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Hi All:
This exam includes 4 worksheets with 9 problems. Total: 79
Please remember the following: pts.
you are not allowed to use the Internet in any form during the
exam. Once you downloaded the exam file you are expected
to log off!
the only file that can be open during the exam is the exam
Excel file;
you are allowed to use the formula sheet but no other notes;
also: I'd like to see your work; just one number in a cell as an
answer without the formula behind it is not sufficient.

Please let me know if you have any questions.

Good luck,
prof. Bodo
otal: 79
pts.
Q1. A poll conducted to learn about attitudes toward investment and retirement asked male and female
respondents how important they felt level of risk was in choosing a retirement investment. The joint
probability table on the right was constructed from the data provided.

a. What is the probability that a survey respondent will say level of risk is important?

b. What is the probability that a male respondent will say level of risk is important?
10 pts.
c. What is the probability that a female respondent will say level of risk is important?

d. Is the level of risk independent of the gender of the respondent? Why or why not?

e. Do male and female attitudes toward risk differ? Explain.

Q2. A company studied the number of accidents occurring at its plant. Historical records show that 6% of
the employees suffered accidents last year. Management believes that a special safety program will
reduce such accidents to 5% during the current year. In addition, it estimates that 15% of employees who
had accidents last year will experience an accident during the current year.

a. What percentage of the employees will experience accidents in both years?

b. Are the two events (accident in current year, accident in last year) independent? Explain.
6 pts.
 Male Female
male and female Important 0.22 0.27 0.49
nt. The joint Not Important 0.28 0.23 0.51
0.5 0.5 1

10 pts. a. P(important) = 0.49

b. P(im|male) = 0.44

c. P(im|female) = 0.54

d. Not independent b/c P(important) =!= P(im|male) =!= P(im|female)

e. Yes they differ: P(im|male) = 0.44 but P(im|female) = 0.54

s show that 6% of
rogram will P(Last year) = 0.06
of employees who P(This year) = 0.05
P(This year|Last year) = 0.15

ain.
6 pts. a. P(This year and Last year) = P(This year|Last year) * P(Last year) 0.009

b. Not independent since P(This year) =!= P(This year | Last year) OR
Not independent since P(Last year) * P(This year) =!= P(This year and Last year)
Q3. The budgeting process for a college resulted in expense forecasts for the coming year a.
(in $ millions) of $9, $10, $11, $12, and $13. Because the actual expenses are unknown,
the following respective probabilities are assigned: .3, .2, .25, .05, and .2.

a. Show the probability distribution for the expense forecast.

b. What is the expected value of the expense forecast for the coming year? 8 pts.
c. What is the variance of the expense forecast for the coming year?

d. If income projections for the year are estimated at $12 million, comment on the b.
financial position of the college.
c.

d.

Q4. Reynolds Electronics accepts a lot from a particular supplier if the defective
components in the lot do not exceed 3%. Suppose a random sample of 50 items from a
recent shipment is tested.
10 pts.
a. Assume that 3% of the shipment is defective. Compute the probability that no items in
a.
the sample are defective.

b. Assume that 5% of the shipment is defective. Compute the probability that exactly b.
three items in the sample is defective.

c. What is the probability of observing one or more defective items in the sample if 1% of
the shipment is defective? c.
d. What is the probability of observing more than three defective items in the sample if
2% of the shipment is defective?
d.
e. Would you feel comfortable accepting the shipment if two items was found to be
defective? Why or why not?

e.

Q5. The unemployment rate in the state of Arizona is 8.1. Assume that 650 employable
people in Arizona are selected randomly.

a. What is the expected number of people who are unemployed? 8 pts. a.

b. What are the variance and standard deviation of the number of people who are
unemployed?
b.
 Expense P(Expense) Deviations^2
9 0.3 2.7225
10 0.2 0.4225
11 0.25 0.1225
12 0.05 1.8225
13 0.2 5.5225

E(Expense) 10.65

Var(Expense) 2.13 St dev 1.46

Financial position of the college is solid, $12 million expected income is higher than the expected cost

n= 50

p= 0.03 e1. p P(x = 2)

P(x = 0) = 0.21806538 0.01 0.076
0.02 0.186
p= 0.05 0.03 0.256
P(x = 3) = 0.21987484 0.04 0.276
0.05 0.261
p= 0.01 0.06 0.226
P(x >= 1) 0.39499393 0.07 0.184
0.08 0.143
p= 0.02 0.09 0.107
P(x > 3) 0.01775808 0.1 0.078

Depends: if two items were found defective the most likely proportion of defective items is 4%
which is greater than 3%; on the other hand one can argue that the probability of getting two
defective if the real proportion is 3% is 25.6%, which is not that low, so it is quite likely, not unusual at all
that we get two defective items in a sample of 50 even when the proportion of defective items is 3%

E(x) 52.650

Var(x) 48.385 Sigma(x) 6.956

Q6. A hotel contains 700 rooms. Suppose a marketing group forecasts a mean
demand of 670 rooms for the coming weekend. Assume that demand for the mu
upcoming weekend is normally distributed with a standard deviation of 30. sigma
a. What is the probability that all the hotel's rooms will be rented?
a.
b. What is the probability that 50 or more rooms will not be rented? 12 pts.
c. What is the probability that the number of rooms rented will be between b.
620 and 665?
c.

