Chapter 5.

Random variables- discrete and continuous

Random variable: A real valued function associated with the outcome of a

random experiment. Numerical description of the outcome of an experiment.

Discrete:

Assume either a finite or infinite number of values . Eg. Appearing for an

examination 5 times, the success can be either 0,1,2,3,4

Eg. Appearing for an examination until pass. 0,1,2,3….

Car arriving at a toll booth ..

Continuous:

Any random variable that may assume any numerical value in an interval or
collection of intervals. Eg. Time, weight, distance…

Expected value and variance

PROBLEMS:
1. The monthly demand for transistors is known to have the following prob distribution
demand (X) :1 2 3 4 5 6
prob (x) : 0.1 0.15 0.2 0.25 0.18 0.12
Determine the expected demand for transistors. Also obtain its variance

2. Compute mean ,variance and standard deviation for the following data
X : 0 1 2 3
P(X) : 1/8 3/8 3/8 1/8 Mean =1.5 var =0.75

3. Find the expected value and variance for the following data Also standard deviation
Home mortgages per week : 0 1 2 3 4 5 6
Probability : 0.10 0.10 0.20 0.30 0.15 0.10 0.05
( 2.8/ 2.46/ 1.568)

4. If Project A has the following probability distribution of forecast profits:

Prob : 0.1 0.3 0.4 0.2
Profit/ Loss : -800 -200 400 500
Should we go ahead with project A?

5. A survey shows that the average number of television sets per household is 2.3. Assume
that the probability distribution for the number of television sets per household is as shown in
the following table:
X :0 1 2 3 4 5
P(x) :0.01 0.23 0.41 0.20 0.10 0.05
a. Compute the expected value of the number of television sets per household and
compare it with the average reported in survey. ( 2.3)
b. What are the variance and standard deviation of the number of television sets per
household. (1.23, 1.1090)

6.Compute expected return and risk on a mutual fund scheme and its risk given the following.
Return : 12% 13% 14% 15% 16%
Prob : 0.1 0.2 0.4 0.2 0.1

7. A random variable X has the following distribution

X :0 1 2 3 4 5
P(X=x) : 3a 4a 6a 7a 8a 12a
Find a and P(X<=2) and P(0<x<3)

8. If the probability that the value of Reliance Industries share will remain the same is 0.50,
the probability that its value will increase by Rs.10.00 or Rs. 15.00 per share are respectively
0.15 and 0.25, and the probability that its value will decrease Rs. 5.00 per share is 0.10, what
is the expected gain per share?

Ans) X :0 10 15 -5
P(x) :0.5 0.15 0.25 0.10 E(X) = 4.75

BINOMIAL DISTRIBUTION
Assumptions; pmf, constants, characteristics, problems ( simple, expected value, construct a
distribution, finding parameters, fit a distribution)

Assumptions:

1. The number of trials ‘n’ is finite and fixed

2. There are two mutually exclusive outcomes on each trial which are referred as “success”
and “failure”
3. The probability of success denoted by p in any trial of the event is constant.
4. The trials are independent

Characteristics /Constants of Binomial distribution

1. Mean = np
2. Variance = npq
3. When n is large, p is small , the binomial distribution tends to normal distribution.
4. variance < mean
1. The proportion of consumers favouring a new product is 0.7 . A sample of n= 5 persons is
randomly selected. Determine the probability for the following number of consumers
favouring a new product a. exactly 5 b. none c. exactly 3

2.The overall percentage of failures in a certain examination is 40. What is the prob that out
of group of 6 candidates at least 4 will pass in the examination.

3.The incidence of occupational disease in an industry is such that the workers have a 20%
chance of suffering from it. What is the prob that out of six workers chosen at random four or
more will suffer from the disease.
4. In a survey, 60% of all the staffs in one company “like their jobs very much.” Suppose 5
randomly selected staffs from that company are to be asked whether they like their job very
much. Find the probability that 2 people don’t like their jobs very much.

5. Six dice are thrown 729 times. How many times do you expect at least three dice to show a
face of six?

6.Assuming that half of the population are consumers of rice so that the chance of an
individual being a consumer of rice is ½ and assume that 200 investigators , each take ten
individuals to see whether they are consumers of rice. How many investigators do you
expect to report, that three or less are consumers are rice?
P(X<=3) = 176/1024 == 200 * 176/1024 = 34 app.

7.Construct a BD with parameters n = 6 and p = 0.3

8.The mean and variance of a BD are 2 and 6 respectively. Comment of the statement

9. The mean and variance of a binomial variate X with parameters n and p are 16 and 8
respectively. Find
i. P(X=0) ii. P(X=1) iii. P(X>=2)

10.With usual notations, find p for a binomial random variable if n= 6 and if 9P(X=4)=
P(X=2)

11. A BD X satisfies the relation P(X=4) = P(X=2) when n= 6. Find the value of p. ( ¼)

12. Fit a binomial distribution .A set of 5 coins is tossed 3200 times and the number of heads
appearing each time is noted.

