Binomial Distribution Theory

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Binomial Distribution Theory

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R d

Random variable

i bl

A random variable assigns a number to

each outcome of a random event.

Classes of random variables:

Discreterandom variables

Continuous random variables

For discrete random variables we can find

probabilities for exact outcomes

For continuous random variables we can

find probabilities only for intervals

Discrete Random

Variables

Notation for Discrete Random

Variables

X is how we denote a random variable

k is a possible outcome for the discrete

random variable

P(X=k) is the probability that X equals k

P b bilit di

Probability distribution

t ib ti ffunction

ti

The probability distribution function

(pdf)) for a discrete random variable is the

(p

rule that assigns probabilities to the

possible outcomes of a random variable.

p

Examples:

The toss of a coin.

coin The pdf is

is

die. The pdf is

is.

Conditions for Probabilities of

discrete random variables

P X k 1

k

F every k we have

For h

0 P X k 1

C

Cumulative

l ti DiDistribution

t ib ti ffunction

ti

The cumulative distribution function (cdf)

for a random variable X ((that can take

quantitative values) is the rule that assign

probabilities P X k for any

p yppossible

value k

Example: Roll a die

E

Expected

t d value

l

The expected value of a random variable

X is the mean value of the variable in the

sample space.

Example:

I play a game and the probability of winning

$2 dollars is 0

0.3

3 and the probability of losing

$1 dollar is 0.7. What is my expected gain in

this game?

Expected value=2*0.3+(-1)*0.7=0.6-0.7=-0.1

F

Formula

l off Expected

E t d value

l

To find the expected value you multiply

each outcome with its p

probability

y and yyou

sum everything.

That is

is,

E X xi P X xi

i

V i

Variance and

d St

Standard

d dD Deviation

i ti

p y each xi E X with

2

variable yyou multiply

its probability and then you sum the result.

That is,,

xi E X P X xi

2

j t ttake

just k the

th square roott off the

th variance

i

E

Example

l

A car insurance wants to know on average

how many y car accidents a customer has

each year. They collect data for one year

and the result is as follows.

0 accidents 70% of the customers

1 accident 23% of the customers

2 accidents 6% of the customers

3 accidents 1% of the customers

E

Example

l

What is going to be the expected number

of accidents for each customer based on

those data?

of the accidents of each customer?

Bi

Binomial

i l random

d variables

i bl

Binomial Experiments are those that have only

two possible outcomes that are denoted by 0

and 1 or failure and success.

A binomial experiment is defined as follows:

Number of trials, denoted by n

Two possible outcomes, success and failure

Each

E h ttrial

i l iis iindependent

d d t off th

the other

th

Probability of success denoted by p, and probability of

failure is denoted byy 1-p.p

We denote with X the number of successes

E

Examples

l

Toss of a coin:

Possible outcomes: Head, Tail

Roll of a die:

Possible outcomes: Even number

number, odd

number

Birth of a child:

Possible outcomes: Boy, Girl

Fi di Bi

Finding Binomial

i lPProbabilities

b biliti

Use the formula:

n!

P X k p 1 p

k nk

k ! n k !

E

Expected

t d value

l and

d variance

i

When we have a Binomial distribution, the

expected

p value is calculated as:

E X np

Var X np 1 p

E

Example

l

I play a game 10 times. The probability I

win the ggame is 0.2.

I denote with X the number of times I won

the game

game.

What is n?

What

Wh t isi p?

?

How to calculate P(X=3)?

E

Example

l

What is going to be E(X)?

Wh t iis going

What i tto b

be V

Var(X)?

(X)?

Continuous Random

Variables

C ti

Continuous R

Random

d V

Variables

i bl

Continuous random variable are those for

which the outcome can be any y value in an

interval.

The probability density function for a

continuous random variable is a curve so

that the area under the curve is the

probability that the random variable

belongs to that interval

P b bilit ffor continuous

Probability ti variables

i bl

P(X

P(X=k)=0

k) 0

We can measure the probability in intervals.

For example:

p We want to measure the

probability that a man has height between 60

and 65 inches, that is:

P 60 X 65

U if

Uniform di

distribution

t ib ti

One way to describe probabilities for

continuous random variables is by using

uniform distribution

One example is for example, if you know

that there is a bus coming to a bus station

every 20 minutes, then there is a constant

probability for waiting time in the interval 0

to 20.

E

Example

l

If we use the probability example:

Draw the probability distribution function.

and 12 minutes.

N

Normal

l curves

Remember Normal curve from Chapter 2.

Normal curve is used to describe some

continuous random variables

Properties:

Symmetric, bell shaped

We

W describe

d ib it using

i ththe mean value

l andd

the standard deviation

P X d P X d

E ii lR

Empirical Rule

l

P X 0.68

0 68

P 2 X 2 0.95

0 95

P 3 X 3 0.997

0 997

C l l ti a z-score

Calculating

Remember from Chapter 2 what we need

to do to convert any

y value from a normal

curve to the standard normal curve. We

need to standardize it using

g the formula

Score mean x

z

S d d deviation

Standard d

T bl

Tables

Example:

Let say, that the height of women have a normal

curve with mean 65 and standard deviation of 5

inches.

What is the probability of a woman being shorter than

60 iinches?

h ?

What is the probability that a woman is taller than 67

inches?

What is the probability that a woman is between 60

and 67 inches?

What is the probability that a woman is taller than 70

inches?

T bl

Tables

What is the height so that 25% of the women

are shorter than that height?

What the height of a woman should be in

order to be taller than at least 30% of all

women

Approximating binomial distribution

probabilities using normal distribution

If I flip a coin 100 times and denote with X

the number of times I g get a Head.

What is the distribution of X?

Normal approximation to the

Binomial Distribution

So if X is a Binomial Distribution with n

number of tries and p probability

y of success

p then X can be approximated by a normal

distribution with mean npp and standard

deviation np 1 p

CONDITIONS:

10 n 1 p 10

np 10,

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