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Distributions

6.1 P(1.4 < X < 1.8) = F(1.8) F(1.4) = (.5)(1.8) (.5)(1.4) = 0.20

6.2 P(1.0 < X < 1.9) = F(1.9) F(1.0) = (.5)(1.9) (.5)(1.0) = 0.45

6.3 P(X < 1.4) = F(1.4) = (.5)(1.4) = 0.7

6.4 P(X > 1.3) = F(1.3) = (.5)(2.0) (.5)(1.3) = 0.35

6.5 a.

1.5

f(x)

1.0

0.5

0.0

0

b.

Cumulative distribution function: F(x)

F(x)

1.0

0.8

0.6

0.4

0.2

0.0

0.0

0.2

0.4

0.6

0.8

1.0

C17

d. P(X >.75) = 1-P(X < .75) = 1-.75 = .25

e. P(.2 < X < .8) = P(X <.8) P(X <.2) = .8 - .2 = .6

6.6 a.

0.75

f(x)

0.50

0.25

0.00

0

123

124

th

b.

Cumulative density function: F(x)

1.0

F(x)

0.8

0.6

0.4

0.2

0.0

d. P(X < .5) + P(X > 3.5)=P(X < .5) + 1 P(X < 3.5) = .25

6.7 a. P(60,000 < X< 72,000) = P(X < 72,000) P(X < 60,000) = .6 - .5 = .1

b. P(X < 60,000) < P(X < 65,000) < P(X < 72,000); .5 < P(X < 65,000)

< .6

6.8 a. P(380 < X < 460) = P(X < 460) P(X < 380) = .6 - .4 = .2

b. P(X < 380) < (PX< 400) < P(X < 460); .4 < P(X < 400) < .6

6.9 W = a + bX. If TC = 1000 + 2X where X = number of units produced, find

the mean and variance of the total cost if the mean and variance for the

number of units produced are 500 and 900 respectively. W = a + b x = 1000

+ 2(500) = 2000. 2W = b 2 2 X = (2)2(900) = 3600.

6.10 W = a + bX. If Available Funds = 1000 - 2X where X = number of units

produced, find the mean and variance of the profit if the mean and variance

for the number of units produced are 50 and 90 respectively. W = a + b x =

1000 - 2(50) = 900. 2W = b 2 2 X = (-2)2(90) = 360.

6.11 W = a + bX. If Available Funds = 2000 - 2X where X = number of units

produced, find the mean and variance of the profit if the mean and variance

for the number of units produced are 500 and 900 respectively. W = a + b x

= 2000 - 2(500) = 1000. 2W = b 2 2 X = (-2)2(900) = 3600.

6.12

produced, find the mean and variance of the profit if the mean and

variance for the number of units produced are 1000 and 900 respectively.

W = a + b x = 6000 - 2(1000) = 4000. 2W = b 2 2 X = (-3)2(900) = 8100

6.13

Y = |1.5| X = 1.5 (8,000) = $12,000

6.14

Y = 20 + X = 20 + 4 = $24 million

Bid = 1.1 Y =1.1(24) = $26.4 million, = $1 million

6.15

Y = 60 + .2 X = 60 + 140 = $200

Y = |.2| X = .2 (130) = $26

6.16

Y = |.08| X = .08(180,000) = $14,400

6.17

a.

b.

c.

d.

e.

f.

g.

P(Z > 1.33) = 1 Fz(1.33) = 1 - .9082 = .0918

P(Z < -1.70) = 1 Fz(1.70) = 1 - .9554 = .0446

P(Z > -1.00) = Fz(1) = .8413

P(1.20 < Z < 1.33) = Fz(1.33) Fz(1.20) = .9082 - .8849 = .0233

P(-1.70 < Z < 1.20) = Fz(1.20) [1 - Fz(1.70)] = .8849 .0446 = .8403

P(-1.70 < Z < -1.00) = Fz(1.70) Fz(1.00) = .9554 - .8413 = .1141

6.18

a.

b.

c.

d.

Find Z0 such that P(Z < Z0) = .7, closest value of Z0 = .52

Find Z0 such that P(Z < Z0) = .25, closest value of Z0 = -.67

Find Z0 such that P(Z > Z0) = .2, closest value of Z0 = .84

Find Z0 such that P(Z > Z0) = .6, closest value of Z0 = -.25

6.19

60 50

a. Find P(X > 60). P(Z >

) = P(Z > 1.25)

8

= .5 - .3944 = .1056

35 50

62 50

b. Find P(35 < X < 62). P(

<Z<

) = P(-1.88 < Z < 1.5)

8

8

= .4699 + .4332 = .9031

55 50

c. Find P(X < 55). P(Z <

) = P(Z < .62)

8

= .5 + .2324 = .7324

d. Probability is .2 that X is greater than what number? Z = .84.

