Random Variables and Discrete probability Distributions

7.1 Random Variables and Probability Distributions

 A random variable is a function or rule that

assigns a numerical value to each simple event
in a sample space.
 A random variable reflects the aspect of a
random experiment that is of interest for us.
 There are two types of random variables:
 Discrete random variable
 Continuous random variable.
Discrete and Continuous Random Variables
 A random variable is discrete if it can assume a
countable number of values.
 A random variable is continuous if it can assume an
uncountable number of values.

Discrete random variable Continuous random variable

After the first value is defined After the first value is defined,
the second value, and any value any number can be the next one
thereafter are known.

0 1 2 3 ... 0 1/16 1/4 1/2 1

Therefore, the number of Therefore, the number of
values is countable values is uncountable
Discrete Distributions
 In this chapter we will be dealing with discrete,
in the next chapter (8) we will discuss
continuous
Discrete Probability Distribution
 A table, formula, or graph that lists all possible
values a discrete random variable can assume,
together with associated probabilities, is called
a discrete probability distribution.

 To calculate the probability that the random variable

X assumes the value x, P(X = x),
 add the probabilities of all the simple events for which X is
equal to x, or
 Use probability calculation tools (tree diagram),
 Apply probability definitions
Requirements for a Discrete Distribution

 If a random variable can assume values xi,

then the following must be true:

1. 0  p(x i )  1 for all x i

2.  p( x )  1
all xi
i

These are the rules of probability

Example 7.1, pg. 200

Number of Persons Number of Households (millions)

1 31.1
2 38.6
3 18.8
4 16.2
5 7.2
6 2.7
7 or more 1.4
Total 116.0
Example 7.1, pg. 200
Probability distributions can be estimated from relative
frequencies.
x P(x)
1 31.1/116.0 = .268
2 38.6/116.0 = .333
3 18.8/116.0 = .162
4 16.2/116.0 = .140
5 7.2/116.0 = .062
6 2.7/116.0 = .023
7 or more 1.4/116.0 = .012
Total 1.000
Example 7.1, pg. 200
E.g. what is the probability there are 4 or more
persons in any given household?
x P(x)
1 .268
2 .333
3 .162
4 .140
5 .062
6 .023
7 or more .012

P(X ≥ 4) = P(4) + P(5) + P(6) + P 7 or more)

= .140 + .062 + .023 + .012 = .237
Developing a Probability Distribution

 Probability calculation techniques can be used

to develop probability distributions
 Example 7.2 on pg. 201
 A mutual fund sales person knows that there is 20%
chance of closing a sale on each call she makes.
 What is the probability distribution of the number of
sales if she plans to call three customers?
Developing a Probability Distribution

 Solution
 Use probability rules and trees (.2)(.2)(.8)= .032
 Define event S = {A sale is made}.
P(S)=.2 SSS
P(S)=.2 X P(x)
P(SC)=.8 S S SC
P(S)=.2 S SC S 3 .23 = .008
P(S)=.2
P(SC)=.8 2 3(.032)=.096
P(SC)=.8 S SC SC 1 3(.128)=.384
P(S)=.2 SC S S
0 .83 = .512
P(SC)=.8 P(S)=.2
P(SC)=.8 SC S SC
P(S)=.2 SC SC S
P(SC)=.8
P(SC)=.8 SC SC SC
Describing the Population/ Probability Distribution

 The probability distribution represents a

population
 We’re interested in describing the population
by computing various parameters.
 Specifically, we calculate the population mean
and population variance.
Population Mean (Expected Value)
 Given a discrete random variable X with values
xi, that occur with probabilities p(xi), the
population mean of X is.

E( X )     x i  p( x i )
all xi
Population Variance

 LetX be a discrete random variable with possible

values xi that occur with probabilities p(xi), and let
E(xi) = . The variance of X is defined by

V ( X )   2  E( X  ) 2    ( x i  ) 2 p( x i )
all xi

The s tan dard deviation is

  2
Example 7.3
Find the mean, variance, and standard deviation for the population
of the number of persons per household… (from Example 7.1).
Assume that the category “7 or more” is actually 7.