Q7. A study conducted under the auspices of the National Highway Traffic
Safety Administration found that the average number of fatal crashes caused mu
by drowsy drivers each year was 1550 . Assume the annual number of fatal
crashes per year is normally distributed with a standard deviation of 300. sigma

a. What is the probability of fewer than 1000 fatal crashes in a year?

12 pts. a.
b. What is the probability that the number of fatal crashes will be between
1000 and 2000 for a year?

c. For a year to be in the upper 5% with respect to the number of fatal crashes, b.
how many fatal crashes would have to occur?
c.

Q8. a.
Given that z is a standard normal random variable, find z for each situation.

a. The area to the left of z is .1. b.

b. The area between −z and z is .82. 5 pts.

c. The area between −z and z is .38. c.
d. The area to the left of z is .97.

e. The area to the right of z is .01. d.

e.
 670
30

P(x > 700) 0.159

P(x < 650) 0.252

P(620 < x < 665) 0.386

1550
300

P(x < 1000) 0.0334

P(1000 < x < 2000) 0.8998

P95 2043.46

-1.282

-1.341
1.341

-0.496
0.496

1.881

2.326
 Stockholders' Market Random
Company Equity Value Profit #s
Tenneco 2504.0 5220.2 255.0 0.017008 0.033243
SuperValue 1201.9 2701.5 230.8 0.078695 0.743736
Comcast 3815.3 26746.1 972.1 0.096387 0.798779
Baxter International 2839.0 21743.0 315.0 0.127607 0.459271
Colgate-Palmolive 2085.6 26810.2 848.6 0.128101 0.440662
CMS Energy 2216.0 4546.6 285.0 0.151391 0.156997
Sunoco 1514.0 2995.2 280.0 0.160127 0.913633
Conagra 2778.9 15169.4 613.2 0.166694 0.080579
Phelps Dodge 2587.4 2797.3 190.9 0.170981 0.076958
Mellon Bank 4521.0 19251.3 870.0 0.174483 0.168646
GAP 1573.7 39644.9 824.5 0.188828 0.980395
Best Buy 557.7 10376.5 94.5 0.193464 0.811401
Staples 1514.0 2995.2 280.0 0.196524 0.316186
Qualcomm 957.6 5862.1 108.5 0.201644 0.128495
Conseco 5273.6 11725.7 588.1 0.22036 0.02171
Dollar General 725.8 7193.1 182.0 0.220952 0.426555
Charles Schwab 1429.0 35340.6 348.5 0.234444 0.812535
Nordstrom 1316.7 5683.2 206.7 0.274542 0.406509
Safeway 3082.1 27700.7 806.7 0.306624 0.912023
Bergen Brunswick 629.1 2787.5 3.1 0.335586 0.289831
Shaw Industries 797.4 3110.3 20.6 0.340821 0.571181
AMP 2698.0 12017.6 2.0 0.369244 0.034782
Kohl's 1162.8 11790.5 192.3 0.425837 0.1001
Coca-Cola 2438.0 15704.9 142.0 0.437108 0.7037
Kmart 5979.0 8539.3 568.0 0.499907 0.531459
Whirlpool 2001.0 3729.4 325.0 0.513349 0.958175
Safeco 5575.8 5655.6 351.9 0.525284 0.179448
Nike 3261.6 15824.9 399.6 0.531439 0.298917
AGCO 982.1 372.1 60.6 0.545083 0.557836
Owens & Minor 161.1 299.6 20.1 0.555135 0.219248
Fortune Brands 4097.5 5639.2 263.1 0.574727 0.378341
KN Energy 1223.8 1432.0 60.0 0.604763 0.9835
Hormel Foods 813.3 2710.1 139.3 0.617279 0.456378
Thermo Electron 2248.1 2218.9 181.9 0.625054 0.499092
Ingram Micro 1399.3 2555.6 245.2 0.63663 0.19958
Apple Computer 1642.0 4605.0 309.0 0.65293 0.033451
Xerox 5544.0 35603.7 395.0 0.653448 0.178889
Federated 5709.0 8301.4 662.0 0.677675 0.834126
OfficeMax 1138.1 1014.6 42.6 0.731573 0.83177
Walgreen 2849.0 30324.7 511.0 0.756221 0.439168
Nucor 2072.6 3734.3 263.7 0.764444 0.446229
Mead 2252.0 3155.8 119.7 0.795742 0.028248
Lowe's 3136.0 22635.3 482.4 0.843236 0.909606
Republic Industries 5424.2 6190.9 499.5 0.847792 0.556894
Kimberly-Clark 3887.2 26881.4 1165.8 0.856065 0.106786
Ingersoll-Rand 2707.5 8209.2 509.1 0.88027 0.400347
Delta Air Lines 4023.0 9773.7 1001.0 0.971866 0.338204
Maytag 507.6 4828.7 280.6 0.979253 0.336265
Westvaco 2246.4 2225.6 132.0 0.991789 0.068714
Marketspan 3000.0 3850.7 51.3 0.998738 0.346713
Q9. Consider the data set on the
left. Select a simple random sample
of 11 companies.

10 pts.