Lecture 15:

Practice problems from other books / resources

Assignment-B (05 Marks)
Ex1. Consider the experiment of rolling a pair of dice. Suppose that we are interested in the sum
of the face values showing on the dice.
a. Construct the sample space and count the sample points.
b. What is the probability of obtaining a value of sum of 7?
c. What is the probability of obtaining a value of sum of 9 or greater?

[Ans: a: 36, b: 6/36 c:10/36]

Ex2: A small assembly plant has 50 employees. On occasion, some of the workers fail to meet
the performance standards by completing work late or assembling a defective product. At the end
of a performance evaluation period, the production manager found that 5 of the 50 workers
completed work late, 6 of the 50 workers assembled a defective product, and 2 of the 50 workers
both completed work late and assembled a defective product. The production manager decided to
assign a poor performance rating to any employee whose work was either late or defective. What
is the probability that the production manager assigned an employee a poor performance rating?

[Ans: 9/50, addition law]

Ex3: Clarkson University surveyed alumni to learn more about what they think of Clarkson. One
part of the survey asked respondents to indicate whether their overall experience at Clarkson fell
short of expectations, met expectations, or surpassed expectations. The results showed that 4% of
the respondents did not provide a response, 26% said that their experience fell short of
expectations, and 65% of the respondents said that their experience met expectations.
a. If we chose an alumnus at random, what is the probability that the alumnus would say their
experience surpassed expectations?
b. If we chose an alumnus at random, what is the probability that the alumnus would say their
experience met or surpassed expectations?
[Ans: a. 0.05, b: 0.65+0.05 = 0.70, addition for Mutually Exclusive events]

Ex4: A survey of magazine subscribers showed that 45.8% rented a car during the past 12
months for business reasons, 54% rented a car during the past 12 months for personal reasons,
and 30% rented a car during the past 12 months for both business and personal reasons.
a. What is the probability that a subscriber rented a car during the past 12 months for business or
personal reasons?
b. What is the probability that a subscriber did not rent a car during the past 12 months for either
business or personal reasons
[Ans: a: 0.698 (addition law), b: P ( B ∪ P ) =1−P ( B ∪ P )=0.302¿

Ex5: Consider a service station manager who knows from past experience that 80% of the
customers use a credit card when they purchase gasoline. What is the probability that the next
two customers purchasing gasoline will each use a credit card? (what is your assumption in
calculating this probability?). [Ans: 0.64,multiplication rule for independent events.]

Ex6: The automobile industry sold 657,000 vehicles in the United States during January 2009.
The Big Three U.S. automakers— General Motors, Ford, and Chrysler. A summary of sales by
automobile manufacturer and type of vehicle sold is shown in the following table. Data are in
thousands of vehicles. The non-U.S. manufacturers are led by Toyota, Honda, and Nissan. The
category Light Truck includes pickup, minivan, SUV, and crossover models.

a. If a vehicle was manufactured by one of the U.S. automakers, what is the probability that the
vehicle was a car? What is the probability it was a light truck?
b. If a vehicle was not manufactured by one of the U.S. automakers, what is the probability that
the vehicle was a car? What is the probability it was a light truck?
c. If the vehicle was a light truck, what is the probability that it was manufactured by one of the
U.S. automakers?
[Ans: a:0.3115, b: 0.6069, c:0.566, all conditional probabilities using reduced sample space]

Ex7: In a survey of MBA students, the following data were obtained on “students’ first reason
for application to the school in which they matriculated.

a. If a student goes full time, what is the probability that school quality is the first reason for
choosing a school?
b. If a student goes part time, what is the probability that school quality is the first reason for
choosing a school?
c. Let A denote the event that a student is full time and let B denote the event that the student lists
school quality as the first reason for applying. Are events A and B independent? Justify your
answer.
[Ans a: 0.473, b: 0.385, c: not independent(check if joint prob = product of marginal prob)]

