Summary of Lecture 6

I. Random variables and probability distributions

- A random variable is a function or a rule that assigns a numerical value to each
outcome of an experiment, denoted by X, Y, Z, ...
- Two types of random variables: discrete random variable and continuous
random variable.
- Discrete random variable has a finite or countably infinite number of possible
values
- Continuous random variable has an uncountably infinite number of possible
values, that is, it can take on any value in one or more intervals of values
- A probability distribution is a table, formula, or graph that describes the values
of a random variable and the probability associated with these values.
Example:
+) Consider the experiment of random selection of two from a box containing 4
coins: a dollar coin, two 50-cent coins and a 20-cent coin.
+) The sample space: S = {DF, DF, DT, FF, FT, TF}, where D, F, T mean the
dollar coin, 50-cent coin and 20-cent coin have been selected.
+) Denote by X the total sum of money observed. X is a discrete random
variable. The possible values of X are: $0.7, $1.0, $1.2 and $1.5:
X: S = {DF, DF, DT, FF, FT, TF} → {0.7, 1.0, 1.2, 1.5}
FT ⟼ 0.7
TF ⟼ 0.7
FF ⟼ 1.0
DT ⟼ 1.2
DF ⟼ 1.5
DF ⟼ 1.5
+) The probability distribution of X is
• a table:

X 0.7 1.0 1.2 1.5

P(x) 2/6 1/6 1/6 2/6

• a formula:
 2
𝑖𝑓 𝑥 = 0.7
6
1
𝑃(𝑥) = 𝑖𝑓 𝑥 = 1.0 𝑜𝑟 𝑥 = 1.2
6
2
𝑖𝑓 𝑥 = 1.5
6

II. Discrete Probability Distribution

+) The probability distribution of X is the following table

X 𝑥4 𝑥5 … 𝑥6
P(x) 𝑃(𝑥4 ) 𝑃(𝑥5 ) … 𝑃(𝑥6 )

+) The expected value (or expectation, average value, population mean) of X is

6

𝜇 = 𝐸 𝑋 = 𝑥: 𝑃(𝑥: )
:;4

+) The variance of X is
6

𝜎 5 = 𝑉(𝑋) = 𝐸[ 𝑋 − 𝜇)5 = 𝐸 𝑋 5 − 𝐸 𝑋 5
= 𝑥:5 𝑃 𝑥: − 𝜇5
:;4

+) Law of expectation and variance:

- E(aX + b) = aE(X) + b
- V(aX + b) = 𝑎5 V(X)