Exercise 

5.2
Self­Check Exercises
SC 5-1 Construct a probability distribution based on the following frequency distribution.
Outcome 102 105 108 111 114 117
Frequency 10 20 45 15 20 15

(a) Draw a graph of the hypothetical probability distribution.

(b) Compute the expected value of the outcome.
SC 5-2 Bob Walters, who frequently invests in the stock market, carefully studies any potential investment. He is currently
examining the possibility of investing in the Trinity Power Company. Through studying past performance, Walters has
broken the potential results of the investment into five possible outcomes with accompanying probabilities. The outcomes
are annual rates of return on a single share of stock that currently costs $150. Find the expected value of the return for
investing in a single share of Trinity Power.
Return on investment ($) 0.00 10.00 15.00 25.00 50.00
Probability 0.20 0.25 0.30 0.15 0.10

If Walters purchases stock whenever the expected rate of return exceeds 10 percent, will he purchase the stock, according to
these data?

Basic Concepts
5-7 Construct a probability distribution based on the following frequency distribution:
Outcome

8
10
12
15
Frequency
24
22
16
12

(a) Draw a graph of the hypothetical probability distribution.

(b) Compute the expected value of the outcome.
5-8 From the following graph of a probability distribution
(a) Construct a table of the probability distribution.
(b) Find the expected value of the random variable.
5-9 The only information available to you regarding the probability distribution of a set of outcomes is the following list of
frequencies:
X 0 15 30 45 60 75
Frequency 25 125 75 175 75 25

(a) Construct a probability distribution for the set of outcomes.

(b) Find the expected value of an outcome.

Applications
5-10 Bill Johnson has just bought a VCR from Jim’s Videotape Service at a cost of $300. He now, has the option of buying an
extended service warranty offering 5 years of coverage for $100. After talking to friends and reading reports, Bill believes
the following maintenance expenses could be incurred during the next five years:
Expense
0
50
100
150
200
250
300
Probability
0.35

0.25
0.15
0.10
0.08
0.05
0.02

Find the expected value of the anticipated maintenance costs. Should Bill pay $100 for the warranty?
5-11 Steven T. Opsine, supervisor of traffic signals for the Fairfax County division of the Virginia State Highway Administration,
must decide whether to install a traffic light at the reportedly dangerous intersection of Dolley Madison Blvd. and
Lewinsville Rd. Toward this end, Mr. Opsine has collected data on accidents at the intersection:
Number of Accidents
Year J F M A M J J A S O N D
1995 10 8 10 6 9 12 2 10 10 0 7 10
1996 12 9 7 8 4 3 7 14 8 8 8 4

S.H.A. policy is to install a traffic light at an intersection at which the monthly expected number of accidents is higher than
7. According to this criterion, should Mr. Opsine recommend that a traffic light be installed at this intersection?
5-12 Alan Sarkid is the president of the Dinsdale Insurance Company and he is concerned about the high cost of claims that take a
long time to settle. Consequently, he has asked his chief actuary, Dr. Ivan Acke, to analyze the distribution of time until
settlement. Dr. Acke has presented him with the following graph:

Dr. Acke also informed Mr. Sarkid of the expected amount of time to settle a claim. What is this figure?
5-13 The fire marshal of Baltimore County, Maryland, is compiling a report on single-family-dwelling fires. He has the following
data on the number of such fires from the last 2 years:
Number of Fires
Year J F M A M J J A S O N D
1995 25 30 15 10 10 5 2 2 1 4  8 10
1996 20 25 10  8  5 2 4 0 5 8 10 15

Based on these data

(a) What is the expected number of single-family-dwelling fires per month?
(b)
What is the expected number of single-family-dwelling fires per winter month (January, February, March)?
5-14 Ted Olson, the director of Overnight Delivery, Inc., has become concerned about the number of first-class letters lost by his
firm. Because these letters are carried by both truck and airplane, Mr. Olson has broken down the lost letters for the last year
into those lost from trucks and those lost from airplanes. His data are as follows:
Number Lost from J F M A M J J A S O N D
Truck 4 5 2 3 2 1 3 5 4 7 0 1
Airplane 5 6 0 2 1 3 4 2 4 7 4 0

Mr. Olson plans to investigate either the trucking or air division of the company, but not both. If he decides to investigate the
division with the highest expected number of lost letters per month, which will he investigate?