Ex8: Visa Card USA studied how frequently young consumers, ages 18 to 24, use plastic (debit
and credit) cards in making purchases. The results of the study provided the following
probabilities. The probability that a consumer uses a plastic card when making a purchase is
0.37. Given that the consumer uses a plastic card, there is a 0.19 probability that the consumer is
18 to 24 years old. Given that the consumer uses a plastic card, there is a 0.81 probability that the
consumer is more than 24 years old.
The U.S. Census Bureau data show that 14% of the consumer population is 18 to 24 years old.
a. Given the consumer is 18 to 24 years old, what is the probability that the consumer use a
plastic card?
b. Given the consumer is over 24 years old, what is the probability that the consumer uses a
plastic card?
c. What is the interpretation of the probabilities shown in parts (a) and (b)?
[Ans: a: 0.5021 (cond. prob rule), b: 0.3484(cond. prob rule), c: 50.21% of the young customers
use plastic card for purchases, 34.84% of the more than 24 age customers use plastic cards for
purchases.]

Ex9:The Wall Street Journal/Harris Personal Finance poll asked 2082 adults if they owned a
home (All Business website, January 23, 2008). A total of 1249 survey respondents answered
Yes. Of the 450 respondents in the 18–34 age group, 117 responded Yes.
a. What is the probability that a respondent to the poll owned a home?
b. What is the probability that a respondent in the 18–34 age group owned a home?
c. What is the probability that a respondent to the poll did not own a home?
d. What is the probability that a respondent in the 18–34 age group did not own a home?
[Ans: a: 0.5999, b: 0.26, c: 0.4001 d: 0.74]

Ex10: A study of 31,000 hospital admissions in New York State found that 4% of the admissions
led to treatment-caused injuries. One-seventh of these treatment-caused injuries resulted in death,
and one-fourth of the treatment-caused injuries were caused by negligence.
a. What is the probability a person admitted to the hospital will suffer a treatment-caused injury
due to negligence?
b. What is the probability a person admitted to the hospital will die from a treatment caused
injury?
[Ans: a: 0.01, Multiplication rule, b: 1/175 = 0.00571(multiplication rule)]

Ex11: A large consumer goods company ran a television advertisement for one of its soap
products. On the basis of a survey that was conducted, probabilities were assigned to the
following events.
B: individual purchased the product
S: individual recalls seeing the advertisement
B∩ S : individual purchases the product and recalls the seeing the advertisement

The probabilities assigned were P(B) = 0.20, P(S) = 0.40, and P( B∩ S ) =0 .12.
a. What is the probability of an individual’s purchasing the product given that the individual
recalls seeing the advertisement? Does seeing the advertisement increase the probability that the
individual will purchase the product? As a decision maker, would you recommend continuing the
advertisement (assuming that the cost is reasonable)?
b. Assume that individuals who do not purchase the company’s soap product buy from its
competitors. What would be your estimate of the company’s market share? Would you expect
that continuing the advertisement will increase the company’s market share? Why or why not?
c. The company also tested another advertisement and assigned it values of P(S) =0.30 and P(
B∩ S ) = 0.10. What is P(B | S) for this other advertisement? Which advertisement seems to have
had the bigger effect on customer purchases?
[Ans a: 0.3 (cond. probrule) yes, b: 20% yes since P(B | S)> P(B) c: 0.333 other advertisement]

Ex12: Cooper Realty is a small real estate company located in Albany, New York, specializing
primarily in residential listings. They recently became interested in determining the likelihood of
one of their listings being sold within a certain number of days. An analysis of company sales of
800 homes in previous years produced the following data.

a.If A is defined as the event that a home is listed for more than 90 days before being sold,
estimate the probability of A.
b. If B is defined as the event that the initial asking price is under $150,000, estimate the
probability of B.
c. What is the probability of A∩B?
d. Assuming that a contract was just signed to list a home with an initial asking price of less than
$150,000, what is the probability that the home will take Cooper Realty more than 90 days to
sell?
e. Are events A and B independent?
[Ans: a: 0.25 b: 0.125 c: 0.0125 (cond. prob rule) d: 0.1 e: no (check joint prob ≠ product of
marginal prob]

