UNIVERSITY OF GHANA BUSINESS SCHOOL

UGBS 301 – QUANTITATIVE METHODS FOR BUSINESS

EXERCISE THREE (OCTOBER 2017)
DISCRETE PROBABILITY DISTRIBUTION
Not to be submitted

1. Which of the following is an example of a continuous probability distribution?

I. Binomial II. Poisson III. Exponential
IV. Hypergeometric V. Negative binomial VI. Normal

A. III and V only B. III and VI only C. I, II and IV only

D. I, III, and VI only D. None of the above

2. Given the following probability distribution:

x P(x)
50 0.375
60 0.15
70 0.225
80 0.05
90 0.2

a. Calculate the expected value of x

b. Calculate the variance of x
c. Calculate the standard deviation of x

3. The quality control process at a manufacturing plant requires that each lot of finished units be
sampled for defective items. Twenty units from each lot are inspected. If five or more defective
units are found, the lot is rejected. If a lot is known to contain 10% defective items, what is the
probability that the lot will be accepted?

4. Given that the rate of unemployment is 45% and a random selection of 20 people, what is the
standard deviation of the number of people who are unemployed?
A. 1.962 B. 3.85 C. 9.682 D. 3.062 E. None of the above

5. Suppose that the number of customers arriving each hour at the only checkout counter in a
local pharmacy is approximately distributed with an expected arrival rate of 20 customers per
hour. Is this binomial or Poisson?
a. what is the probability that exactly 10 customers arrive at this checkout counter in a given hour
b. Find the probability that at least 5 customers arrive at this checkout counter in a given hour

6. In a typical month, an insurance agent presents life insurance plans to 40 customers.

Historically, one in four such customers chooses to buy life insurance from this agent

a. Is this binomial or Poisson? Justify

b. what is the probability that exactly 5 customers will buy life insurance from this agent in the
coming month?
c. What is the probability that no more than 10 customers will buy
life insurance from this agent in the coming month?
d. What is the probability that at least 20 customers will buy life insurance from this agent in the
coming month?
e. Determine the mean and standard deviation of the number of customers who will buy life
insurance from this agent in the coming month?

7. Hisense Ghana produces and sells HDTVs. The HDTVs are inspected at the end of the
production process at a quality control station. Out of every batch of HDTVs, four are
randomly selected and tested for defects.

a. Given that 20% of all batches are defective, what is the probability that each of the HDTVs
will contain exactly two defective HDTVs? If 2 or more defective HDTVs are found, the whole
batch will be rejected.
b. The manager wants to know the probability of rejecting an entire batch of HDTVs, if in fact,
the batch has 20% defective TVs.
c. Also, the probability of less than two defectives.

8. UGBS sells furniture and carpets. From years of sales records, management has found that the
mean number of yards of a carpet demanded by customers during a week is 4200 yards and the
sstandard deviation is 1400 yards.

a. The store manager wants to know the probability the demand for the carpet in the upcoming
week will exceed 6000 yards.
b. What is th probability that demand for carpet will be 5000 yards or less?
c. What is the probability that the demand for carpet will be between 3000 yards and 5000 yards?
d. What is the probability that demand for carpet will be at least 2000?
e. What is the probability that demand for carpet will be above 2000 yards but below 5000 yards.

9. Using the information in question (5) above, find the expected number of employed people
A. 9 B. 15 C. 11 D. 20 E. None of the above

10. What is the probability that there are at most 15 employed people in the sample?
A. 0.8194 B. 0.9811 C. 0.0189 D. 0.1805 E. None of the above

11. A manufacturing company has 10 machines in continuous operation during a workday.

The probability that an individual machine will break down during the day is .10. Determine
the probability that during any given day 3 machines will break down.

12. A polling firm is taking a survey regarding a proposed new law. Of the voters polled, 30%
are in favour of the law. If 10 people are surveyed, what is the probability that 4 will indicate
that they are opposed to the passage of the new law?

