Normal Distributions

Frequency Distributions and Histograms

Large sets of data are often displayed using a grouped frequency distribution or a histogram.
For instance, consider the following situation. An Internet service provider (ISP) has installed new
computers. To estimate the new download times its subscribers will experience, the ISP surveyed 1000 of
its subscribers to determine the time required for each subscriber to download a particular fi le from an
Internet site. The results of that survey are summarized in Table below.
A grouped Frequency Distribution
with 12 Classes

A histogram for the frequency

Distribution
Grouped frequency distribution it shows how often (frequently) certain events occurred.
The graph of a frequency distribution is called a histogram. A histogram provides a pictorial view of
how the data are distributed.

Relative frequency distribution the type of frequency distribution that lists the percent of data in
each class. It was drawn by using the data in the relative frequency distribution. It shows the percent
of subscribers along its vertical axis.

Relative frequency histogram

Example 1 Use a Relative Frequency Distribution

Use the relative frequency distribution in Table below to determine the

a. percent of subscribers who required at least 25 s to download the file.
b. probability that a subscriber chosen at random will require at least 5 but less than 20 s to download
the file.

Solution
a. The percent of data in all the classes with a lower boundary of 25 s or more is the sum of the
percents printed in red in Table below. Thus the percent of subscribers who required at least
25 s to download the fi le is 69.1%.

b. The percent of data in all the classes with a lower boundary of at least 5 s and an upper
boundary of 20 s or less is the sum of the percents printed in blue in Table above. Thus the
percent of subscribers who required at least 5 but less than 20 s to download the fi le is 15.2%.
The probability that a subscriber chosen at random will require at least 5 but less than 20 s to
download the fi le
is 0.152.

Normal Distributions and the Empirical Rule

A normal distribution forms a bell-shaped curve that is

symmetric about a vertical line through the mean of the
data. A graph of a normal distribution with a mean of 5 is
shown at the right.

Properties of a Normal Distribution

Every normal distribution has the following properties.
■ The graph is symmetric about a vertical line through the mean of the distribution.
■ The mean, median, and mode are equal.
■ The y-value of each point on the curve is the percent (expressed as a decimal) of
the data at the corresponding x-value.
■ Areas under the curve that are symmetric about the mean are equal.
■ The total area under the curve is 1.

What is the area under the curve to the right of the mean for a
normal distribution?

Empirical Rule for a Normal Distribution

In a normal distribution, approximately
■ 68% of the data lie within 1 standard deviation of the mean.
■ 95% of the data lie within 2 standard deviations of the mean.
■ 99.7% of the data lie within 3 standard deviations of the mean.
The Standard Normal Distribution
To convert data values x to z-scores, use the z-score formulas:

xx
z
s
where : z  standard score
x = raw score
x = mean
s = standard deviation

mean x z s

75 85 2 5
xx
263.41 181.5 -2.88 28.44 s
z
77.77 86.92 1.03 8.88
x  x  zs
349 148.34 -2.54 79
= x  x  zs

If the original distribution of x values is a normal distribution, then the corresponding distribution of z-
scores will also be a normal distribution. This normal distribution of z-scores is called the standard
normal distribution.

Conversion of a normal distribution to the standard normal distribution

The standard normal distribution is the normal distribution that has a mean of 0 and a standard
deviation of 1.

Use Symmetry to Determine an Area

Find the area of the standard normal distribution between z = - 1.44 and z = 0.

Solution
Because the standard normal distribution is symmetrical
about the center line z = 0,
the area of the standard normal distribution between z =
-1.44 and z = 0 is equal to
the area between z = 0 and z = 1.44. See Figure at the left.
The entry in the figure associated with z = 1.44 is 0.425.
Thus the area of the standard normal distribution between z
= -1.44 and z = 0 is 0.425 square unit.
 Linear Regression and Correlation
Linear Regression

The Scatter Diagram

In solving problems that concern estimation and forecasting, a scatter diagram can be used as
a graphical approach. This technique consists of joining the points corresponding to the paired scores
of dependent and independent variables which are commonly represented by X and Y on the X – Y
coordinate system.

The Least-Squares Regression Line

The least-squares regression line for a set of bivariate data is the line that minimizes the sum of the
squares of the vertical deviations from each data point to the line.