Ex13: A company knows that a rival is about to bring out a competing product. It believes that
this rival has three possible packaging plans (superior, normal, and cheap) in mind and that all
are equally likely. Also, there are three equally likely possible marketing strategies (intense
media advertising, price discounts, and the use of a coupon to reduce the price of future
purchases). What is the probability that the rival will employ superior packaging in conjunction
with an intense media advertising campaign? Assume that packaging plans and marketing
strategies are determined independently.
[Ans: 1/9 (multiplication rule for independent events)]

Ex14: A conference began at noon with two parallel sessions. The session on portfolio
management was attended by 40% of the delegates, while the session on chartism was attended
by 50%. The evening session consisted of a talk titled “Is the Random Walk Dead?” This was
attended by 80% of all delegates.
a. If attendance at the portfolio management session and attendance at the chartism session are
mutually exclusive, what is the probability that a randomly chosen delegate attended at least one
of these sessions?
b. If attendance at the portfolio management session and attendance at the evening session are
statistically independent, what is the probability that a randomly chosen delegate attended at least
one of these sessions?
c. Of those attending the chartism session, 75% also attended the evening session. What is the
probability that a randomly chosen delegate attended at least one of these two sessions?
[Ans: a: 0.9 (add. law for ME events), b: 0.88(add law with assumption for independence) c:
0.925(add law with intersection prob computed from cond. prob rule)]

Ex15: A corporation was concerned with the basic educational skills of its workers and decided
to offer a selected group of them separate classes in reading and practical mathematics. Of these
workers, 40% signed up for the reading classes and 50% for the practical mathematics classes.
Of those signing up for the reading classes 30% signed up for the mathematics classes.
a. What is the probability that a randomly selected worker signed up for both classes?
b. What is the probability that a randomly selected worker who signed up for the mathematics
classes also signed up for the reading classes?
c. What is the probability that a randomly chosen worker signed up for at least one of these two
classes?
d. Are the events “signs up for the reading classes” and “signs up for the mathematics classes”
statistically independent?
[Ans a: 0.12 (multiplication rule), b: 0.24 (cond. prob rule), c: 0.78 (add. law), d: no]

Ex16: A consulting organization predicts whether corporations’ earnings for the coming year
will be unusually low, unusually high, or normal. Before deciding whether to continue
purchasing these forecasts, a stockbroker compares past predictions with actual outcomes. The
accompanying table shows proportions in the nine joint classifications.

a.What proportion of predictions have been for unusually high earnings?

b. What proportion of outcomes has been for unusually high earnings?
c. If a firm were to have unusually high earnings, what is the probability that the consulting
organization would correctly predict this event?
d. If the organization predicted unusually high earnings for a corporation, what is the probability
that these would materialize?
e. What is the probability that a corporation for which unusually high earnings had been
predicted will have unusually low earnings?
[Ans: a: 0.3, b: 0.38c: 0.605(cond. prob),d: 0.7666(cond. prob), e: 1/30 = 0.0333(cond. prob)]
Ex17: Before books aimed at preschool children are marketed, reactions are obtained from a
panel of preschool children. These reactions are categorized as favorable, neutral, or unfavorable.
Subsequently, book sales are categorized as high, moderate, or low, according to the norms of
this market. Similar panels have evaluated1,000 books in the past. The accompanying table
shows their reactions and the resulting market performance of the books.

a.If the panel reaction is favorable, what is the probability that sales will be high?
b. If the panel reaction is unfavorable, what is the probability that sales will be low?
c. If the panel reaction is neutral or better, what is the probability that sales will be low?
d. If sales are low, what is the probability that the panel reaction was neutral or better?
[Ans a: 0.5709(cond. prob), b: 0.5183(cond. prob), c: 0.2191(cond. prob), d:0.5236(cond. prob)]

