Department of Computer Science and Engineering

TAE 1

Probability and Statistics

Topic: - Real Life Problems and its Solutions on Random Variables

Submitted By: - Suyog Dhole

Submitted To: - Prof. B. Thakran
Sec/Roll No: - C-19
Semester/Year: - 6th semester / 3rd Year
 Problems and Solutions on Discrete Random
Variables
Example 1: - A service organization in a large ton organizes a raffle each month. One
thousand raffle tickets are sold for 1$ each. Each has an equal chance of winning. First
prize is 300$, second prize is 200$ and third prize is 100$. Let X denote the net gain from
the purchase of one ticket.
Now, find the Probability of winning any money in the purchase of one ticket, and also find
the expected value of X, and interpret its meaning.

Solution: - If a ticket is selected as the first winner, the net gain to the purchaser is the
300$ prize less than the 1$ that was paid for the ticket, hence X = 300-1 = 299. There is
one such ticket so, P(299) = 0.001. Applying the same “income minus outgo” principle to the
second and the third prize winners and to the 997 losing tickets yields the probability
distribution of X: -

x 299 199 99 -1
P(x) 0.001 0.001 0.001 0.997
Now, let W denote the event that a ticket is selected to win in one of the prizes. Using the
table we can conclude that,

P(W) = P(299) + P(199) + P(99) = 0.001+0.001+0.001 = 0.003

Therefore, the probability of winning any money in the purchase of one ticket is 0.003.

Also, by using the formula in the definition of expected value will be

E(X) = (299 * 0.001) + (199 * 0.001) + (99 * 0.001) + ((-1) * 0.997) = -0.4

The negative value means that one losses money on the average. In particular, if someone
were to buy tickets repeatedly, then although he would win now and then, on average he
would lose 40 cents tickets purchased.
Example 2: - A life insurance company will sell a $200,000 one-year term life insurance
policy to an individual in a particular risk group for a premium of $195.
Find the expected value to the company of a single policy if a person in this risk group has
99.97% chance of surviving one year.

Solution: - Let X denote the net gain to the company from the sale of one such policy.
There are two possibilities:
1. The insured person lives the world whole year, or
2. The insured person dies before the year is up.

Applying the “ income minus outgo ” principle, in the former case the value of X is 195 – 0;
in the latter case it is (195 – 200,000 = -199,805).
Since the probability in the first case is 0.9997 and in the second case is
(1 - 0.9997 = 0.0003).
The Probability distribution for X is:
x 195 -199, 805
P(x) 0.9997 0.0003

Therefore,
E(X) = ∑x P(x) = (195 * 0.9997 + (-199,805) * 0.0003) = 135

Occasionally (in fact, 3 times in 10,000) the company loses a large amount of
money on a policy, but typically it gains $195, which by our computation of E(X)
works out to a net gain of $135 per policy sold, on average.
 Problems and Solutions on Continuous Random
Variables
Example 1: - A random variable X has the uniform distribution on the interval [0,1]:
the density function is f(x) = 1 if x is between 0 and 1 and f(x) = 0 for all other values
of x, as shown in the figure below:
Now,
a) Find the P(X > 0.75), the probability that X assumes a value greater than 0.75
b) Find the P(X <= 0.2), the probability that X assumes a value less than or equal to 0.2
c) Find P(0.4 < X < 0.7), the probability that X assumes a value between 0.4 and 0.7

Solution: -
d) P(X > 0.75) is the area of the rectangle of height 1 and base length 1-0.75 = 0.25,
hence is base * height = 0.25 * 1 = 0.25
e) P(X <= 0.2) is the area of the rectangle of height 1 and base length 0.2-0 = 0.2, hence
is base * height = 0.2 * 1 = 0.2
f) P(0.4 < X < 0.7) is the area of the rectangle of height 1 and length 0.7-0.4 = 0.3, hence
is base * height = 0.3 * 1 = 0.3

Concluding the above solutions

Figures would be
Example 2: - A man arrives at a bus stop at a random time (that is, with no regard for the
scheduled service) to catch the next bus. Buses run every 30 minutes without fail, hence
the next bus will come any time during the next 30 minutes with evenly distributed
probability (a uniform distribution).
Find the probability that a bus will come within the next 10 minutes.

Solution: - The graph of the density function is a horizontal line above the interval from 0
to 30 and is the x-axis everywhere else.
Since the total area under the curve must be 1, the height of the horizontal line is 1/30.
See the figure below:
The Probability sought is P(0 <= X <= 10).
By definition, this probability is the area of the rectangular region bounded above by the
horizontal line f(x) = 1/30, bounded below by the x-axis, bounded on the left by the
vertical line at 0 (the y-axis), and bounded on the right by the vertical line at 10.
This is the shaded region in the figure shown.
Its area is the base of the rectangle times its height.

i.e. base * height = 10 * (1/30) = 1/3

Thus, P(0 <= X <= 10) = 1/3