X 50

.84 =

X = 56.72

8

125

126

th

X 50

between? Z = +/- .06. .06 =

. X = 49.52 and 50.48.

8

6.20

60 80

a. Find P(X > 60). P(Z >

) = P(Z > -2.00) = .5 + .4772 = .9772

10

72 80

82 80

b. Find P(72 < X < 82). P(

<Z<

) = P(-.80 < Z < .20) =

10

10

.2881 + .0793 = .3674

55 80

c. Find P(X < 55). P(Z <

) = P(Z < -2.50) = .5 - .4938 = .0062

10

d. Probability is .1 that X is greater than what number? Z = 1.28.

X 80

X = 92.8

1.28 =

10

e. Probability is .08 that X is in the symmetric interval about the mean

X 80

between? Z = +/- .10. .10 =

. X = 79 and 81.

10

6.21

.4 .2

a. Find P(X > .4). P(Z >

) = P(Z > 4.00) = .5 - .5 = .0000

.05

.15 .2

.28 .2

b. Find P(.15 < X < .28). P(

<Z<

) = P(-1.00 < Z <

.05

.05

1.60) = .3431 + .4452 = .7883

.10 .20

c. Find P(X < .10). P(Z <

) = P(Z < -2.00) = .5 - .4772 = .0228

.05

d. Probability is .2 that X is greater than what number? Z = .84.

X .20

.84 =

X = .242

.05

e. Probability is .05 that X is in the symmetric interval about the mean

X .2

between? Z = +/- .06. .06 =

. X = .197 and .203.

.05

6.22

400 380

) = P(Z < .4) = .6554

50

360 380

b. P(Z >

) = P(Z > -.4) = FZ(.4) = .6554

50

c. The graph should show the property of symmetry the area in the tails

equidistant from the mean will be equal.

300 380

400 380

d. P(

<Z<

) = P(-1.6 < Z < .4) = FZ(.4) [150

50

FZ(1.6)] = .6554 - .0548 = .6006

a. P(Z <

e. The area under the normal curve is equal to .8 for an infinite number

of ranges merely start at a point that is marginally higher. The

shortest range will be the one that is centered on the z of zero. The z

that corresponds to an area of .8 centered on the mean is a Z of 1.28.

This yields an interval of the mean plus and minus $64: [$316, $444]

6.23

6.24

6.25

6.26

1, 000 1, 200

) = P(Z > -2) =FZ(2) = .9772

100

1,100 1, 200

1,300 1, 200

<Z<

) = P(-1 < Z < 1) = 2FZ(1) 1 =

b. P(

100

100

.6826

c. P(Z > 1.28) = .1, plug into the z-formula all of the known information

Xi 1, 200

and solve for the unknown: 1.28 =

. Solve algebraically

100

for Xi = 1,328

a. P(Z >

38 35

) = P(Z > .75) = 1 - FZ(.75) = .2266

4

32 35

b. P(Z <

) = P(Z < -.75) = 1 - FZ(.75) = .2266

4

32 35

38 35

<Z<

) = P(-.75 < Z < .75) = 2FZ(.75) 1 =

c. P(

4

4

2(.7734) 1 = .5468

d. (i) The graph should show the property of symmetry the area in the

tails equidistant from the mean will be equal.

(ii) The answers to a, b, c sum to one because the events cover the

entire area under the normal curve which by definition, must sum to 1.

a. P(Z >

20 12.2

) = P(Z > 1.08) = 1 Fz (1.08) = .1401

7.2

0 12.2

) = P(Z < -1.69) = 1 Fz (1.69) = .0455

b. P(Z <

7.2

5 12.2

15 12.2

c. P(

<Z<

) = P(-1 < Z < .39) = Fz (.39) [1- Fz (1)] =

7.2

7.2

.6517 - .1587 = .4930

a. P(Z >

10 12.2

) = P(Z < - .79) = 1 Fz (.79) = .2148

2.8

15 12.2

b. P(Z >

) = P(Z > 1) = 1 Fz (1) = .1587

2.8

12 12.2

15 12.2

c. P(

<Z<

) = P(-.07 < Z < 1) = Fz (1) [1- Fz (.07)]

2.8

2.8

= .8413 - .4721 = .3692

a. P(Z <

127

128

th

than is 15 grams. Thus, there would be a greater area remaining less

than 10 grams than will be the area above 15 grams.