Ex18: An insurance company estimated that 30% of all automobile accidents were partly caused
by weather conditions and that 20% of all automobile accidents involved bodily injury. Further,
of those accidents that involved bodily injury, 40% were partly caused by weather conditions.
a. What is the probability that a randomly chosen accident both was partly caused by weather
conditions and involved bodily injury?
b. Are the events “partly caused by weather conditions” and “involved bodily injury”
independent?
c. If a randomly chosen accident was partly caused by weather conditions, what is the probability
that it involved bodily injury?
d. What is the probability that a randomly chosen accident both was not partly caused by weather
conditions and did not involve bodily injury?
[Ans a: 0.08 b: no c:0.2666 d: Use De Morgan’s law: P ( B ∩W )=P ¿
P ( B ∪ W )=P ( B )+ P ( W )−P ¿]

Ex19: In a campus restaurant it was found that 35% of all customers order vegetarian meals and
that 50% of all customers are students. Further, 25% of all customers who are students order
vegetarian meals.
a. What is the probability that a randomly chosen customer both is a student and orders a
vegetarian meal?
b. If a randomly chosen customer orders a vegetarian meal, what is the probability that the
customer is a student?
c. What is the probability that a randomly chosen customer both does not order a vegetarian meal
and is not a student?
d. Are the events “customer orders a vegetarian meal” and “customer is a student” independent?
e. Are the events “customer orders a vegetarian meal” and “customer is a student” mutually
exclusive?
[Ans a: 0.125 (multiplication rule), b: 0.3571(cond. prob) c: 0.275(Use DeMorgan’s law
P ( A ∩B )=1−P( A ∪ B))], d: No e: No]
Ex20: From past experience, a stockbroker believes that under present economic conditions a
customer will invest in tax-free bonds with a probability of 0.6, will invest in mutual funds with
a probability of 0.3, and will invest in both tax-free bonds and mutual funds with a probability of
0.15. At this time, find the probability that a customer will invest
(a) in either tax-free bonds or mutual funds;
(b) in neither tax-free bonds nor mutual funds.
[Ans a: 0.75 b: 0.25 (Use DeMorgan’s law P ( A ∩B )=1−P( A ∪ B))]

Ex21: According to Nielsen Media Research, approximately 67% of all U.S. households with
television have cable TV. Seventy-four percent of all U.S. households with television have two
or more TV sets. Suppose 55% of all U.S. households with television have cable TV and two or
more TV sets. A U.S. household with television is randomly selected.
a. What is the probability that the household has cable TV or two or more TV sets?
b. What is the probability that the household has cable TV or two or more TV sets but not both?
c.What is the probability that the household has neither cable TV nor two or more TV sets?
[Ans a: 0.86 b:0.31 (use Venn diagram) c: 0.14 (use DeMorgan’s law P ( A ∩B )=1−P( A ∪ B)]
Ex22: The following probability matrix contains a breakdown on the age and gender of U.S.
physicians in a recent year, as reported by the American Medical Association.

a. What is the probability that one randomly selected physician is 35–44 years old?
b. What is the probability that one randomly selected physician is both a woman and 45–54 years
old?
c. What is the probability that one randomly selected physician is a man or is 35–44 years old?
d. What is the probability that one randomly selected physician is less than 35 years old or 55–64
years old?
e. What is the probability that one randomly selected physician is a woman if she is 45–54 years
old?
f. What is the probability that a randomly selected physician is neither a woman nor 55–64 years
old?
[Ans a:0.28, b:0.04 c:0.86 d:0.32 e: 0.1739 f:0.66, use De-Morgan’s law
P ( A ∩B )=1−P( A ∪ B)¿