Exercise 5.3

Self­Check Exercise
SC 5-3 Mario, owner of Mario’s Pizza Emporium, has a difficult decision on his hands. He has found that he always sells between
one and four of his famous “everything but the kitchen sink” pizzas per night. These pizzas take so long to prepare, however,
that Mario prepares all of them in advance and stores them in the refrigerator. Because the ingredients go bad within one day,
Mario always throws out any unsold pizzas at the end of each evening. The cost of preparing each pizza is $7, and Mario
sells each one for $12. In addition to the usual costs, Mario also calculates that each “everything but” pizza that is ordered
but he cannot deliver due to insufficient stock costs him $5 in future business. How many “everything but” pizzas should
Mario stock each night in order to minimize expected loss if the number of pizzas ordered has the following probability
 distribution?
Number of pizzas demanded 1 2 3 4
Probability 0.40 0.30 0.20 0.10

Applications
5-15 Harry Byrd, the director of publications for the Baltimore Orioles, is trying to decide how many programs to print for the
team’s upcoming three-game series with the Oakland A’s. Each program costs 25c to print and sells for $1.25. Any programs

unsold at the end of the series must be discarded. Mr. Byrd has estimated the following probability distribution for program
sales, using data from past program sales:
Programs sold 25,000 40,000 55,000 70,000
Probability 0.10 0.30 0.45 0.15

Mr. Byrd has decided to print either 25, 40, 55, or 70 thousand programs. Which number of programs will minimize the
team’s expected losses?
5-16 Airport Rent-a-Car is a locally operated business in competition with several major firms. ARC is planning a new deal for
prospective customers who want to rent a car for only one day and will return it to the airport. For $35, the company will
rent a small economy car to a customer, whose only of her expense is to fill the car with gas at day’s end. ARC is planning to
buy number of small cars from the manufacturer at a reduced price of $6,300. The big question is how many to buy.
Company executives have decided the following distribution of demands per day for the service:
Number of cars rented 13 14 15 16 17 18
Probability 0.08 0.15 0.22 0.25 0.21 0.09

The company intends to offer the plan 6 days a week (312 days per year) and anticipates that its variable cost per car per day
will be $2.50. After the end of one year, the company expects to sell the cars and recapture 50 percent of the original cost.
Disregarding the time value of money and any noncash expenses, use the expected-loss method to determine the optimal
number of cars for ARC to buy.
5-17 We Care Air needs to make a decision about Flight 105. There are currently 3 seats reserved for last-minute customers, but
the airline does not know if anyone will buy them. If they release the seats now, they know they will be able to sell them for
$250 each. Last-minute customers must pay $475 per seat. The decision must be made now, and any number of seats may be
released. We Care Air has the following probability distribution to help them:
Number of last-minute
  customers requesting seats 0 1 2 3
Probability 0.45 0.30 0.15 0.10

The company also counts a $150 loss of goodwill for every last-minute customer who is turned away.
(a) How much revenue will be generated by releasing all 3 seats now?
(b) What is the company’s expected net revenue (revenue less loss of goodwill) if 3 seats are released now?
(c) What is the company’s expected net revenue if 2 seats are released now?
(d) How many seats should be released to maximize expected revenue?

Exercise 5.4

Self­Check Exercises
SC 5-4 For a binomial distribution with n  12 and p  0.45, use Appendix Table 3 to find
(a) P(r  8).
(b) P(r > 4).
(c) P(r  10).
SC 5-5 Find the mean and standard deviation of the following binomial distributions:
 (a) n  16, p  0.40.
(b) n  10, p  0.75.
(c) n  22, p  0.15.
(d) n  350, p  0.90.
(e) n  78, p  0.05.
SC 5-6 The latest nationwide political poll indicates that for Americans who are randomly selected, the probability that they are
conservative is 0.55, the probability that they are liberal is 0.30, and the probability that they are middle-of-the-road is 0.15.
Assuming that these probabilities are accurate, answer the following questions pertaining to a randomly chosen group of 10
Americans. (Do not use Appendix Table 3.)
(a) What is the probability that four are liberal?
(b) What is the probability that none are conservative?
(c) What is the probability that two are middle-of-the-road?
(d) What is the probability that at least eight are liberal?

