MGMT562 Assignment #2

Related Computer Demonstrations (just check these out, theres nothing to do for
the homework):
Z table: http://davidmlane.com/hyperstat/z_table.html
Part I: Normal Probability Exercises
The lifetime of a certain brand of tires is approximately normally distributed, with a mean of
45,000 miles and a standard deviation of 2,500 miles. The tires carry a warranty for 40,000
miles. Answer the question by computing the requested values in three ways in each of parts
a-c: by the rough approximation of the known area under a symmetric distribution, the
normal table in your text, and using Excel normal functions.
a) What proportion of the tires will fail before the warranty expires?
b) What proportion of the tires will fail after the warranty expires but before they have
lasted for 41,000 miles?
c) What should the warranty be if the company wants no more than a 1% failure rate?
a)
(1) Area using symmetrical distribution
Graph for a normally distributed curve is as follow:
As mentioned in question, warranty of the tires is 40,000 miles.

As highlighted in graph, area below 40,000 is 2.5% of the total area.

(2) Using normal table

For this equation, values are as follow:

x = 40,000

= 45,000

= 2,500

Therefore, z = (40,000 45,000) / 2,500

z = -5,000 / 2,500
z= -2
By looking at z-value table for -2, probability comes as 0.0228
Hence, total proportion of area using normal table is 2.28%

(3) Using Excel normal functions

By using following mentioned normal distribution function NORM.DIST in excel as follow
=NORM.DIST(40000,45000,2500,1)
Value of the excel function comes as 0.02275
Hence, total proportion of the area calculated using excel function is 2.275%
b)
(1) Area using symmetrical distribution
Graph for a normally distributed curve is as follow:
Area between 41,000 and 42,500 is 40% of total area.
40% of 13.5 is equal to 5.4
Slope of the curve is rising. Hence, approximately reducing the percentage by 1.5%
Therefore, percentage of total area comes out to be 3.9%

As mentioned in question, warranty of the tires is 40,000 miles.

As highlighted in graph, area below 40,000 is 2.5% of the total area.
(2) Using normal table
Firstly, calculating area for x = 40,000

For this equation, values are as follow:

x = 40,000

= 45,000

= 2,500

Therefore, z = (40,000 45,000) / 2,500

z = -5,000 / 2,500
z= -2
By looking at z-value table for -2, probability comes as 0.0228
Secondly, calculating area for x = 41,000

For this equation, values are as follow:

x = 41,000

= 45,000

= 2,500

Therefore, z = (41,000 45,000) / 2,500

z = -4,000 / 2,500
z= -1.6
By looking at z-value table for -1.6, probability comes as 0.0548
Subtracting value calculated with x=40,000 from x=41,000
0.0548 0.0228 = 0.032
Hence, total proportion of area using normal table is 3.20%
(3) Using Excel normal functions
By using following mentioned normal distribution function NORM.DIST in excel as follow
=NORM.DIST(40000,45000,2500,1)
Value of the excel function comes as 0.02275

- (1)

=NORM.DIST(41000,45000,2500,1)
Value of the excel function comes as 0.054799

- (2)

Subtracting value (1) from (2)

= 0.054799 0.02275
= 0.32049
Hence, total proportion of the area calculated using excel function is 3.20 %
c)
(1) Area using symmetrical distribution
Graph for a normally distributed curve is as follow:
Failure rate for a tire running 40,000 miles is 2.5%
Looking at the graph having a rising slope, we count 39,000 miles as the mileage that will
have less than 1% failure rate.

(2) Using normal table

Per z-score table,
Probability at -2.32 and -2.33 is 0.0102 and 0.0099 respectively.
Hence, we will take average of both of the values to have the nearest correct value
Hence,
= (-2.32 -2.33) / 2
= -2.325

For this equation, values are as follow:

z = -2.325

= 45,000

= 2,500

Therefore, -2.325 = (x 45,000) / 2,500

-5812.5 = x 45,000
x = 39187.5
Hence, total distance covered by tire with less than 1% failure rate is 39187.5 miles
(3) Using Excel normal functions
By using following mentioned normal distribution function NORMINV in excel as follow
=NORM.INV(0.01,45000,2500)
Hence, total distance covered by tire with less than 1% failure rate is 39184.13 miles

How to get Normal probabilities with Excel:

Use the NORMDIST function and then fill in the blanks accordingly:
X = value of x
Mean = mean of normal distribution
Standard_dev= standard deviation of normal distribution
Cumulative: only use value of 1 which gives you P(X value of x) [Note: if you use 0, then you will get the
height of the curve for that specific value of x, which isnt the probability]
How to get x values given a Normal probability with Excel:
Use the NORMINV function and then fill in the blanks accordingly:
Probability = the normal probability from the left tail to that value of x [ P(X value of x)]
Mean = mean of normal distribution
Standard_dev= standard deviation of normal distribution
Suggestion: Do the calculations by hand first, then try Excel. This will help you make comparisons to see if
you are getting approximately the correct number with Excel.

Part II: Sampling Distribution Simulation

Go to the following web address to run the Sampling Distribution Simulation (click the Begin
button): http://www.ruf.rice.edu/%7Elane/stat_sim/sampling_dist/index.html

Before answering the questions below, you might try to figure out the simulation demo
by clicking options
The first distribution is the population distribution that can be normal, uniform,
positively skewed, or customized to what ever distribution you want to make (simply
click on the distribution).
You can simulate one sample at a time (animated sample) or sample several at once
(5; 1,000; 10,000)

Answer the following questions about the simulation (set the third distribution option to
mean):
1. Briefly describe the three distributions that are displayed (ignore the bottom
distribution that is empty by default).
Parent population chart: The parent population chart represents distribution of all the
points in the sample population.
Sample Data chart: Sample data chart represents a chart having random sample of n
number of the total population.
Distribution mean chart: The distribution chart, details on individual functions, such as
mean, median, standard deviation etc. out of the sample data that will be collected in
the sample data chart as selected in chart two.
2. Run the simulation several times using different shapes for the population distribution.
For each shape of the population distribution, vary the sample size in the third
distribution. What do you notice about the shape of the third distribution (the
sampling distribution of the mean) as you change sample size for different shapes of
the population distribution?
The variation in the third distribution chart, sampling distribution of the mean, has the
same shape as that of the parent population chart. This is because the third table has
mean of the sample taken out of the first table, population table.
3. Run the simulation using the custom option for the population simulation and sample
size n=5. Click on the empty distribution to create a custom distribution. Make a
distribution that is roughly symmetric with a mean and median approximately 15 and a
standard deviation any value between 1-1.5 (you dont have to be too exact here,
these are just some guidelines to get a rough idea). Examine the sampling
distribution. Now, change the custom population distribution by adding more
dispersion (standard deviation about 5) but keeping the mean and median about 15
(you can do this by simply adding to the tails). Now examine this sampling
distribution. How do the two resulting sampling distributions compare: which has less
variability and why?
The sampling distribution graph for scenario-1 had all the individual lines all stacked up
closely because the population distribution graph was all arranged up closely too.
The sampling distribution graph for scenario-2 had the sample points distributed over
the graph because the population distribution was also scattered up with some of the
population in the center while other stacked up near the tail.

The sampling distribution in scenario-1 has less variability because the population
distribution is set up pretty closely, and also has less standard deviation too, while the
population distribution in scenario-2 has data scattered all over the graph and has
higher standard deviation too. Hence, sampling distribution for scenario-1 has less
variability.