No. of heads : 0 1 2 3 4 5
Frequency : 80 570 1100 900 500 50

{Expected frequency = 100,500,1000,1000,500,100}

13. The bolts produced by a certain machine were checked by examining samples of 12. The
following table shows the distribution of 128 samples according to the number of defective
items they contained

No. of defective
In a sample of 12 :0 1 2 3 4 5 6 7
Number of sample :7 6 19 35 30 23 7 1
Fit a binomial distribution and find the expected frequencies, if the chance of the machine
being defective is ½. Find the mean and variance of the fitted distribution. ( N= 128, n= 7,
p=1/2=q)
(1,7,21,35,35,21,7,1)

Fit a binomial distribution to the following data:

X :0 1 2 3 4 5
F : 11 10 30 25 15 9
( Mean = 250/100 = 2.5 ; n= 5 therfore , p = 2.5/5 = 0.5 3,16,31,31,16,3

POISSON DISTRIBUTION

Assumptions :

- the occurrence of the event within any interval is independent of its occurrence in
any other non overlapping interval
- the prob of one occurrence in a small time interval is proportional to the length of
the interval
- the prob of more than one occurrence in a small time interval is negligible
- the average number of occurrence is constant for all time intervals of the same
size.

Definition of Poisson distribution :

It is a discrete probability distribution and is applicable where the chance of success is small.

The probability mass function is given by P (X=x) = e-λλx/ x!, x = 0,1,2,3,……

λ>=0

it is denoted by X ~ P(λ)

Limiting case of Binomial distribution:

As n   and p  0 such that np =  (say finite) then BD will become PD

Characteristics / Constants of Poisson distribution

1. Mean = 
2. Variance = 
3. If X and Y are two independent Poisson random variables with parameters 1 and 2
then X+Y is also a Poisson random variable with parameter 1+2.
4. It is positively skewed and leptokurtic
PROBLEMS:

1. The number of calls to a switchboard is random, with a mean of 1.5 per minute. What
is the probability that there are no calls in any one minute ?

2. A firm that manufactures table tennis table suspects that 2% of its output is defective in
some way. If this suspicion is correct, find the probability that in a day’s sample of nine
tables
(i) There is at least one defective
(ii) There are no defective

3.There are 120 calls in 30 minutes on a telephone board. Calculate the probability that there
will be x calls per minute for various values of x = 1, 3 and 5.

4.On the average, six people per hour use a self-service banking facility during the prime
shopping hours in a department store. What is the probability that
a. Exactly six people will use the facility during a randomly selected hour?
b. Fewer than five people will use the facility during a randomly selected hour.
c. No one will use the facility during a 10 minutes interval?
d. No one will use the facility during a 5 – minutes interval

5.On an average, one in 400 items is defective. If the items are packed in boxed of 100, what
is the prob , that any given box of item will contain:
a. no defective b. less than two defective c. One or more defective d.more
than three defectives ( 0.7788, 0.2212,0.00014)

6.Assuming that the customer arrivals at the Fidelity Credit Union drive through window are
Poisson distributed with a mean of five per hour , find
a. The probability that in a given hour more than eight customers will arrive at the
drive-through window.
b. The probability that between three and six customers inclusive, will arrive at the
drive through window in a given hour.
c. The probability that fewer than three customers will arrive at the window in a
given 30 minute period.

7.Suppose the probability of dialing a wrong number is 0.05. Then, what is the probability of
dialing exactly 3 wrong numbers in 100 dials?

8.The number of customers arriving at a facility for service between 10 A.M. and 11 A.M. is
a random variable say X1 with poisson distribution with mean 2, similarly the number of
customers arriving between 11 A.M. and 12 Noon say X2 has a poisson distribution with
mean

9. X ~P(λ) st p(x=1) = P(x=2) find the mean and P(x=0) 2, 0.1353

10. The variance of the PD is 0.5. Find P(X=3) 0.0126

11. Out of 1000 applications for shares in a company, the number of errors per applications
has the following distributions
Errors : 0 1 2 3 4
Applications : 400 300 210 80 10 Fit a Poisson distribution

12. In Delhi with 100 municipals, each having approximately the same population, the
distribution of cards is given by
No. of cards: 0 1 2 3 4
Wards : 63 28 6 2 1 (61,30,8,1,0)

6. CONTINUOUS PROBABILITY DISTRIBUTION

Uniform, Normal and Exponential

1. The scores obtained by students of a class follow a Uniform distribution with 100 as
maximum and minimum as 60. Find the mean and standard deviation of scores. If the passing
score is set at 70, what percentage of students will pass the examination?