Basic Concepts
5-18 For a binomial distribution with n  7 and p  0.2, find
(a) P(r  5).
(b) P(r > 2).
(c) P(r  8).
(d) P(r  4).
5-19 For a binomial distribution with n  15 and p  0.2, use Appendix Table 3 to find
(a) P(r  6).
(b) P(r  11).
(c) P(r  4).
5-20 Find the mean and standard deviation of the following binomial distributions:
(a) n  15, p  0.20.
(b) n  8, p  0.42.
(c) n  72, p  0.06.
(d) n  29, p  0.49.
(e) n  642, p  0.21.
5-21 For n  8 trials, compute the probability that r  1 for each of the following values of p:
(a) p  0.1.
(b) p  0.3.
(c) p  0.6.
(d) p 0.4.

Applications
5-22 Harley Davidson, director of quality control for the Kyoto Motor company, is conducting his monthly spot check of
automatic transmissions. In this procedure, 10 transmissions are removed from the pool of components and are checked for
manufacturing defects. Historically, only 2 percent of the transmissions have such flaws. (Assume that flaws occur
independently in different transmissions.)
(a) What is the probability that Harley’s sample contains more than two transmissions with manufacturing flaws? (Do not
use the tables.)
(b) What is the probability that none of the selected transmissions has any manufacturing flaws? (Do not use the tables.)
5-23 Diane Bruns is the mayor of a large city. Lately, she has become concerned about the possibility that large numbers of people
who are drawing unemployment checks are secretly employed. Her assistants estimate that 40 percent of unemployment
beneficiaries fall into this category, but Ms. Bruns is not convinced. She asks one of her aides to conduct a quiet
investigation of 10 randomly selected unemployment beneficiaries.
(a) If the mayor’s assistants are correct, what is the probability that more than eight of the individuals investigated have
jobs? (Do not use the tables.)
(b) If the mayor’s assistants are correct, what is the probability that one or three of the investigated individuals have jobs?
(Do not use the tables.)
5-24 A month later, Mayor Bruns (from Exercise 5-23) picks up the morning edition of the city’s leading newspaper, the Sun-
American, and reads an exposé of unemployment fraud. In this article, the newspaper claims that out of every 15
unemployment beneficiaries, the probability that four or more have jobs is 0.9095, and the expected number of employed
beneficiaries exceeds 7. You are a special assistant to Mayor Bruns, who must respond to these claims at an afternoon press
 conference. She asks you to find the answers to the following two questions:
(a) Are the claims of the Sun-American consistent with each other?
(b) Does the first claim conflict with the opinion of the mayor’s assistants?
5-25 A recent study of how Americans spend their leisure time surveyed workers employed more than 5 years. They
determined the probability an employee has 2 weeks of vacation time to be 0.45, 1 week of vacation time to be 0.10, and
3 or more weeks to be 0.20. Suppose 20 workers are selected at random. Answer the following questions without
Appendix Table 3.
(a) What is the probability that 8 have 2 weeks of vacation time?
(b) What is the probability that only one worker has 1 week of vacation time?
(c) What is the probability that at most 2 of the workers have 3 or more weeks of vacation time?
(d) What is the probability that at least 2 workers have 1 week of vacation time?
5-26 Harry Ohme is in charge of the electronics section of a large department store. He has noticed that the probability that a
customer who is just browsing will buy something is 0.3. Suppose that 15 customers browse in the electronics section each
hour. Use Appendix Table 3 in the back of the book to answer the following questions:
(a) What is the probability that at least one browsing customer will buy something during a specified hour?
(b) What is the probability that at least four browsing customers will buy something during a specified hour?
(c) What is the probability that no browsing customers will buy anything during a specified hour?
(d) What is the probability that no more than four browsing customers will buy something during a specified hour?

Exerxise 5.5

Self­Check Exercises
SC 5-7 Given λ  4.2, for a Poisson distribution, find
(a) P(x  2).
(b) P(x  5).
(c) P(x  8).
SC 5-8 Given a binomial distribution with n  30 trials and p  0.04, use the Poisson approximation to the binomial to find
(a) P(r  25).
(b) P(r  3).
(c) P(r  5).

