Sample Exam 2 Statistics for Business Professor Avi Giloni

Problem 1. (18 points) Consider random variables X and Y. We know that E(X) = 2 and E(Y) = 5.
Furthermore, Var(X) = 16 and Var(Y) = 25. X and Y are independent random variables.
a.) Find Var(-2X+3Y) (6 points)
b.) Find E(XY) + E(X)*E(Y) (6 points)
c.) Find E(4X-7Y) (6 points)

Problem 2. (36 points) The daily returns on a portfolio are normally distributed with a mean
of 0.004 and a standard deviation of 0.004.
a. What is the probability that a daily portfolio return is greater than .007? (7 points)
b. What is the probability that a daily portfolio return is between 0.0033 and 0.0041?
(9 points)
c. Using the Normal Approximation to the Binomial, what is the probability that the
daily returns on that portfolio are negative for at least 18 out of the next 110 days?
(11points)
d. What is the probability that the average return for the portfolio over the next 36
days is less than 0.0039? (9 points)

Problem 3. (17 points) A salesperson goes from house to house selling knives. The probability she
makes a sale at a house is .22 and each trial is independent of the others. She makes either one sale or
0 sales at any house.
a. What is the probability that she makes at least 27 sales out of 100 house visits? (10 points)
b. What is the mean and the standard deviation of the number of sales she makes at 70 house
visits? (7 points)

Problem 4. (29 points) The amount of corn chips dispensed into a 12-ounce bag by the dispensing
machine is claimed to have a mean of 11.8 ounces and a standard deviation of .1 ounces. Suppose 100
bags of corn chips were randomly selected from this dispensing machine.
a) According to the claim, what is the probability that the total amount of chips in 100 randomly
selected bags is more than 1181 ounces? (11 points)
b) According to the claim, what is the probability that the average amount of chips per bag out of
100 randomly selected bags is between 11.79 and 11.82? (11 points)
c) According to the Central Limit Theorem, is the amount of chips in a bag Normally Distributed?
Explain. (7 points)