OPSM 506: Decision Sciences and Data Analytics I

Assignment 2
Due – 21/9/2023, 11:59 PM

Problem No. 1: Students taking the Graduate Management Admissions Test (GMAT) were
asked about their undergraduate major and intent to pursue their MBA as a full-time or part-
time student. A summary of their responses follows.
Undergraduate Major
Business Engineering Other Totals

Intended Full-Time 352 197 251 800

Enrollment Part-Time 150 161 194 505
Status
Totals 502 358 445 1,305

a. Develop a joint probability table for these data.

b. Use the marginal probabilities of undergraduate major (business, engineering , or other)
to comment on which undergraduate major produces the most potential MBA students.
c. If a student intends to attend classes full-time in pursuit of an MBA degree, what is the
probability that the student was an undergraduate engineering major?
d. If a student was an undergraduate business major, what is the probability that the
student intends to attend classes full-time in pursuit of an MBA degree?
e. Let F denote the event that the student intends to attend classes full-time in pursuit of
an MBA degree, and let B denote the event that the student was an undergraduate
business major. Are events F and B independent?

Problem No. 2: A local bank reviewed its credit card policy with the intention of recalling some
of its credit cards. In the past approximately 5% of cardholders defaulted, leaving the bank
unable to collect the outstanding balance. Hence management established a prior probability of
.05 that any particular cardholder will default. The bank also found that the probability of
missing a monthly 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.

a) Given that a customer missed one or more monthly payments, compute the posterior
probability that the customer will default?
b) The bank would like to recall its credit card if the probability that a customer will default
is greater than 0.20. should the bank recall its card if the customer misses a monthly
payment? why or why not?

Problem No. 3. Consider the experiment of a worker assembling a product.

a. Define a random variable that represents the time in minutes required to assemble the
product
b. What values may the random variable assume?
c. Is the random variable discrete or continuous?
Problem No. 4. The demand for a product of Carolina Industries varies greatly from month to
month. The probability distribution in the following table, based on the past two years of data,
shows the company’s monthly demand.

Unit Demand Probability

300 0.20
400 0.30
500 0.35
600 0.15

a. If the company places monthly orders equal to the expected value of the monthly
demand, what should Carolina's monthly order quantity be for this product?
b. Assume that each unit demanded generates $70 in revenue and that each unit ordered
costs $50. How much will the company gain or lose in a month if it places an order
based on your answer to part a and the actual demand is 300 units?
c. What are the variance and standard deviation for the number of units demanded?

Problem No. 5. According to a 2010 study conducted by the Toronto-based social media
analytics firm, Sysomos, 71% of all tweets get no reaction. That is, these are tweets that are not
replied to or retweeted. Suppose we randomly select 100 tweets.

a. What is the expected number of these tweets with no reaction?

b. What are the variance and standard deviation for the number of these tweets with no
reaction?

Problem No. 6. During the period of time that a local university takes phone-in registrations,
calls come in at the rate of one every two minutes.
a. What is the expected number of calls in one hour?
b. What is the probability of three calls in five minutes (to 4 decimals)?
c. What is the probability of no calls in a five-minute period (to 4 decimals)?