SECTION 1- C2

1. If probability of hitting the target is .20 and 10 shots are fired independently.
a. What is the probability of hitting the target at least twice?
b. What is the probability that the target was hit at least twice given that it had been hit at least
once?
Answer: -
A)
Probability of hitting target, p(t) = 0.2
Number of trials, n = 10
Probability(hitting the target at least twice) = 1 – Cumulative Probability(hitting the target
once)
= 1 - 0.3758
= 0.6242
B) The probability that the target was hit at least twice given that it had been hit at least once will
remain the same since the events are independent.

2. An airline always books whenever possible. A particular plane has 95 seats and each ticket
cost INR 4000. The airline sells 100 such tickets.
a. If the probability of an individual not showing up is 0.05, assuming independence, what is the
probability that the airline can accommodate all who show up?
b. If the airline must return INR 4000 plus penalty of a INR 5000 for all who show up but cannot
be accommodated, what is the expected penalty the airline will pay?
Answer:
A)
Number of seats in the airline = 95
Number of tickets sold = 100
Probability of a person not showing up = 0.05
=> Probability of a person showing up = 0.95
By Binomial probability distribution,
Probability that more than 95 people show up I.e. f(x>95) = 0.435981
=> Probability that the airline can accommodate all who show up = 1-0.435981 = 0.5640 or
56.4%

0.435981301

b.
Airline line Penalty =5000
By Binomial probability distribution,
Expected Penalty for the Airline
=5000*BINOM.DIST(5,100,0.05,TRUE)
= 3079.996

3.The number of defects occurring in a smart phone screen produced by machine follows a
Poisson distribution with an average number of 3 defects per screen. A mobile screen is
classified as defective if it has 4 or more defects. What is the probability that the sample of 7
mobile screens taken from a day’s production has 0 to 2 defective screens?
Ans: Mean = 3 defects/person. X = No. Of defective screens
So, probability that a mobile screen will be classified as defective :-
= 1 – P(cumulative probability of x<=3)
= 1 – 0.647232
=0.352768
Now, given n = 7, x<=2, probability that a mobile screen from a day’s production has 0 to 2
defects :-
=f(0) + f(1) + f(2) [Using Binomial Probability Distribution]
=0.047579 + 0.181529 + 0.296823
=0.525932.
4. A local bank reviewed its credit card policy with the intention of recalling some of the credit
cards. In the past approximately 5% of the cardholders defaulted, leaving the bank unable to
collect the outstanding balance. Hence, the management established a prior probability of 0.05
that any particular cardholder will default. The bank also found that the probability of missing a
payment is 0.20 for customers who do not default. Of course, the probability of missing a
monthly payment for those who default is 1. Given that a customer missed one or more monthly
payments, compute the posterior probability that the customer will default?

Ans: P(Defaulted)=5%=0.05
P(missing| defaulted)= 0.20
P(Not Defaulted)= 0.95
So, P(missing|Defaulted)* P(not defaulted)= 0.20*0.95=0.19
P(missing|Defaulted)* P(defaulted)=0.20*1=0.05
P(defaulted|missing)=
[P(missing|Defaulted)* P(defaulted)]/ [P(missing|Defaulted)* P(defaulted)+ P(missing|
Defaulted)* P(not defaulted)
=0.208
3