460 500

540 500

<Z<

) = P(-.8 < Z < .8) = 2 Fz (.8) 1 = .5762

50

50

b. If P(Z < -.84) = .2, then plug into the z formula and solve for the Xi:

Xi 500

the value of the cost of the contract. -.84 =

. Xi = $458

50

(thousand dollars)

c. The shortest 95% range will be the interval centered on the mean.

Xi 500

Since the P(Z > 1.96) = .025, 1.96 =

. Xi = 598. The

50

Xi 500

lower value of the interval will be 1.96 =

which is Xi =

50

$402 (thousand dollars). Therefore, the shortest range will be 598

402 = $196 (thousand dollars).

6.27

a. P(

6.28

6.29

6.30

P(Z > 1.03) = .15, 1.04 = 19.2 -

Solving for , : = 15.265, 2 = (3.7838)2 = 14.317

6.31

6.32

Xi 18.2

Xi = 16.152

1.6

820 700

) = P(Z> 1) = 1 Fz (1) = .1587

120

730 700

820 700

b. P(

<Z<

) = P(.25 < Z < 1) = .8413 - .5987 =

120

120

.2426

Number of students = .2426(100) = 24.26 or 24 students

Xi 700

c. P(Z < -1.645) = .05, 1.645 =

, Xi = 502.6

120

a. P(Z >

10 10.4

P(Z >

) = P(Z > -.33) = FZ(.33) = .6293

1.2

For Investment B, the probability of a return higher than 10%

10 11.0

P(Z >

) = P(Z > -.25) = FZ(.25) = .5987

4

Therefore, Investment A is a better choice

6.33

6.34

6.35

6.36

6.37

5 4.4

) = P(Z < 1.5) = .9332

.4

5 4.2

For Supplier B: P(Z <

) = P(Z < 1.33) = .9082

.6

Therefore, Supplier A has a greater probability of achieving less than 5%

impurity and is hence the better choice

For Supplier A: P(Z <

Xi 150

, Xi = 98.8

40

Xi 150

b. P(Z < .84) = .8, .84 =

, Xi = 183.6

40

120 150 2

c. P(X 1) = 1 P(X = 0) = 1-[P(Z<

)] = 1 [P(Z < -.75)]2 =

40

2

1 (.2266) = .9487

60 75

) = P(Z < -.75) = .2266

20

90 75

) = P(Z >.75) = .2266

b. P(Z >

20

c. The graph should show that 60 minutes and 90 minutes are equidistant

from the mean of 75 minutes. Therefore, the areas above 90 minutes

and below 60 minutes by the property of symmetry must be equal.

Xi 75

d. P(Z > 1.28) = .1, 1.28 =

, Xi = 100.6

20

a. P(Z <

400 420

480 420

<Z<

) = P(-.25 < Z < .75) = Fz (.75) [1 FZ

80

80

(.25)] = .7734 - .4013 =.3721

Xi 420

b. P(Z > 1.28) = .1, 1.28 =

, Xi = 522.4

80

c. 400 439

d. 520 559

500 420 2

e. P(X 1) = 1 P(X = 0 ) = 1 [P(Z<

)] = 1 (.8413)2 =

80

.2922

a. P(

180 200

< Z < 0) = .5 [1- Fz (1)] = .5 -.1587 = .3413

20

245 200

b. P(Z >

) = 1 FZ(2.25) = .0122

20

c. Smaller

Xi 200

d. P(Z < -1.28) = .1, -1.28 =

, Xi = 174.4

20

a. P(

129

130

6.38

th

85 70

, = 10

80 70

) = P(Z > 1) = .1587

10

P(X 1) = 1 P(X=0) = 1 [FZ(1)]4 = 1 (.8413)4 = .4990

P(Z >

6.39

a. Find P(X > 500). E[X] = = 900(.5) = 450, = (900)(.5)(.5) = 15

500 450

P(Z >

) = P(Z > 3.33) = 1 FZ(3.33) = .0004

15

430 450

b. Find P(X < 430). P(Z <

) = P(Z < -1.33) = 1 - FZ(1.33) =

15

.0918

440 450

480 450

c. P(

<Z<

) = P(-.67 < Z < 2.00) = fz (-.67) +

15

15

fZ(2.00) = .2486 + .4772 = .7258

d. Probability is .1 that the number of successes is less than how many?