13. A survey reports that 37% of people plan to spend more on eating out after they retire. If
8 people are randomly selected, determine:

a. The expected number of people who will plan to spend more on eating out after they retire
b. the probability that no more than two people will not spend more on eating out
c. The standard deviation of the individuals who plan to spend more on eating outside

14. An airplane has 200 seats, but 205 tickets are sold. Assume passengers do not show up
with a probability of .03 independently. What is the chance that a flight is over full?

15. An automobile manufacturer has discovered that 20% of all the transmissions it installed
in a particular style of truck one year are defective. It has contacted the owners of these vehicles
and asked them to return their trucks to the dealer to check the transmission. The Friendly
 Auto Mart sold seven of these trucks and has two of the new transmissions in stock. What is
the probability that the auto dealer will need to order more new transmissions?

16. For a random variable that follows a Poisson distribution with λ=2 and t=1/2, calculate:
a. The expected value, the variance and the standard deviation of the distribution
b. The probability of exactly 8 successes

17. The average number of errors per page made by a member of a processing pool in a factory
is 1.5. if three pages are examined what is the probability that more than 3 errors will be
examined

18. A 23 mile stretch highway is labelled as a “danger zone” because of the number of fatalities
on the highway. Over a six-month period, a number of 29 accidents were recorded over the
period.
a. Determine the average number of accidents over the period
b. Calculate the probability that at least 5 accidents would occur over the six-month period
c. The mayor of the city estimates that his chances of being re-elected will double if within a two-
year period, no more than 30 accidents are recorded. What is the probability that the mayor will
double his chances of being re-elected?

19. In a barbering shop, an average of 5 customers arrive every hour. What is the probability
that for a given hour:
a. Exactly 3 customers shall arrive
b. More than five customers shall arrive

20. Arrivals to a bank ATM are distributed according to a Poisson distribution with a mean of
three people per every 15 minutes
a. Determine the probability that in a given 15-minute interval, no customers will arrive
b. What is the probability that five or more customers shall arrive in a given hour interval?

21. Based on a report issued by a Building Contractors Association, it indicates that 60% of all
the home buyers will not remodel their homes within the first five years of home ownership.
a. Determine the probability that of a sample of 20 homeowners, more than two homeowners
will remodel their homes.
b. Find the expected number of homeowners who will remodel their homes in the next five years
based on this sample.

22. In a ward, there are 16 patients, 4 of whom have AIDS. A doctor has been assigned to 6
patients at random. What is the probability that he gets 2 of the AIDS patients?

23. Among 200 people working for a large actuary department of an insurance company, 120
are actuaries and 80 are support staff. If 8 people are randomly chosen to attend a brainstorm
meeting with company executives, what is the probability that exactly 5 actuaries are chosen to
attend the meeting?

24. The UGBS senate has 100 members, suppose there are 30 Accounting students and the
rest are non-Accounting students: If a committee of 15 is to be formed from this group, what
is the probability that there will be exactly 10 accounting students.

25. In a hypergeometric distribution the number of subjects with the required attribute in the
sample can range from zero to the population size
A. True B. False
26. In a hypergeometric distribution the number of subjects with the required attribute in the
sample CANNOT be less than the population size
A. True B. False

27. Eight out of ten stocks listed on the Ghana stock exchange are manufacturing firms.
Assuming a sample of 3 is taken at random, find the probability that:
a. there will be exactly one manufacturing company
b. at least one company is a manufacturing company.

28. An auto insurance company has determined that the average number of claims against the
comprehensive coverage of a policy is 0.6 per year. What is the probability that a policyholder
will file:
a. Exactly one claim in a year;
b. More than one claim in a year?

29. Suppose you toss a dice 10 times where a four is a success and any other value is a failure,
this is a binomial distribution with n=10 and p=1/6
A. TRUE B. FALSE C. NOT SURE

30. A continuous random variable can assume

A. Only 2 values
B. Positive and negative integers
C. Any value on the continuous scale
D. All whole numbers
E. All of the above

31. A mutually exclusive event has a valid intersection

A. TRUE
B. FALSE

32. A student is supposed to answer 10 multiple choice questions with five possible answers
each. If the student does guess work completely, what is the probability that he gets all correct

33. The mean of a Poisson random variable is 25, what is the value of its standard deviation
A. 25
B. 20
C. 4
D. 5
E. Cannot say