness 0.82001
a. mean = 1.56 devices

b. Var = 0.8264, sd = 0.90907
c. Using Chebyshev’s theorem, k = 2 and the bounds are µ ± 2σ = 1.56 ± 2(0.909) = [-0.258,
3.378]
d. mean expenditure: (1.56)(199) = $310.44
e. sd of expenditures: 180.90493
f. suggestions will vary.
3-92. Use template: Geometric.xls

p Mean Variance Stdev.

0.2166 4.616805 16.69808 4.086329

1 0.2166 0.2166 1.0000

2 0.1697 0.3863 0.7834

3 0.1329 0.5192 0.6137
4 0.1041 0.6234 0.4808
5 0.0816 0.7049 0.3766
6 0.0639 0.7688 0.2951
7 0.0501 0.8189 0.2312
8 0.0392 0.8581 0.1811
9 0.0307 0.8889 0.1419
10 0.0241 0.9129 0.1111
11 0.0189 0.9318 0.0871
12 0.0148 0.9466 0.0682
13 0.0116 0.9581 0.0534
a) expected number of interviews = 4.617 var = 16.698

b) 0.7688
c) 13
d) p = 0.3929 using Goal Seek setting cell D12 to 0.95 by changing cell C4
p
0.39288394

1 0.3929 0.3929 1.0000
2 0.2385 0.6314 0.6071
3 0.1448 0.7762 0.3686
4 0.0879 0.8641 0.2238
5 0.0534 0.9175 0.1359
6 0.0324 0.9499 0.0825
e)
p P(At most 6)
0.1000 0.4686
0.1500 0.6229
0.2000 0.7379
0.2500 0.822
0.3000 0.8824
0.3500 0.9246
0.4000 0.9533
0.4500 0.9723
0.5000 0.9844
3-93. Using the binomial distribution for n = 20, p = 0.10:

P(X > 3) = 1 – F(3) = 1 – 0.867 = 0.133
Expected value of the geometric distribution with p = 0.1 is µ = 1/p = 10.
3-94. X is not approximated well by a binomial random variable because N/n is less than 10. X is
hypergeometric.

3-95. a. ∑ P( x) = 1.00
b. x F(x)
0 0.10
1 0.30
2 0.60
3 0.75
4 0.90
5 0.95
6 1.00
c. P(2 < X < 5) = F(5) – F(2) = .95 –.6 = 0.35
P(3 < X < 6) = F(6) – F(2) = 1 – 0.6 = 0.40
P(X > 4) = 1 – F(4) = 1 – 0.9 = 0.1
d. P(4 or 5 orders) = P(4) + P(5) = 0.2
e. By independence: P(3) x P(3) = (.15)2 = 0.0225
f. E(X) = 2.4 E(X 2) = 8.2 V(X) = 2.44 SD(X) = 1.562
3-96. Using the Binomial Distribution table, n = 20, p = 0.90: F(3) = 0.000
(Use template: Binomial.xls)
n p
20 0.9

0 0.0000 0.0000 1.0000
1 0.0000 0.0000 1.0000
2 0.0000 0.0000 1.0000
3 0.0000 0.0000 1.0000
4 0.0000 0.0000 1.0000

a) 0.2119 for n = 9, p = 0.45
n p
9 0.45

0 0.0046 0.0046 1.0000
1 0.0339 0.0385 0.9954
2 0.1110 0.1495 0.9615
3 0.2119 0.3614 0.8505
b) 0.2716 for n = 9, p = 0.35

n p
9 0.35

0 0.0207 0.0207 1.0000
1 0.1004 0.1211 0.9793
2 0.2162 0.3373 0.8789
3 0.2716 0.6089 0.6627
c) 0.1762 for n = 9, p = 0.20

n p
9 0.2

0 0.1342 0.1342 1.0000
1 0.3020 0.4362 0.8658
2 0.3020 0.7382 0.5638
3 0.1762 0.9144 0.2618

Case 3: Hedge Funds

Answers will vary, but should include some/all of the following points:
• Discussion of linear composites in summing the expected value of several random
variables since hedge funds are attempting to maximize the return of several investment
instruments, Xi, in their portfolio based on expected returns of each instrument, ai.
• Discussion of the concept of mutual independence as it applies to random variables.
• Discussion of expected value and standard deviation of random variables.

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Complete Business Statistics, 8/e Instructor’s Solutions Manual, Chapter 3

c. P(X > 2) = 1 − F(2) = 0.3

Copyright 2012 by Wohl Publishing, Inc. All rights reserved. 50

3-6. a. P( 2 ≤ X ≤ 4) = 0.2 + 0.2 + 0.3 = 0.7

Copyright 2012 by Wohl Publishing, Inc. All rights reserved. 51

Copyright 2012 by Wohl Publishing, Inc. All rights reserved. 52

3-11. P(X = 0) is 0.2.

3-12. E(X) = 8.3 V(X) = 2.3

3-13. For the random variable in Problem 3-1:

Copyright 2012 by Wohl Publishing, Inc. All rights reserved. 53

3-15. For Problem 3-3:

3-16. For Problem 3-4:

3-17. E(sum of two dice) = 7. Derived as follows:

3-18. For Problem 3-6:

3-19. For Problem 3-7:

Copyright 2012 by Wohl Publishing, Inc. All rights reserved. 54

600 0.05 0.1 Mean 1230

3-20. Mean = 0.7565, std. dev. = 0.01152

3-21. We use Equation (3-6) for a linear function of a random variable.

[Using the template: Random Variables.xls)]

3-23. 3.11 found by: ∑ P(x)v(x) :

Copyright 2012 by Wohl Publishing, Inc. All rights reserved. 55

0.2 3.25 0.65

3-24. By Chebyshev’s theorem:

3-26. Refer to Problem 3-6. Operation cost: C(X) = 300 X

3-27. Refer to Problem 3-21:

3-29. In Problem 3-2, penalty = X 2.

3-30. Mean = 0.03, var. = 0.9291

Copyright 2012 by Wohl Publishing, Inc. All rights reserved. 56

3-31. Three standard deviations. Because:

3-35. X is binomial if sales calls are independent of each other.

3-37. Using the Binomial Template, we get the following answers:

Copyright 2012 by Wohl Publishing, Inc. All rights reserved. 57

3-40. E(X) = np = 100(.10) = 10

3-42. Using the Binomial Template, we get the following answers:

3-44. Using the Binomial Template, we get the following answers:

Descriptive Statistics of a Random Variable

Copyright 2012 by Wohl Publishing, Inc. All rights reserved. 58

c. mean number of chest x-rays = (1.55)(350) = 542.5

3-46. Use template: Poisson.xls

x P(Exactly x) P(At most x) P(At least x)

c) µ = 0.106 by setting D7 to 0.90

x P(Exactly x) P(At most x) P(At least x)

3-47. Use template: Exponential.xls

λ Mean Var. Stdev.

b) 0.1599, P(x≤= 1) = 0.1599

Copyright 2012 by Wohl Publishing, Inc. All rights reserved. 59

x P(Exactly x) P(At most x) P(At least x)

3-51. Use template: Exponential.xls

Copyright 2012 by Wohl Publishing, Inc. All rights reserved. 60

3-52. Using template: Negative Binomial.xls

x P(Exactly x) P(At most x) P(At least x)

x P(Exactly x) P(At most x) P(At least x)

Copyright 2012 by Wohl Publishing, Inc. All rights reserved. 61

7 0.0549 0.1243 0.9306

Copyright 2012 by Wohl Publishing, Inc. All rights reserved. 62

3-54. Use template: Exponential.xls

λ Mean Var. Stdev.