X 450

Z=

-1.28. 1.28 =

X = 430.8

15

e. Probability is .08 the number of successes is greater than? Z = 1.41.

X 450

1.41 =

. X = 471.15.

15

6.40

a. Find P(X > 1650). E[X] = = 1600(.4) =

640, = (1600)(.4)(.6) = 19.5959 P(Z >

1650 1600

) = P(Z > 2.55) = 1 FZ(2.55) =

19.5959

.0054

1530 1600

b. Find P(X < 1530). P(Z <

) = P(Z

19.5959

< -3.57) = 1 - FZ(3.57) = .0002

1550 1600

1650 1600

c. P(

<Z<

) = P(-2.55

19.5959

19.5959

< Z < 2.55) = (2)Fz (2.55) = (2).4946 =

.9892

d. Probability is .09 that the number of

successes is less than how many? Z =

X 1600

-1.34. 1.34 =

X=

19.5959

1573.741 1,574 successes

e.

X 1600

greater than? Z = .84. .84 =

.

19.5959

X = 1616.46 1,616 successes

6.41

a. Find P(X > 110). E[X] = = 900(.1) = 90,

110 90

= (900)(.1)(.9) = 9

P(Z >

)

9

= P(Z > 2.22) = 1 FZ(2.22) = .0132

53 90

b. Find P(X < 53). P(Z <

) = P(Z < 9

4.11) = 1 - FZ(4.11) = .0000

55 90

120 90

c. P(

<Z<

) = P(-3.89 < Z <

9

9

3.33) = 1.0000

d. Probability is .10 that the number of successes

is less than how many? Z =

-1.28.

X 90

1.28 =

X = 78.48

9

e. Probability is .08 the number of successes is

X 90

greater than? Z = 1.41. 1.41 =

. X=

9

102.69

6.42

a. Find P(P > .45). E[P] = = P = .40, =

P (1 P)

.4(1 .4)

= .01225 P(Z >

=

n

1600

.45 .40

) = P(Z > 4.082) = 1 FZ(4.082) =

.01225

.0000

.36 .40

b. Find P(P < .36). P(Z <

) = P(Z < .01225

3.27) = 1 - FZ(3.27) = .0005

.44 .40

.37 .40

c. P(

<Z<

) = P(3.27 < Z < .01225

.01225

2.45) = 1 [(2)[1-Fz (3.27)]] = 1 - (2)[1.9995] = .9995 - .0071 = .9924

d. Probability is .20 that the percentage of

successes is less than what percent? Z = -.84.

X .40

.84 =

P = 38.971%

.01225

131

132

th

X .40

is greater than? Z = 1.34. 1.34 =

. P

.01225

= 41.642%

6.43

6.44

6.45

a. Find P(P > .25). E[P] = = P = .20, =

P (1 P)

.2(1 .8)

= .02

P(Z >

=

n

400

.25 .20

) = P(Z > 2.50) = 1 FZ(2.50) = 1 .02

.4938 = .0062

.16 .20

b. Find P(P < .16). P(Z <

) = P(Z < .02

2.00) = 1 - FZ(2.00) = .0228

.17 .20

.24 .20

c. P(

<Z<

) = P(-1.50 < Z <

.02

.02

2.00) = [Fz (1.50) - .5] + [Fz (2.00) - .5] =

.4332 + .4772 = .9104

d. Probability is .15 that the percentage of

successes is less than what percent? Z = -1.04.

X .20

1.04 =

P = 17.92%

.02

e. Probability is .11 the percentage of successes

X .20

is greater than? Z = 1.23. 1.23 =

. P

.02

= 22.46%

a. E[X] = = 900(.2) = 180, = (900)(.2)(.8) = 12

200 180

P(Z >

) = P(Z > 1.67) = 1 FZ(1.67) = .0475

12

175 180

b. P(Z <

) = P(Z < -.42) = 1 - FZ(.42) = .3372

12

a. E[X] = = 400(.1) = 40, = (400)(.1)(.9) = 6

35 40

P(Z >

) = P(Z > -.83) = FZ(.83) = .7967

6

40 40

50 40

<Z<

) = P(0 < Z < 1.67) = Fz (1.67) FZ(0) =

b. P(

6

6

.9525 - .5 = .4525

34 40

48 40

<Z<

) = P(-1 < Z < 1.33) = Fz (1.33) [1 FZ(1)]

