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QTM-1 Quiz 3

Set A
1. The number of cars sold by a dealer in a day follows the following distribution:
0
0.2
1
0.3
2
0.25
3
0.2
4
0.05
What is the variance on the daily sales? (2)
Expected Value E(X) =
Variance

= 0*.2 + 1*.3 + 2*.25 + 3*.2 + 4*.05 = 1.6


[

2. Two investments A and B can each have standard deviation of 7% and 3% respectively. If
the two investments are added together their standard deviation is 9.43%, whereas in a
portfolio the std.dev. is 7.8%. What is the ratio of the investments in the portfolio? (3)
Note: The problem can be solved by taking standard deviations as either 7 and 3 or
0.07 and 0.03. In this case I took 7 and 3

+2

Thus,
Thus,
=
Thus,

7.8=

Solving for w gives us w = 1.165.


In real life, 0<w<1, so this problem had incorrect numbers.

3. A binomial distribution of 20 samples has a variance of 3.4. What is the probability of


success? (1)
Variance in binomial distribution = npq = np(1-p) = 3.4, with n=20.
Thus, 20p 20p2 = 3.4
Solving for p, p=0.78,0.22
4. The average income from 200 households is 4.4lakh, with a standard deviation of
70,000. If it is normally distributed:
a) How many households fall in the 2.5-4lakh range? (1.5)
P(X<2.5) = P(Z = (2.5-4.4)/0.7) = P(Z= - 2.714) = 0.0034
P(X<4) = P(Z = (4 - 4.4)/0.7) = P(Z= -0.5714 = 0.2843
Thus, P(2.5<X<4) = P(X<4) - P(X<2.5) = 0.2809
No. of households in range = 0.2809*200 = 56 approx.

b) What are the chances of a household having income exceeding 5.5lakh? (1)
P(X>5.5) = 1 - P(X<5.5) = 1 P(Z= (5.5-4.4)/0.7) = 1 P(Z=1.5714) = 0.0582
c) If we add another 100 households to the sample with mean 4.6 lakh and standard
deviation 60,000, then what are the chances of a household having income less than
4 lakh? (1.5)
First sample:
Second sample:

=4.467

Adding the two samples,

, w=2/3,

Thus,
P(X<4)= P(Z = (4-4.467)/0.5077) = P(Z= - 0.9198) = 0.1788

QTM-1 Quiz 3
Set B
1. The number of cars sold by 2 dealers in a day follows the following distribution:
Dealer A
Dealer B
0
0.2
0.1
1
0.3
0.2
2
0.25
0.3
3
0.2
0.2
4
0.05
0.2
If the covariance is 6.5 and P(AiBi) is uniform across all i, what is P(AiBi) ? (2)
Dealer A: E(X) =

= 0*.2 + 1*.3 + 2*.25 + 3*.2 + 4*.05 = 1.6

Dealer B: E(Y) =

= 0*.1 + 1*.2 + 2*.3 + 3*.2 + 4*.2 = 2.2

Covariance

][

Thus,
6.5=[(0-1.6)(0-2.2) + (1-1.6)(1-2.2) + (2-1.6)(2-2.2) + (3-1.6)(3-2.2) + (4-1.6)(42.2)]
Thus,
2. Two investments A and B can each have standard deviation of 7% and 3% respectively,
and their covariance is 32.
Note: The problem can be solved by taking standard deviations as either 7 and 3 or
0.07 and 0.03. In this case I took 7 and 3
a) If the two investments are added together what is their standard deviation? (1.5)

=
Thus,

+2

b) What ratio of portfolio is required to achieve standard deviation of 5%? (1.5)


= 5 =

Thus,
25 =
Thus, solving for w, w=0.372. Investment A: Investment B = 0.372:0.628

3. A poisson distribution of car accidents at a turnabout has a mean of 4 accidents in a


year. What is the chance of at least 2 accidents? (1)
In a poisson distribution, mean =4

P(X2) = 1 - P(X=0) P(X=1) = 1 -

= 1-

=0.908

4. The average height from 300 men is 164cm, with a standard deviation of 29cm. If it is
normally distributed:
a) How many men are shorter than 170cm? (1)
P(X<170) = P(Z = (170-164)/29 ) = P(Z = 0.2068) = 0.5832
No. of men = 300*0.5832 = 175 approx.
b) If we add 300 women to the sample with and the chances of a person being less
than 155 cm in the new sample is 0.45, but the mean is unchanged, what is the new
standard deviation, and the standard deviation of only the female heights? (2)
0.45 = P(Z= (155-164)/
Thus,

= 0.13 = 9/

Thus,

(Note:

can also be taken as 0.12)

(New standard deviation)

Also,

Thus,

+2

and

(Samples are independent)

5. In an exponential distribution there are seven occurrences a week. What is the chance
of there being at least 5 occurrences? (1)
Mean = 7 = 1/, thus =1/7 in an exponential distribution
P(X5) = 1 P(X4) = 1 (1 -

= 0.5647