Ex23: The “random walk” theory of securities prices holds that price movements in disjoint time
periods are independentof each other. Suppose that we record only whether the price is up or
down each year, and that the probability that our portfolio rises in price in any one year is 0.65.
(This probability is approximately correct for a portfolio containing equal dollar amounts of all
common stocks listed on the New York Stock Exchange.)
(a) What is the probability that our portfolio goes up for 3 consecutive years?
(b) If you know that the portfolio has risen in price 2 years in a row, what probability do you
assign to the event that it will go down next year?
(c) What is the probability that the portfolio’s value moves in the same direction in both of the
next 2 years?
[Ans: a : 0.2746(multiplication rule for independent events) b: 0.35 (cond. prob keeping in view
independence) c:0.545 (P(UP1∩UP2∩ UP3)+P(D1∩D2∩ D3)]
Ex24: The probability that a man will be alive in 25 years is 3/5 and the probability that his wife
will be alive in 25 years is 2/3. Find the probability that (a) both will be alive in 25 years (b) only
man will be alive (c) only wife will be alive (d) neither will be alive.
[Ans:a: 2/5 (multiplication rule assuming independence), b:1/5(multiplication rule assuming
independence). Also if events are independent, their complements are also independent), c:4/15
(multiplication rule assuming independence) d: 2/15 (multiplication rule assuming
independence)].

Lecture 16:

Random Variable
A random variable is a quantitative variable whose value depends on chance
experiment. In other words a random variable is function defined on the outcome
of a sample space.
e.g. in the experiment if tossing three coins, define the RV X: number of heads that
turn up.Possible values of X are 0,1,2,3.

Discrete Random Variable

A discrete random variable is a random variable whose possible values can be
listed. In particular, a random variable with only a finite or (countably infinite)
number of possible values is a discrete random variable.

A discrete variable usually involves a count of something, such as the number of

siblings a person has, the number of cars owned by a family, or the number of
students in an introductory statistics class.

Continuous Random Variableis a variable whose possible values lie in an

interval of numbers. Typically, a continuous variable involves a measurement of
something, such as the height of a person, the weight of a newborn baby, or the
length of time a car battery lasts.

Probability Density Function (pdf)

A continuous random variable is characterized by a continuous functionf(x),known
as probability density function (pdf). The pdf of a continuous random variable X
has three properties:

Properties of Probability Density Function f(x):

1) f (x)≥ 0
∞

2) Total area under the density function f(x) is 1 i.e. ∫ f ( x ) dx=1

−∞

3) Let aand b be two possible values of random variable X, with a <b. Then,
the probability that X lies between aand b is the area under the probability
density function between these points.
b
P ( a ≤ X ≤b )=∫ f ( x ) dx
a

Some of the continuous random variables arise frequently in real life situations.
These distributions are studied in detail. They are known as standard probability
distributions. One such distribution is Uniform Distribution

Weiss Chapter 6: The Normal Distribution

A continuous random variable X is said to have a normal distribution if its pdf is

given by the formula:
( )
2
−1 x− μ
1 2 σ
f ( x )= e ,−∞ < x <∞
√2 π σ
Here e=2.71828 .. . (the base of natural log) and π=3.14159 … are two famous
irrational numbers.

The normal distribution is characterized by two parameters:the mean (μ) and the
standard deviation (σ).
Several features of normal distributions are listed below

1. Normal distribution is symmetric around its mean.

2. The mean, median, and mode of a normal distribution (and all other
symmetric distributions) are same hence any skewness measure e.g. Pearson
Skewness coefficient is zero.
3. The area under the normal curve is equal to 1.
4. Normal distributions are denser in the center and less dense in the tails. Thus
values near average are more common. Such a behaviors arise frequently in
real life e.g. height of men is such that many people’s height in community
is near the average. There are very few people who are very tall or very
short.
5. 68% of the area of a normal distribution is within one standard deviation of
the mean, approximately 95% with two standard deviation of mean and
nearly all (99.7%) is within three standard deviation of the mean.
6. Points of inflection of the normal curve are x=μ ± σ . At these points the curve
changes its curvature.
 Standard Normal Distribution. The distribution of the standardized variable
X−μ
Z= is said to be the Standard Normal distribution. Its mean is zero and
σ
standard deviation is 1.(See Weissp -291).