6

6

= .9082 - .1587 = .7495

d. 39 - 41

c. P(

6.46

P(Z <

6.47

6.48

6.49

6.50

(100)(.6)(.4) = 4.899

50 60

) = P(Z < -2.04) = 1 FZ(2.04) = 1- .9793 = .0207

4.899

100 112.5

P(Z <

) = P(Z < -1.36) = 1 - FZ(1.36) = 1 - .9131 = .0869

9.1856

120 112.5

150 112.5

b. P(

<Z<

) = P(.82 < Z < 4.08) = Fz(4.08) 9.1856

9.1856

Fz(.82) = 1.000 - .7939 = .2061

38 35

) = P(Z > .75) = 1 - FZ(.75) = 1 - .7734 = .2266

4

E[X] = 100(.2266) = 22.66, = (100)(.2266)(.7734) = 4.1863

25 22.66

P(Z >

) = P(Z > .56) = 1 - FZ(.56) = 1 - .7123 = .2877

4.1863

P(Z >

10 12.2

) = P(Z < -.79) = 1 - FZ(.79) = 1 - .7852 = .2148

2.8

E[X] = 400(.2148) = 85.92, = (400)(.2148)(.7852) = 8.2137

100 85.92

P(Z >

) = P(Z > 1.71) = 1 - FZ(1.71) = 1 - .9564 = .0436

8.2137

P(Z

= 1.0, what is the probability that an arrival occurs in the first t=2 time

units?

Cumulative Distribution Function

Exponential with mean = 1

x P( X <= x )

0

0.000000

1

0.632121

2

0.864665

3

0.950213

4

0.981684

5

0.993262

133

134

th

6.51 = 8.0, what is the probability that an arrival occurs in the first t=7 time

units?

Cumulative Distribution Function

Exponential with mean = 8

x P( X <= x )

0

0.000000

1

0.117503

2

0.221199

3

0.312711

4

0.393469

5

0.464739

6

0.527633

7

0.583138

8

0.632121

6.52

= 5.0, what is the probability that an arrival occurs after t=7 time units?

Exponential with mean = 5

x P( X <= x )

0

0.000000

1

0.181269

2

0.329680

3

0.451188

4

0.550671

5

0.632121

6

0.698806

7

0.753403

8

0.798103

6.53

= 6.0, what is the probability that an arrival occurs after t=5 time units?

Exponential with mean = 6

x P( X <= x )

0

0.000000

1

0.153518

2

0.283469

3

0.393469

4

0.486583

5

0.565402

6

0.632121

6.54

= 3.0, what is the probability that an arrival occurs after t=2 time units?

Exponential with mean = 3

x P( X <= x )

0

0.000000

1

0.283469

2

0.486583

3

0.632121

P(T<2) = .4866

6.55 a. P(X < 20) = 1 - e (20 /10) = .8647

b. P(X > 5) = 1 [1 - e (5/10) ] = e (5/10) = .6065

c. P(10 < X < 15) = (1- e (15 /10) - (1 - e (10 /10) ) = e 1 - e 1.5 = .1447

6.57 P(X > 2) = e (2)(.8) = .2019

6.58 a. P(X > 3) = 1 [1 - e (3/ ) ] = e 3 since = 1 /

b. P(X > 6) = 1 [1 - e (6 / ) ] = e (6 / ) = e6

c. P(X>6|X>3) = P(X > 6)/P(X > 3) = e 6 / e 3 ] = e 3

The probability of an occurrence within a specified time in the future

is not related to how much time has passed since the most recent

occurrence.

6.59 Find the mean and variance of the random variable: W = 5X + 4Y with

correlation = .5

W = a x + b y = 5(100) + 4(200) = 1300

2W = a 2 2 X + b 2 2Y + 2abCorr ( X , Y ) X Y

= 52(100) + 42(400) + 2(5)(4)(.5)(10)(20) = 12,900

6.60 Find the mean and variance of the random variable: W = 5X + 4Y with

correlation = -.5

W = a x + b y = 5(100) + 4(200) = 1300

2W = a 2 2 X + b 2 2Y + 2abCorr ( X , Y ) X Y

= 52(100) + 42(400) + 2(5)(4)(-.5)(10)(20) = 4,900

6.61 Find the mean and variance of the random variable: W = 5X 4Y with

correlation = .5.

