Indian Institute of Management Rohtak

PGP
Course – Probability Analysis
Mid-Term Exam
Faculty In-charge: Dr. Priyank Sinha

Note- All questions are compulsory. Total Marks- 35

Duration: 1 hour 30 minutes Date- 05-08-2020

Instructions:
1. This is a closed book exam.
2. Use of scientific calculator is prohibited. Non-scientific calculator is allowed.
3. Write legibly.
4. You will be evaluated on the step marking, so take outmost care to not skip any step.
5. Please follow PGP office instructions on scanning and uploading answer script.

Q1. ONGC is considering whether to drill for shale gas in Krishna-Godavari basin. Drilling
would incur ONGC a cost of 40,000$. If the gas is found, then another 30,000$ should be
additionally spent to cap the well including the hardware and control equipment cost. If the
gas is not found then this additional cost will not be borne by it, however the drilling cost will
still be incurred.
British petroleum has offered a sum of 200,000$ to purchase all rights of gas production, if it
is found. Market price of the shale gas currently is 150,000$, however ONGC expect that the
prices will get doubled in open market in immediate future.
Company engineers feel that chances of finding the gas is 30% in the basin, and staff
economist thinks that there is a 60% chance of the price getting doubled in open market.
Illustrate the decision-making sequence for ONGC through a probability decision tree
diagram, and assist it in the decision making.
[4+4]

Q2. A diagnostic test for COVID-19 has a probability 0.95 of detecting the infection
correctly, and a probability 0.10 of incorrectly detecting the infection (false positive). In a
given region, epidemiologists estimate that 0.5% population is infected. A person is randomly
chosen from the same region and administered the test. Calculate the following probabilities:
[3+3+3]
(a) of obtaining the positive result of the test;

1
(b) that, given a positive result, the person is infected;
(c) that, given a negative result, the person is a not-infected;
Q3. In a group of 40 people, what is the probability that all have different birthday?
(You can leave the answer in non-reduced form) [4]

Q4. Joint probability values of two random variables X and Y is given in the table below
[2+2+2+2]

p(X,Y) Y=2 Y=4 Y=5

X=1 1/12 1/24 1/24
X=2 1/6 1/12 1/8
X=3 1/4 1/8 1/12

a) Calculate CDF at P(X=2, Y=4)

b) Calculate the marginal probabilities of X and Y
c) Calculate the conditional probability P(Y=2|X=1)
d) Are X and Y independent?

Q5. For the following data set, calculate mean, and variance.
X = 0, 4, 9, 12, 25, 2, 21, 7, 11, 12
If 4 is added to each data point, what will be the effect on variance? Explain your answer.
[2+4]