Chapter 4: Q170SE (page 282)
Assume that xis a binomial random variable with n = 100
and p = 5. Use the normal probability distribution to approximate
the following probabilities:
a.
b.
c.
d.
e.
f.
Short Answer
a.
b.
c.
d.
e.
f.
Chapter 4: Q170SE (page 282)
Assume that xis a binomial random variable with n = 100
and p = 5. Use the normal probability distribution to approximate
the following probabilities:
a.
b.
c.
d.
e.
f.
a.
b.
c.
d.
e.
f.
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Get started for freeInvestment risk analysis. The risk of a portfolio of financial assets is sometimes called investment risk. In general, investment risk is typically measured by computing the variance or standard deviation of the probability distribution that describes the decision maker’s potential outcomes (gains or losses). The greater the variation in potential outcomes, the greater the uncertainty faced by the decision maker; the smaller the variation in potential outcomes, the more predictable the decision maker’s gains or losses. The two discrete probability distributions given in the next table were developed from historical data. They describe the potential total physical damage losses next year to the fleets of delivery trucks of two different firms.
Firm A | Firm B | |||||
Loss Next Year | Probabiity | Loss Next Year | Probability | |||
0 | 0.01 | 0 | 0 | |||
500 | 0.01 | 200 | 0.01 | |||
1000 | 0.01 | 700 | 0.02 | |||
1500 | 0.02 | 1200 | 0.02 | |||
2000 | 0.35 | 1700 | 0.15 | |||
2500 | 0.3 | 2200 | 0.3 | |||
3000 | 0.25 | 2700 | 0.3 | |||
3500 | 0.02 | 3200 | 0.15 | |||
4000 | 0.01 | 3700 | 0.02 | |||
4500 | 0.01 | 4200 | 0.02 | |||
5000 | 0.01 | 4700 | 0.01 |
a. Verify that both firms have the same expected total physical damage loss.
b. Compute the standard deviation of each probability distribution and determine which firm faces the greater risk of physical damage to its fleet next year.
Soft-drink dispenser. The manager of a local soft-drink bottling company believes that when a new beverage dispensing machine is set to dispense 7 ounces, it in fact dispenses an amount at random anywhere between 6.5and 7.5 ounces inclusive. Suppose has a uniform probability
distribution.
a.Is the amount dispensed by the beverage machine a discreteor a continuous random variable? Explain.
b. Graph the frequency function for , the amount of beverage the manager believes is dispensed by the new machine when it is set to dispense 7 ounces.
c. Find the mean and standard deviation for the distribution graphed in part b, and locate the mean and theinterval on the graph.
d. Find .
e. Find .
f. Find .
g. What is the probability that each of the next six bottles filled by the new machine will contain more than7.25 ounces of beverage? Assume that the amount of beverage dispensed in one bottle is independent of the amount dispensed in another bottle.
Find the area under the standard normal probability distribution between the following pairs of z-scores:
a)
b)
c)
d)
Identify the type of random variable—binomial, Poisson or hypergeometric—described by each of the following probability distributions:
a.
b.
c.
Space shuttle disaster. On January 28, 1986, the space shuttle Challenger exploded, killing all seven astronauts aboard. An investigation concluded that the explosion was caused by the failure of the O ring seal in the joint between the two lower segments of the right solid rocket booster. In a report made 1 year prior to the catastrophe, the National Aeronautics and Space Administration (NASA) claimed that the probability of such a failure was about 1/ 60,000, or about once in every 60,000 flights. But a risk-assessment study conducted for the Air Force at about the same time assessed the probability to be 1/35, or about once in every 35 missions. (Note: The shuttle had flown 24 successful missions prior to the disaster.) Given the events of January 28, 1986, which risk assessment—NASA's or the Air Force's—appears more appropriate?
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