W = a x b y = 5(100) 4(200) = -300

2W = a 2 2 X + b 2 2Y 2abCorr ( X , Y ) X Y

= 52(100) + 42(400) 2(5)(4)(.5)(10)(20) = 4900

6.62 Find the mean and variance of the random variable: W = 5X 4Y with

correlation = .5.

W = a x b y = 5(500) 4(200) = 1700

2W = a 2 2 X + b 2 2Y 2abCorr ( X , Y ) X Y

= 52(100) + 42(400) 2(5)(4)(.5)(10)(20) = 4900

135

136

th

6.63 Find the mean and variance of the random variable: W = 5X 4Y with

correlation of -.5.

W = a x b y = 5(100) 4(200) = -300

2W = a 2 2 X + b 2 2Y 2abCorr ( X , Y ) X Y

= 52(500) + 42(400) 2(5)(4)(-.5)(22.3607)(20) = 27,844.28

6.64

Z = 0. Note that the first

investment yields a certain profit

of 10% which is a zero standard

deviation. x = 100,000(.06) =

6,000

Z = 5 x = 5(200) = 1,000

Z =

6.66

5 x =

2

Z = 1 + 2 + 3 =

6.67

2

Z = 1 + 2 + 3 =

6.68 The calculation of the mean is correct, but the standard deviations of two

random variables cannot be summed. To get the correct standard

deviation, add the variances together and then take the square root. The

standard deviation: = 5(16) 2 = 35.7771

6.69

Z = (16 x ) / 16 = x = 28

2

Z = 16 x / 16 =

(2.4) 2 / 16 = 2.4 / 4 = .6

6.70 a. Compute the mean and variance of the portfolio with correlation of +.5

W = a x + b y = 50(25) + 40(40) = 2850

2W = a 2 2 X + b 2 2Y + 2abCorr ( X , Y ) X Y

= 502(121) + 402(225) + 2(50)(40)(.5)(11)(15) = 992,500

b. Recompute with correlation of -.5

W = a x + b y = 50(25) + 40(40) = 2850

2W = a 2 2 X + b 2 2Y + 2abCorr ( X , Y ) X Y

= 502(121) + 402(225) + 2(50)(40)(-.5)(11)(15) = 332,500

6.71

a. Find the probability that total revenue is greater than total cost

W = aX bY = 10X [7Y+25)]

W = a x b y = 10(100) [7(100) + 250] = 50

2W = a 2 2 X + b 2 2Y 2abCorr ( X , Y ) X Y

= 102(64) + 72(625) 2(10)(7)(.6)(8)(25) = 20,225 W = 20, 225

= 142.2146

P(Z >

0 50

) = P(Z > -.35) = FZ(.35) = .6368

142.2146

6.72 a. W = aX bY = 10X 10Y

W = a x b y = 10(100) 10(90) = 100

2W = a 2 2 X + b 2 2Y 2abCorr ( X , Y ) X Y

=102(100) + 102(400) 2(10)(10)(-.4)(10)(20) =66,000 W = 66, 000

=256.90465

b. P(Z <

0 100

) = P(Z < -.39) = 1 FZ(.39) = 1 .6517 = .3483

256.90465

6.73

W = aX bY = 10X 4Y

W = a x b y = 10(400) 4(400) = 2400

2W = a 2 2 X + b 2 2Y 2abCorr ( X , Y ) X Y

=102(900) + 42(1600) 2(10)(4)(.5)(30)(40) = 67,600 W = 67, 600 =260

P(Z >

2000 2400

) = P(Z > -1.54) = FZ(1.54) = .9382

260

6.74 a. W = aX bY = 1X 1Y

W = a x b y = 1(100) 1(105) = -5

2W = a 2 2 X + b 2 2Y 2abCorr ( X , Y ) X Y

=12(900) + 12(625) 2(1)(1)(.7)(30)(25) = 475 W = 475 =21.79449

b. P(Z >

6.75

0 (5)

) = P(Z > .23) = 1 FZ(.23) = 1 .5910 = .4090

21.79449

b. P(X > 12) = (20/12) (12/12) = 8/12 = 2/3

137

138

th

d. To jointly maximize the probability of getting the contract and the

profit from that contract, maximize the following function: max E[]

= (B 10)(20/12 B/12). Where B is the value of the bid. To

determine the value for B that maximizes the expected profit, an

iterative approach can be used. The value of B is 15.