The Least Squares Linear Regression Equation

Example 1:Find the Equation of a Least-Squares Line

Find the equation of the least-squares line for the ordered pairs in Table below.

Solution
The ordered pairs are
(2.5, 3.4), (3.0, 4.9), (3.3, 5.5), (3.5, 6.6), (3.8, 7.0), (4.0, 7.7), (4.2, 8.3), (4.5, 8.7)
The number of ordered pairs is n _ 8. Organize the data in four columns, as shown in
Table below. Then find the sum of each column.
 Linear Correlation Coefficient
To determine the strength of a linear relationship between two variables, statisticians use a statistic
called the linear correlation coefficient, which is denoted by the variable r and is defined as follows.
 Example:Find a Linear Correlation Coefficient
Find the linear correlation coefficient for stride length versus speed of an adult man. Use
the data in Table below. Round your result to the nearest hundredth.

H
 The Mathematics of Finance
Simple Interest
The amount deposited in a bank or borrowed from a bank is called the principal. The amount of
interest paid is usually given as a percent of the principal. The percent used to determine the amount
of interest is called the interest rate. If you deposit $1000 in a savings account paying 5% interest
per year, $1000 is the principal and the annual interest rate is 5%. Interest paid on the original
principal is called simple interest. The formula used to calculate simple interest is given below.

Example: Calculate Simple Interest

Calculate the simple interest earned in 1 year on a deposit of $1000 if the interest rate is 5%.
Solution
Use the simple interest formula. Substitute the following values into the formula:

Compound Interest
Compound Interest
Simple interest is generally used for loans of 1 year or less. For loans of more than 1 year, the
interest paid on the money borrowed is called compound interest. Compound interest is interest
calculated not only on the original principal, but also on any interest that has already been earned.
Example: Calculate Future Value

Credit Cards and Consumer Loans

Credit Cards
When a customer uses a credit card to make a purchase, the customer is actually receiving a loan.
Therefore, there is frequently an added cost to the consumer who purchases on credit. This added
cost may be in the form of an annual fee or interest charges on purchases. A finance charge is an
amount paid in excess of the cash price; it is the cost to the customer for the use of credit.
 Consumer Loans: Calculating Monthly Payments
The stated interest rate for most consumer loans, such as a car loan, is normally the annual
percentage rate, APR, as required by the Truth in Lending Act. The payment amount for these loans
is given by the following formula.

Example: Calculate a Car Payment

Bonds
When a corporation issues stock, it is selling part of the company to the stock-holders.
When it issues a bond, the corporation is borrowing money from the bondholders; a bondholder
lends money to a corporation. Corporations, the federal government, government agencies, states,
and cities all issue bonds. These entities need money to operate—
for example, to fund the federal deficit, repair roads, or build a new factory—so they borrow money
from the public by issuing bonds.
Bonds are usually issued in units of $1000. The price paid for the bond is the face value. The issuer
promises to repay the bondholder on a particular day, called the maturity date, at a given rate of
interest, called the coupon. Assume that a bond with a $1000 face value has a 5% coupon and a 10-
year maturity date. The bondholder collects interest payments of $50 in each of those 10 years. The
payments are calculated using the simple interest formula, as shown below.
I = Prt
I = 1000(0.05)(1)
I = 50
At the end of the 10-year period, the bondholder receives from the issuer the $1000 face value of the
bond.

Mutual Funds
An investment trust is a company whose assets are stocks and bonds. The purpose of these
companies is not to manufacture a product but to purchase stocks and bonds with the hope that their
value will increase. A mutual fund is an example of an investment trust. When investors purchase
shares in a mutual fund, they are adding their money to a pool along with many other investors. The
investments within a mutual fund are called the fund’s portfolio. The investors in a mutual fund share
the fund’s profits or losses from the investments in the portfolio.
 Apportionment and Voting
Apportionment
 A method of dividing a whole into various parts.
 The apportionment of seats in the House of Representatives is based on the relative
population of each state.
 Has its roots in the US Constitution.

