PROBLEMS INVOLVING MEAN

AND VARIANCE OF
PROBABILITY DISTRIBUTION
ROBERTO V. GABRIEL JR.
Teacher
 OBJECTIVES:
• Interpret the mean and variance of a discrete
random variable; and

• Solve problems involving mean and variance

of probability distribution
 PROBLEM:
A rich inventor was puzzled about the two investment packages
on which he is about to put in a large sum of money. He learned
that the two investments have the same average return on
investment (ROI). The query is which is the best investment
package?
Return on Investment
Investment Packages Probability P(x)
(x) in millions
Package A 1 0.2
2 0.2
3 0.2
4 0.2
5 0.2
Package B 3 0.2
3 0.2
3 0.2
3 0.2
3 0.2
 SOLUTION:
PACKAGE A
X P(x) xP(x) x- (x− )𝟐 (x− )𝟐 P(x)
1 0.2 0.2 -2 4 0.8
2 0.2 0.4 -1 1 0.2
3 0.2 0.6 0 0 0
4 0.2 0.8 1 1 0.2
5 0.2 1.0 2 4 0.8
σ [xP(x)] = 3.0 σ [(x− )𝟐 P(x) = 2.0
 SOLUTION:
PACKAGE B
X P(x) xP(x) x- (x− )𝟐 (x− )𝟐 P(x)
3 0.2 0.6 0 0 0
3 0.2 0.6 0 0 0
3 0.2 0.6 0 0 0
3 0.2 0.6 0 0 0
3 0.2 0.6 0 0 0
σ [xP(x)] = 3.0 σ [(x− )𝟐 P(x) = 0
 INTERPRETATION OF THE RESULTS:
Mean Variance Standard Deviation
Package A 3.0 2.0 1.41
Package B 3.0 0 0

1. The average returns of investment(ROI) are equal to 3 millions for both

packages.
2. On the average, both are expected to deliver the same benefit to the
investor.
3. Data are not the same, so there is variation.
4. There is less variability in Package B than in Package A.
5. The lesser variability the more consistent is its average.
6. Since both packages shall deliver the same return of 3 million, it is better to
invest in package B as it ensures that every year the investor would get 3
million.
 The CEO of a certain car manufacturer is comforted
with the dilemma when the criteria set for choosing the
“Best Car Dealer of the Year” is based on the over-all
selling performance for the past 10 months. The table
below shows the two finalists on the said category.
No. of cars sold (x) No. of months (y) Probability P(x)
25 1 0.1
30 3 0.3
Dealer A 35 2 0.2
40 3 0.3
45 1 0.1

No. of cars sold (x) No. of months (y) Probability P(x)

25 3 0.3
30 1 0.1
Dealer B 35 1 0.1
40 1 0.1
45 4 0.4
 SOLUTION:
DEALER A
X P(x) xP(x) x- (x− ) 𝟐 (x− )𝟐 P(x)
25 0.1 2.5 -10 100 10
30 0.3 9 -5 25 7.5
35 0.2 7 0 0 0
40 0.3 12 5 25 7.5
45 0.1 4.5 10 100 10
σ [xP(x)] = 35 σ [(x− )𝟐 P(x) = 35
 SOLUTION:
DEALER B
X P(x) xP(x) x- (x− ) 𝟐 (x− )𝟐 P(x)
25 0.3 7.5 -11 121 36.3
30 0.1 3 -6 36 3.6
35 0.1 3.5 -1 1 0.1
40 0.1 4 4 16 1.6
45 0.4 18 9 81 32.4
σ [xP(x)] = 36 σ [(x− )𝟐 P(x) = 74
 Since the data for the two dealer candidates
exhibited different means, 35 and 36, the population
variance is 35 and 74 respectively, it is best to determine
the coefficient of variation (CV) for more substantial
interpretation and to finally decide who is best dealer
based on selling performance.
To determine the coefficient variation (CV),
1. Calculate the standard deviation.
2. Divide the standard deviation by the population mean
then multiply by 100.

CV = x 100

 INTERPRETATION:
Standard Deviation () Population Mean () Coefficient of Variance (CV)
Dealer A 5.92 35 5.92/35 x 100= 0.1691= 16.91%
Dealer B 8.6 36 8.6/36 x 100 = 0.239 = 23.9%

Interpretation of Results:
1. The coefficient of variation for Dealer A is 16.91% of the mean.
2. The coefficient of variation for Dealer B is 23.9% of the mean.
3. Dealer B is 7% more variable than Dealer A
4. Using CV as a measure of variability, it reveals the size of
consistency relative to the size of the mean (in percentage),
therefore, Dealer A is the best Dealer of the Year.
 Player A Player B
points/game P(x) P(x)
0 0.03 0
1 0.05 0.27
2 0.08 0.23
3 0.17 0.20
4 0.25 0.13
5 0.20 0.10
6 0.13 0.05
7 0.08 0.02
Given the following table presented. Answer the ff questions:
1. On the average, how many points per game is being scored by Player A?
2. On the average, how many points per game is being scored by Player B?
3. Compute their population variance.
4. Who is a better player? Explain.