6.76 a.

f(x)

0.033333

0.000000

30

35

40

45

50

55

60

65

70

Cumulative density function: F(x)

1.0

F(x)

0.8

0.6

0.4

0.2

0.0

35

40

45

50

55

X

65 + 35

d. E[X] =

= 50

2

60

65

6.77

1.50

f(x)

1.00

0.5

0.00

0

.5

1.5

.52

.52

c. P(.5 < X < 1.5 ) = (.5 ) + (.5 ) = .375 + .375 = .75

2

2

6.78

b. Y = |1000| x = 1000(.08) = 80

6.79

b. R = |1.45| x = 1.45(69) = 100.05

c. = R C = .5X 100, E[] = .5 x -100 = 165, = |.5| x = .5(69) =

34.5

6.80 Given that the variance of both predicted earnings and forecast error are

both positive and given that the variance of actual earnings is equal to the

sum of the variances of predicted earnings and forecast error, then the

Variance of predicted earnings must be less than the variance of actual

earnings

6.81 Cov[(X1 + X2), (X1 X2)] = E[(X1 + X2)(X1 X2)] E[X1 + X2] E[X1 X2]

= E[X12 - X22] E[(X1) + E(X2)][E(X1) E(X2)] =

E(X12) E(X22) - [(E(X1))2 (E(X2)2] = Var (X1) Var (X2)

Which is 0 if and only if Var (X1) = Var (X2)

139

140

th

3 2.6

) = P(Z > .8) = 1 FZ(.8) = .2119

.5

2.25 2.6

2.75 2.6

<Z<

) = P(-.7 < Z < .3) = Fz (.3) [1-FZ(.3)]

P(

.5

.5

= .3759

Xi 2.6

, Xi = 3.24

P(Z > 1.28) = .1, 1.28 =

.5

P(Xi > 3) = .2119 (from part a)

E[X] = 400(.2119) = 84.76, x = (400)(.2119)(.7881) = 8.173

80 84.76

P(Z >

) = P(Z > -.58) = FZ(.58) = .7190

8.173

P(X 1) = 1 P(X = 0) = 1 (.7881)2 = .3789

b.

c.

d.

e.

6.83

6.84

65 60

) = P(Z > .5) = 1 FZ(.5) = .3085

10

50 60

70 60

b. P(

<Z<

) = P(-1 < Z < 1) = 2 Fz (1) 1 = .6826

10

10

Xi 60

c. P(Z > 1.96) = .025, 1.96 =

, Xi = 79.6

10

d. P(Z > .675) = .025, .675 = The shortest range will be the interval

Xi 60

centered on the mean. Since the P(Z > .675) = .025, .675 =

.

10

Xi 60

Xi = 66.75. The lower value of the interval will be .675 =

10

which is Xi = 53.25. Therefore, the shortest range will be 66.75

53.25 = 13.5. This is by definition the InterQuartile Range (IQR).

d. P(X > 65) = .3085 (from part a)

Use the binomial formula: P(X = 2) = C24 (.3085) 2 (.6915) 2 = 0.2731

a. P(Z >

85 100

) = P(Z < -.5) = .3085

30

70 100

130 100

b. P(

<Z<

) = P(-1 < Z < 1) = 2 Fz (1) 1 = .6826

30

30

Xi 100

c. P(Z > 1.645) = .05, 1.645 =

, Xi = 149.35

30

60 100

d. P(Z >

) = P(Z > -1.33) = FZ(1.33) = .9032

30

P(X 1) = 1 P(X = 0) = 1 (.0918)2 = .9916

a. P(Z <

f. 90 109

g. 130 - 149

6.85

b.

c.

d.

e.

f.

6.86

15 20

25 20

<Z<

) = P(-1.25 < Z < 1.25) = 2 FZ(1.25) 1 =

4

4

.7888

30 20

) = P(Z > 2.5) =1 - Fz (2.5) = .0062

P(Z >

4

P(X 1) = 1 P(X = 0) = 1 [FZ(2.5)]5 = .0306

Xi 20

, Xi = 22.1 The shortest range will be

P(Z > .525) = .3, .525 =

4

the interval centered on the mean. The lower value of the interval will

Xi 20

be .525 =

which is Xi = 17.9. Therefore, the shortest range

4

is 22.1 17.9 = 4.2.

19 21

21 23

a. P(

P(Z >

6.87

, = 23.4375

140 100

) = P(Z > 1.71) = 1 FZ(1.71) = .0436

23.4375

P(Z <

130 100

25

, = 21.8

2.5

20 21.8

) = P(Z < -.72) = 1 FZ(.72) = .2358

2.5

6.88

500 400

P(Z <

) = P(Z < 6.45) 1.0000

15.4919

6.89

200 240

P(Z >

) = P(Z > -4.08) 1.0000

9.798

6.90

P(Z <

50 70

) = P(Z < -2.39) = 1 FZ (2.39) = .0084

70

141

142

th

6.91

a. P(X = 6) =

e 6 66

= .1606

6!