Mean = 80, standard deviation = 11.55 and P(X>=70) = 0.75

2. The random variable x is known to be uniformly distributed between 10 and 20.

a. Compute P(X<15)
b. Compute P(12 <= x<= 18)
c. Compute P(X =16)
d. E(X) and V(X)

NORMAL DISTRIBUTION :

1. Given a standardized normal distribution (m = 0 and s = 1), determine the following

probabilities:
(a) P(Z > +1.34)
(b) P(Z < +1.17)
(c) P(0 < Z < +1.17)
(d) P(Z < -1.17)
(e) P(-1.17 < Z < +1.34)
(f) P(-1.17 < Z < -0.50)

2. Given a normal distribution, X: m = 50, s = 4;

(a) P(X > 43) ?
(b) P(X < 42) ?
(c) P(42 < X < 48) ?
(d) P(X > 57.5) ?
(e) P(X < 40) or P(X > 55) ?
(f) 5% of the values are less than what X value?
(g) 60% of the values are between what two X values (symmetrically distributed around the
mean)?
(h) 85% of the values will be above what X value?
3. A bank manager has learnt that the length of time the customers have to wait for being attended by
the teller is normally distributed with mean time of 5 minutes and standard deviation of 0.8 minutes.
Find the probability that a customer has to wait
a. for less than 6 min
b. for more than 3.5 min and
c. between 3.4 and 6.2 min.

4. Drivers who are members of the Teamsters Union earn an average of $17.15 per hour. Assume that
available data indicate wages are normally distributed with a standard deviation of $2.25
i. what is the probability that wages are between $15.00 and $20.00 per hour?
ii. what is the hourly wage of the highest paid 15% of Teamster drivers?
iii.What is the probability that wages are less than $12.00 per hour?

5. The customer accounts of a certain department store have an average balance of Rs.120 and a
standard deviation of Rs.40. Assuming that the account balances are normally distributed, find
(i) What percentage of accounts is over Rs.150 ?
(ii) What percentage of accounts is between Rs.100 and Rs.150 ?
(iii) Between Rs.60 and Rs.90. (.(i)0.2266 (ii) 46.49% (iii) 0.1598.)

6. If X is a normal random variable with population mean of 25 and population standard deviation
of 4, what is the probability that X would be:
(a)between 25 and 28
(b) greater than 29
(c)between 20 and 30
(d) find xo such that the probability that the random variable X is less than x0 is equal to 0.65.

7. As a result of tests on 20,000 electric fans manufactured by a company, it was found that life line of
the fans was normally distributed with an average life of 2040 hours and standard deviation of 60
hours. Estimate the number of fans that are expected to run for more than 2150 hours.

8. Data indicates that the time to download check$mart’s home page is normally distributed with
mean 7 seconds and standard deviation of 2 seconds.
a. what is the probability that the download time will be more than 9 seconds
b. what is the probability that the download time will be between 7 and 9 seconds
c. what is the probability that the download time is under 7second or over 9 seconds
d. what is the probability that the download time will be between 5 and 9 seconds
e. what is the probability that the download time is less than 3.5 seconds
f. How much time ( in seconds) will elapse before 10% of the download are complete.
g. What are the Upper Limit and Lower limit of X , located symmetrically around the mean,
which include 95% of the download times

9. A small southern West Australian country town has maintained records showing that the daily
maximum temperature during summer (Dec.,Jan.,Feb.) has averaged 30 degree Celsius with a standard
deviation of 5 degree Celsius. • Further, the maximum temperature appears to be approximately
normally distributed.

Find:
(a) the percentage of summer days that will have a maximum temperature between 30C & 35C.
(b) the percentage of days that the maximum temperature will exceed 37.5 C
(c) the probability that the maximum temperature will be less than 24 C.
(d) the proportion of summer days that the maximum temperature will be between 18C and 20C
(e) The maximum temperature that will be exceeded only 5% of the time.
 a. 3413 b. 0.0668 c. 0.1151 d. 0.0146 e. xo= 38.225

EXPONENTIAL:
−x
1 μ
f ( x )= e
μ for x >= 0 , µ>0 where µ = E(X) and V(X)
−x o
μ
Cumulative probability is given by P( X<= Xo) = 1 - e

1. The time between arrivals of cars at Al’s full-service gas pump follows an exponential
probability distribution with a mean time between arrivals of 3 minutes. Al would like to
know the probability that the time between two successive arrivals will be 2 minutes or less.

P(x < 2) = 1 - 2.71828-2/3 = 1 - .5134 = .4866