Apportionment Method
 The Hamilton Plan (Alexander Hamilton)
 The Jefferson Plan (Thomas Jefferson)
 Huntington-Hill Apportionment Method
Hamilton’s Method

1. Using the standard divisor (D), calculate the standard quota (Q). Initially, each sub-group
receives a number of seats equal to its standard quota.
 2. If the sum of the standard quotas equals the number of seats to be apportioned, the
apportionment process is complete.
3. If the sum of the standard quota is less than the total number of seats to be apportioned, then
assign the remaining seat/s one seat for each subgroup that has the highest decimal part in its
quotient (source of standard quota)
Activity:
A university composed of four schools. There are 350 new computers to be apportioned among the four schools
according to their respective enrolments. The enrolment in each school is given in the following table. How many
computers will each school receive?
School Humanities Business Education Science and Math
Enrolment 1250 985 1420 1595

The Jefferson Plan

 Use a modified standard divisor (D m) that yields to the correct number of representatives by
trial and error so that the sum of the standard quota is equal to the number of representatives
to be apportioned.
 The modified standard divisor is always less than the standard divisor.
Jefferson’s Method:
1. Using the standard divisor, calculate the standard subgroup.
2. If the sum of the standard quotas equals the total number of seats to be apportioned, the
apportionment process is complete, that is, each subgroup receives a number of seats equal
to its standard quota.
3. If the sum of the lower quotas is not equal to the number of seats to be apportioned, choose a
modified divisor less than the standard divisor and calculate the modified standard quotas.
4. Repeat step 3 until you find a modified divisor such that the sum of the modified standard
quotas equals the total number of seats to be apportioned. That is, each subgroup receives a
number of seats equal to its modified standard quota, and the apportionment process is
complete.
 Fairness in Apportionment
 Quota Rule
The number of representatives apportioned to a state as the standard
quota or one more than the standard quota.
 Average Constituency (C)
The average constituencies of the subgroup are approximately the same.

Apportionment Principle
When adding a new representative to a subgroup, the representative is assigned to the group
in such a way as to give the smallest relative unfairness of apportionment, R.

C is the average constituency when the new representative is added

A is the absolute unfairness of apportionment = |C – C1|, where
C1 is the average constituency of the other subgroup
Huntington-Hill Apportionment Method
 Method of equal proportions
 Used by the House of representatives since 1940
 Implemented by calculating what is called Huntington-Hill number which is derived from the
apportionment principle.
 Voting
 Each voters votes for one candidate, and the candidate with the most votes wins. The
winning candidate does not have to have a majority of the votes.
 Majority vote: over 50% of the people voting must vote for the candidate.
Plurality with Elimination Method
 Each person votes for his or her favorite candidate. If a candidate receives a majority of votes,
that candidate is declared the winner. If no candidate receives a majority, then the candidate
with the fewest votes is eliminated and a new election is held. This process continues until a
candidate receives a majority of the votes.
Example: Suppose that 30 members of a regional planning board must decide where to build a new
airport. The airport consultants to the regional board have recommended four different
sites. The preference schedule for the board members is shown in the following table.
Weigthed Voting System
 A weighted voting system is one in which some voters have more weight on the outcome of an
election.
  A quota is the number of votes that are required to pass a measure.
 The weight of vote is the number of votes.
 One Person, one vote
{4: 1, 1, 1, 1, 1, 1, 1}
Each person has one vote and 4 votes is the quota; a majority is required to pass a measure
 Dictatorship
{20: 21, 6, 5, 4, 6}
In this system, the person with 21 votes can pass any measure. Even if the remaining four
people get together, their votes do not total the quota of 20.
 Null System
{28: 6, 3, 5, 2}
If all the members of this system vote for a measure, the total number of votes is 16, which is
less than the quota. Therefore, no measure can be passed.
 Veto Power System
{21: 6, 5, 4, 3, 2, 1}
The sum of all the votes is 21, the quota. Therefore, if any one voter does not vote for the
measure, it will fail. Each is said to have veto power.
More definitions
Coalition – set of voters each of whom votes the same way, either for or against a resolution.
Winning Coalition – a set of voters the sum of whose votes is greater or equal to the quota.
Losing Coalition – a set of voters the sum of whose votes is less than the quota.
Critical Voter – a voter who leaves a winning coalition and thereby turns into a losing coalition.
Dictator – a voter who has a weight that is greater or equal to the quota.
Dummy – a voter who is never a critical voter, has no power.
 Derived by John F. Banzhalf III in 1965
 Determines the power of a voter in a weighted voting system