6

3

= .1353

d. 30 minutes = .5 hour, P(X > .5) = e (.5)(6) = .0498

6.92

260 240

P(Z >

) = P(Z > 1.67) = 1 FZ(1.67) = .0475

12

Xi 240

b. P(Z > -.254) = .6, -.254 =

, Xi = 236.95 (237 listeners)

12

6.93

a. P(

120 132

150 132

<Z<

) = P(- 1 < Z < 1.5) = FZ (1.5) [1 FZ(1)]

12

12

= .7745

b. P(Z > .44) = .33, .44 =

Xi 132

, Xi = 137.28

12

120 132

) = P(Z < -1) = 1 FZ(1) = .1587

12

d. E[X] = 100(.1587) = 15.87, x = (100)(.1587)(.8413) = 3.654

25 15.87

P(Z >

) = P(Z > 2.5) = 1 FZ(2.5) = .0062

3.654

c. P(Z <

6.94

P(Z>1.28)=.1, 1.28=

3.5 2.4

400(.242) = 96.8, x =

3 2.4

) = P(Z > .7) = 1 FZ(.7) = .242. E[X] =

.8594

80 96.8

)=P(Z>(400)(.242)(.758) = 8.566. P(Z >

8.566

1.96) = FZ(1.96)=.975

6.95 Portfolio consists of 10 shares of stock A and 8 shares of stock B.

a. Find the mean and variance of the portfolio value: W = 10X + 8Y with

correlation of .3.

W = a x + b y = 10(10) + 8(12) = 196

2W = a 2 2 X + b 2 2Y + 2abCorr ( X , Y ) X Y

= 102(16) + 82(9) + 2(10)(8)(.3)(4)(3) = 2,752

b. Option 1: Stock 1 with mean of 10, variance of 25, correlation of -.2.

2W = a 2 2 X + b 2 2Y + 2abCorr ( X , Y ) X Y

= 102(25) + 82(9) + 2(10)(8)(-.2)(5)(3) = 2,596

= 102(25) + 82(9) + 2(10)(8)(.6)(5)(3) = 2,340

To reduce the variance of the porfolio, select Option 2

6.96 Portfolio consists of 10 shares of stock A and 8 shares of stock B

a. Find the mean and variance of the portfolio value: W = 10X + 8Y with

correlation of .3.

W = a x + b y = 10(12) + 8(10) = 200

2W = a 2 2 X + b 2 2Y + 2abCorr ( X , Y ) X Y

= 102(14) + 82(12) + 2(10)(8)(.5)(3.74166)(3.4641) = 3,204.919

b. Option 1: Stock 1 with mean of 12, variance of 25, correlation of -.2.

2W = a 2 2 X + b 2 2Y + 2abCorr ( X , Y ) X Y

= 122(25) + 82(12) + 2(10)(8)(-.2)(5)(3.4641) = 3,813.744

Option 2: Stock 2 with mean of 10, variance of 9, correlation of .6.

= 102(9) + 82(12) + 2(10)(8)(.6)(3)(3.4641) = 2,665.66

To reduce the variance of the porfolio, select Option 2

6.97

2W = a 2 2 X + b 2 2Y + 2abCorr ( X , Y ) X Y

= 12(1000000) + 12(810000) + 2(1)(1)(.4)(1000)(900) = 2,530,000

W = 2,530, 000 = 1590.597372

Probability that the weight is between 138,000 and 141,000:

138, 000 140, 000

141, 000 140, 000

= -1.26 fz = .3962,

= .63 fz = .2357

1590.597372

1590.597372

.3962 + .2357 = .6319

6.98 a. W = a x + b y = 1(40) + 1(35) = 75

2W = a 2 2 X + b 2 2Y + 2abCorr ( X , Y ) X Y

= 12(100) + 12(144) + 2(1)(1)(.6)(10)(12) = 388

W = 388 = 19.69772

Probability that all seats are filled:

100 75

= 1.27 Fz = .8980. 1 - .8980 = .1020

19.69772

b. Probability that between 75 and 90 seats will be filled:

90 75

= .76 .5 Fz(.76) = .2764

19.69772

143

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