Basic Concepts
5-27 Given a binomial distribution with n  28 trials and p  0.025, use the Poisson approximation to the binomial to find
(a) P(r  3).
(b) P(r  5).
(c) P(r  9).
5-28 If the prices of new cars increase an average of four times every 3 years, find the
probability of
(a) No price hikes in a randomly selected period of 3 years.
(b) Two price hikes.
(c) Four price hikes.
(d) Five or more.
5-29 Given a binomial distribution with n  25 and p  0.032, use the Poisson approximation to the binomial to find
(a) P(r  3)
(b) P(r  5)
(c) P(r  2)
5-30 Given λ  6.1 for a Poisson distribution, find
(a) P(x  3)
(b) P(x  2)
 (c) P(x  6)
(d) P(1  x  4)

Applications
5-31 Concert pianist Donna Prima has become quite upset at the number of coughs occurring in the audience just before she
begins to play. On her latest tour, Donna estimates that on average eight coughs occur just before the start of her
performance. Ms. Prima has sworn to her conductor that if she hears more than five coughs at tonight’s performance, she
will refuse to play. What is the probability that she will play tonight?
5-32 Guy Ford, production supervisor for the Winstead Company’s Charlottesville plant, is worried about an elderly
employee’s ability to keep up the minimum work pace. In addition to the normal daily breaks, this employee stops for
short rest periods an average of 4.1 times per hour. The rest period is a fairly consistent 3 minutes each time. Ford has
decided that if the probability of the employee resting for 12 minutes (not including normal breaks) or more per hour is
greater than 0.5, he will move the employee to a different job. Should he do so?
5-33 On average, five birds hit the Washington Monument and are killed each week. Bill Garcy, an official of the National Parks
Service, has requested that Congress allocate funds for equipment to scare birds away from the monument. A Congressional
subcommittee has replied that funds cannot be allocated unless the probability of more than three birds being killed in week
exceeds 0.7. Will the funds be allocated?
5-34 Southwestern Electronics has developed a new calculator that performs a series of functions not yet performed by any other
calculator. The marketing department is planning to demonstrate this calculator to a group of potential customers, but it is
worried about some initial problems, which have resulted in 4 percent of the new calculators developing mathematical
inconsistencies. The marketing VP is planning on randomly selecting a group of calculators for this demonstration and is
worried about the chances of selecting a calculator that could start malfunctioning. He believes that whether or not a
calculator malfunctions is a Bernoulli process, and he is convinced that the probability of a malfunction is really about 0.04.
(a) Assuming that the VP selects exactly 50 calculators to use in the demonstration, and using the Poisson distribution as an
approximation of the binomial, what is the chance of getting at least three calculators that malfunction?
(b) No calculators malfunctioning?
5-35 The Orange County Dispute Settlement Center handles various kinds of disputes, but most are marital disputes. In fact, 96
percent of the disputes handled by the DSC are of a marital nature.
(a) What is the probability that, out of 80 disputes handled by the DSC, exactly seven are nonmarital?
(b) None are nonmarital?
5-36 The U.S. Bureau of Printing and Engraving is responsible for printing this country’s paper money. The BPE has an
impressively small frequency of printing errors; only 0.5 percent of all bills are too flawed for circulation. What is the
probability that out of a batch of 1,000 bills
(a) None are too flawed for circulation?
(b) Ten are too flawed for circulation?
(c) Fifteen are too flawed for circulation?