Finding Probabilities for the normally distributed random variables.

Probabilities or areas under the standard normal curve are computed using
numerical integration. The tables of cumulative probabilities are available in
statistical text books.

Introduction to the table’s feature (less than type i.e. from –infinity to z table).
Using this table to find various probabilities.

Note that there are different types of normal tables e.g. less than type, b/w zero
and z type etc.

The simplest to work with, that we will use, is less than cumulative
probability table.

This table gives probability of a standard normal RV, Z falling below a given z
value. Using this table all probabilities can be classified as of any of the
following three types.

(1) Less than type: P ( Z ≤ z ) available by default in left cumulative normal table
(2) More than type: P ( Z ≥ z ) =1−P ( Z < z )
(3) Between type: P ( z 1 ≤ Z ≤ z 2 ) =P ( Z ≤ z 2 )−P (Z ≤ z 1 )

Note that for normal or any other continuous RV, these four probabilities are
same:
P ( z 1 ≤ Z ≤ z 2 ) =P ( z 1 ≤ Z < z 2 )=P ( z 1< Z ≤ z 2 )=P ( z 1 <Z < z 2 )

Also, probability at a single point in continuous distribution is zero.

Ex: Find these probabilities.

( 1 ) P ( Z ≤ 1.23 )=0.8907(directly ¿table)

( 2 ) P ( Z ≥ 1.97 )=1−P ( Z <1.97 )=1−0.9756=0.0244

( 3 ) P ( 1.33≤ Z ≤ 2.97 )=P ( Z ≤ 2.97 ) −P ( Z ≤ 1.33 ) =0.9985−0.9082=0.0903

 ( 4 ) P ( Z ←1.63 )

( 5 ) P ( Z >−1.69 ) ( 6 ) P (−1.97 ≤ Z ≤−1.23 ) ,

( 7 ) P (−1.23< Z<1.45 ) ,(8)P ( Z < 0 ) ,

Probabilities of unsual Z values

( 9 ) P ( Z > 4.52 ) , ( 10 ) P ( Z ←3.98 ) , ( 11) P ( Z >−5.69 ) ,

( 12 ) P ( Z <4.62 ) , ( 13 ) P (−4.23< Z <5.19)

Reverse Use of Normal Table i.e. given a probability, finding Z value

(1) P ( Z < A )=0.3336 , find A (2) P ( Z > B )=0.0594 , find B
(3) P (−A < Z< A )=0.8812 , find A

So far we have learnt to use normal table to find probabilities on standard normal
distribution RV i.e. Z
Sol (3): P (−A < Z< A )=0.8812
¿ P (−A < Z< 0 )=0.4406
¿> P ¿)−P ¿) = 0.4406
¿> P ( Z← A )=P ¿)−0.4406=0.5−0.4406=0.0594
¿>− A=−1.56 (using reverseuse of normal table)=¿ A=1.56

Working with normally distributed random variables X (real life random variable
problems).
Weiss p-303 Example 6.11, Example 6.13, exercise p-309. Ex Q: 6.90,6.87,
6.93, 6.94, and 6.99

Lec 17:
We do not consider section 6.4 and onwards topics from this chapter.
Practice questions from other books/resources:

Q1: The marks of students in a course are normally distributed with mean 68 and
standard deviation 10. A student scores 98.
a) Find the first and 3rd quartile of marks and IQR.
b) By doing relevant calculations show whether or not this mark is an outlier?
[Ans: a) Q1 = 61.25, Q3 = 74.75, IQR = 13.5,
b) [Q1-1.5IQR, Q3+1.5 IQR] = [ 41.0, 95.0], yes it is an outlier.

