UNIVERSITY OF KWAZULU-NATAL

School of Mathematics, Statistics & Computer Sciences

STAT350 Random Processes
Summative Assessment Test 2. 18 November 2022 [50 marks]

1. Car alternators of a certain brand of cars lasts for a lifetime which is uniformly distributed on the
interval from 0 to 10 years. Usually, owners of such cars replace the alternator when it breaks
down or if it reaches T-years, whichever comes first, where T<10. If it breaks down before T-
years, the alternator is old as scrap for R50 and a replacement is bought. If the alternator is still
working at T-years, it is sold for R400 and another one is bought to replace it.
a) What is the expected length of a cycle, that is, expected period that a car owner keeps an
alternator before replacing it with another one? [5 marks]
b) Derive an expression for the long-term average return a car owner gets on deposing off an
alternator. [7 marks]

2. A renewal process has inter-arrival times having the exponential distribution given by

𝑓(𝑥) = 𝜆𝑒 −𝜆𝑥 , for 𝑥 > 0.

The time to the nth renewal is denoted by 𝑆𝑛 , so that the time for the first renewal is given by
𝑆1 = 𝑋1, the time the for second renewal is 𝑆2 = 𝑋1 + 𝑋2, and in general 𝑆𝑛 = 𝑋1 + 𝑋2 … + 𝑋𝑛 .
Let N(t) be the number of renewals by time t.

a) Find the distribution of 𝑆𝑛 . [5 marks]

b) Find the distribution of the number of renewals by time t, that is, 𝑃[𝑁(𝑡) = 𝑛]. [10 marks]

3. Answer the following times series questions where 𝑍𝑡 is white noise, that is 𝑍𝑡 ~iid 𝑁(0, 𝜎𝑧2 ).
a) Determine if the following ARMA(1,2) model is stationary and/or invertible:
𝑋𝑡 = 0.5𝑋𝑡−1 + 𝑍𝑡 − 0.7𝑍𝑡−1 + 0.1𝑍𝑡−2 [7 marks]
b) Find the autocorrelation function for the Moving Average MA(2) process given by
2 1
𝑋𝑡 = 𝑍𝑡 + 𝑍𝑡−1 + 𝑍𝑡−2 .
5 3
[5 marks]
c) Consider the stationary second order autoregressive AR(2) process:
2 8
𝑋𝑡 = 𝑋𝑡−1 + 𝑋𝑡−2 + 𝑍𝑡 .
5 25
d) Find the autocorrelation function (ACF) of the process. [8 marks]
e) Plot the ACF for 𝑘 = 0, ±1, ±2. [3 marks]