Exercise 5.6

Worked­Out Answers to Self­Check Exercises
SC 5-9

(a)   np  30(0.35)  10.5  

 P(–0.38  z  1.91)  0.1480 + 0.4719  0.6199

 (b)   np  42(0.62)  26.04  

(c)   np  15(0.40)  6  

(d)   np  51(0.42)  21.42  

P(–1.40  z  1.16)  0.4192 + 0.3770  0.7962

SC 5-10 For today,   850,000,   200,000

 0.5 – 0.2734  0.2266

Chapter Concepts Test

Circle the correct answer or fill in the blank. Answers are in the back of the book.
TF 1. The expected value of an experiment is obtained by computing the arithmetic average value over all possible
outcomes of the experiment.
TF 2. The value of z for some point x lying in a normal distribution is the area between x and the mean of the distribution,
TF 3. The right and left tails of the normal distribution extend indefinitely, never touching the horizontal axis.
TF 4. For a normal distribution, the mean always lies between the mode and the median.
TF 5. All but about three-tenths of 1 percent of the area in a normal distribution lies within 3 standard deviations from the
mean.
TF 6. Developing a conditional loss table is cumbersome when there are many possible actions and outcomes, because
the loss resulting from every action/outcome pair must be included in the table.
TF 7. The area under the curve of a normal distribution between the mean and a point 1.8 standard deviations above the
mean is greater for a distribution having a mean of 100 than it is for a distribution having a mean of 0.
 TF 8. The normal distribution may be used to approximate the binomial distribution when the number of trials, n, is
greater than or equal to 60.
TF 9. The two types of losses we consider in solving an inventory-stocking problem are opportunity losses and activity
losses.
TF 10. When the probability of success in a Bernoulli process is 50 percent (p = 0.5), its binomial distribution is
symmetrical.
TF 11. A frequency distribution lists observed frequencies for an experiment that has already been performed; a
probability distribution lists outcomes that could result if the experiment were performed.
TF 12. The value a random variable will take on can usually be predicted in advance of a particular occurrence.
TF 13. Once the value of p has been decided for a Bernoulli process, the value of q is calculated as 1 – p.
TF 14. If the expected number of arrivals in an office is calculated as five per hour, one can be reasonably confident that
five people will arrive within the next hour.
TF 15. The binomial distribution is not really necessary because its values can always be approximated by another
distribution.
TF 16. The height of adult humans can be described by a Poisson distribution.
TF 17. Any action that minimizes expected loss will also minimize expected gain.
TF 18. After 20 trials of an experiment, a correctly shaped distribution curve is created.
TF 19. An example of an opportunity loss could be loss of sales due to the excess age of fruit on a grocery shelf.
TF 20. A distribution where the mean and median have different values can never be a normal distribution.
TF 21. The mean of a binomial distribution is given by np.
ABCDE 22. If the expected daily profit of a lemonade stand is $13.45, then:
(a) Tomorrow’s profit will be $13.45.
(b) Tomorrow’s profit will be less than $13.45.
(c) Tomorrow’s profit will be more than $13.45.
(d) Tomorrow’s loss will be $13.45.
(e) None of the above.
ABCDE 23. For a given binomial distribution with n fixed, if p < 0.5, then:
(a) The Poisson distribution will provide a good approximation.
(b) The Poisson distribution will provide a bad approximation.
(c) The binomial distribution will be skewed left.
(d) The binomial distribution will be skewed right.
(e) The binomial distribution will be symmetric.
ABCD 24. Suppose we have a Poisson distribution with  = 2. Then the probability of having exactly 10 occurrences is:
(a) 
(b) 
(c) 
(d) 
ABCDE 25. Which of the following is a characteristic of the probability distribution for any random variable?
(a) A probability is provided for every possible value.
(b) The sum of all probabilities is 1.
(c) No given probability occurs more than once.
 (d) All of these.
(e) (a) and (b) but not (c).
ABCD 26. Which of the following could never be described by a binomial distribution?
(a) The number of defective widgets produced by an assembly process.
(b) The amount of water used daily by a single household.
(c) The number of people in your class who can answer this question correctly.
(d) All of these could always be described by a binomial distribution.
ABCDE 27. If p = 0.4 for a particular Bernoulli process, the calculation (0.4)3(0.6)4 gives the probability of getting:
(a) Exactly three successes in seven trials.
(b) Exactly four successes in seven trials.
(c) Three or more successes in seven trials.
(d) Four or more successes in seven trials.
(e) None of these.
ABCDE 28. For binomial distributions with p = 0.2:
(a) A distribution for n = 2,000 would more closely approximate the normal distribution than one for n = 50.
(b) No matter what the value of n, the distribution is skewed to the right.
(c) The graph of this distribution with p = 0.2 and n = 100 would be the exact reverse of the graph for the
binomial distribution with n = 100 and p = 0.8.
(d) All of these.
(e) (a) and (b) but not (c).
ABCDE 29. Which of the following is a necessary condition for use of a Poisson distribution?
(a) Probability of one arrival per second is constant.
(b) The number of arrivals in any 1-second interval is independent of arrivals in other intervals.
(c) The probability of two or more arrivals in the same second is zero.
(d) All of these.
(e) (b) and (c) but not (a).
A B C D E F 30. In what case would the Poisson distribution be a good approximation of the binomial?
(a) n = 40, p = 0.32.
(b) n = 40, q = 0.79.
(c) n = 200, q = 0.98.
(d) n = 10, p = 0.03.
(e) (a) and (c).
(f) All of these.
ABCDE 31. For a normal curve with  = 55 and  = 10, how much area will be found under the curve to the right of the value
55?
(a) 
44. A ____________________ variable is a variable that assumes different values according to the results of an experiment.
45. ____________________ distributions can take on only a limited number of values, which can be listed, while
____________________ distributions can take on any value within a range.