Q2: In an article about the cost of health care, Money magazine reported that a
visit to a hospital emergency room for something as simple as a sore throat has a
mean cost of $328 (Money, January 2009). Assume that the cost for this type of
hospital emergency room visit is normally distributed with a standard deviation of
$92. Answer the following questions about the cost of a hospital emergency room
visit for this medical service.
a. What is the probability that the cost will be more than $500?
b. What is the probability that the cost will be less than $250?
c. What is the probability that the cost will be between $300 and $400?
d. If the cost to a patient is in the lower 8% of charges for this medical service,
what was the cost of this patient’s emergency room visit?
[Ans: a)0.0307 b)0.1977 c)0.4002 d) $198.28]

Q3: For borrowers with good credit scores, the mean debt for revolving and
installment accounts is $15,015 (BusinessWeek, March 20, 2006). Assume the
standard deviation is $3540 and that debt amounts are normally distributed.
a. What is the probability that the debt for a borrower with good credit is more than
$18,000?
b. What is the probability that the debt for a borrower with good credit is less than
$10,000?
c. What is the probability that the debt for a borrower with good credit is between
$12,000 and $18,000?
d. What is the probability that the debt for a borrower with good credit is no more
than $14,000?
[Ans: a) 0.2005 b) 0.0778 c)0.6018 d)0.3859]

Q4: A client has an investment portfolio whose mean value is equal to $1,000,000
with a standard deviation of $30,000. He has asked you to determine the
probability that the value of his portfolio is between $970,000 and $1,060,000, find
it.
[Ans: 0.8185]

Q5: A contractor has concluded from his experience that the cost of building a
luxury home is a normally distributed random variable with a mean of $500,000
and a standard deviation of $50,000.
a. What is the probability that the cost of building a home will be between
$460,000 and $540,000?
b. The probability is 0.2 that the cost of building will be less than what amount?
c. Find the shortest range such that the probability is 0.95 that the cost of a luxury
home will fall in this range.
[Ans: a) 0.5762 b)$458000 c)$500,000 ± 98000 i.e. (402000; 598000)]

Q6: I am considering two alternative investments. In both cases I am unsure about

the percentage return but believe that my uncertainty can be represented by normal
distributions with the means and standard deviations shown in the accompanying
table. I want to make the investment that is more likely to produce a return of at
least 10%. Which investment should I choose?

[Ans: For ‘Investment A’,Prob of return exceeding 10% is 0.6293, for B it is

0.5987 so A selected]

Q7: Tata Motors, Ltd., purchases computer process chips from two suppliers, and
the company is concerned about the percentage of defective chips. A review of the
records for each supplier indicates that the percentage defectives in consignments
of chips follow normal distributions with the means and standard deviations given
in the following table. The company is particularly anxious that the percentage of
defectives in a consignment not exceed 5% and wants to purchase from the
supplier that’s more likely to meet that specification. Which supplier should be
chosen?

[Ans: For A Prob of defective not exceeding 5% is 0.9332, for B it is 0.9082 so A

should be selected]
Q8: Suppose the annual employer 401(k) cost per participant is normally
distributed with a standard deviation of $625, but the mean is unknown. If 73.89%
of such costs are greater than $1,700, what is the mean annual employer 401(k)
cost per participant?
[Ans: $2100]

Q9: Trading volume on the New York Stock Exchange is heaviest during the first
half hour (early morning) and last half hour (late afternoon) of the trading day. The
early morning trading volumes (millions of shares) for 13 days in January and
February are shown here (Barron’s, January 23, 2006; February 13, 2006; and
February 27, 2006).
214 163 265 194 180 202 198 212 201 174 171 211 211
The probability distribution of trading volume is approximately normal.
a. Compute the mean and standard deviation to use as estimates of the population
mean and standard deviation.
b. What is the probability that, on a randomly selected day, the early morning
trading volume will be less than 180 million shares?
c. What is the probability that, on a randomly selected day, the early morning
trading volume will exceed 230 million shares?
d. How many shares would have to be traded for the early morning trading volume
on a particular day to be among the busiest 5% of days?
[Ans: a)199.69, 20.0396 b) 0.1635 c)0.0655 d)232.65]