E( X )  1 P(1)  2 P( 2)  ...  7 P(7)

= 1(.268) + 2(.333) + 3(.162) + 4(.140) + 5(.062) + 6(.023) + 7(.012)

= 2.512
Example 7.3
Find the mean, variance, and standard deviation for the population
of the number of persons per household… (from Example 7.1)

= (1 – 2.513)2(.268) + (2 – 2.513)2(.333)+…+(7 – 2.513)2(.012)

= 1.954

The standard deviation is

σ= 1.958  1.399

WE CAN ALSO DO THIS IN TABULAR FORM

Worksheet – Mean, Variance and SD

x p(x) x*p(x) x-e(x) (x-e(x))2 (x-e(x))2*p(x)

1 0.268 0.268 -1.512 2.286144 0.6127
2 0.333 0.666 -0.512 0.262144 0.0873
3 0.162 0.486 0.488 0.238144 0.0386
4 0.14 0.56 1.488 2.214144 0.3100
5 0.062 0.31 2.488 6.190144 0.3838
6 0.023 0.138 3.488 12.16614 0.2798
7 0.012 0.084 4.488 20.14214 0.2417
E(x)
2.512 V(x) 1.9539
Standard Deviation 1.3978

E(X)    xi  p(xi )

all xi
Laws of Expected Value and Variance

Pg. 205

Laws of Expected Value Laws of Variance

 E(c) = c  V(c) = 0
 E(X + c) = E(X) + c  V(X + c) = V(X)
 E(cX) = cE(X)  V(cX) = c2V(X)
Question 7.19 - pg. 207 PART A ONLY
 Let us try this question now
Question 7.19 - pg. 207 PART A ONLY
Mean ()
= E(X) = xip(xi)= 0(.4) + 1(.3) + 2(.2) + 3(.1) (pg. 219)
= 1.0

Variance ( 2 )
= V(X) = (xi- )2 p(xi) (pg. 219)
= (0-1.0)2(.4) + (1-1.0) 2(.3) + (2-1.0) 2(.2) + (3-1.0) 2(.1)
= 1.0

Standard Deviation ( )
=  2 (pg. 219)
= 1.0
Question 7.19 - pg. 207 - Extension
From the above distribution/information, find the
following:

1. E(3X) 2. V(3X) 3. E(X + 4) 4. E(4X + 3) 5. V(4X + 3)

Question 7.19 - pg. 207 - Extension
From the above distribution/information, find the following:

1. E(3X) 2. V(3X) 3. E(X + 4) 4. E(4X + 3) 5. V(4X + 3)

1. E(3X) = 3E(X) = 3(1.0) = 3.0 (EV Rule #3 – pg.221)

2. V(3X) = 9V(X) = 9(1.00) = 9.00 (V Rule #3 – pg. 221)

3. E(X + 4) = E(X) + 4 = 1.0 + 4 = 5.0 (EV Rule #2 – pg. 221)

4. E(4X + 3) = 4E(X) + 3 = 7.0 (EV Rule #2 & #3 – pg. 221)

5. V(4X + 3) = 16V(X) = 16.0 (V Rule #2 & #3 – pg. 221)

7.2 Bivariate Distributions

 Please skip sections 7.2 (Bivariate) and 7.3

(Applications in Finance) and 7.5 (Poisson)
 Please see Omitted Sections page of course
outline
7.4 The Binomial Distribution

 Is a discrete distribution with special properties

 The binomial experiment can result in only one
of two possible outcomes.
 Typical cases where the binomial experiment
applies:
 A coin flipped results in heads or tails
 An election candidate wins or loses

 An employee is male or female

 A car uses 87octane gasoline, or another gasoline.

Binomial Experiment
 There are n trials (n is finite and fixed).
 Each trial can result in a success or a failure.

 The probability p of success is the same for all the

trials.
 All the trials of the experiment are independent.

 Binomial Random Variable

 The binomial random variable counts the number of
successes in n trials of the binomial experiment.
 By definition, this is a discrete random variable.
Developing the Binomial Probability Distribution (n = 3)
Since the outcome of each trial is
independent of the previous outcomes,
we can replace the conditional probabilities S3 P(SSS)=p3
with the marginal probabilities. S2
S1
F3 P(SSF)=p2(1-p)
P(S2|S1
S3 P(SFS)=p(1-p)p

F2
F3 P(SFF)=p(1-p)2

S3 P(FSS)=(1-p)p2
S2

F3 P(FSF)=(1-p)p(1-p)
F1 S3 P(FFS)=(1-p)2p

F2
F3 P(FFF)=(1-p)3
Developing the Binomial Probability Distribution (n = 3)

SSS 3
P(SSS)=p
Let X be the number of successes
in three trials. Then, SS
P(SSF)=p2(1-p)

P(X = 3) = p3 X=3 S S
P(SFS)=p(1-p)p

P(X = 2) = 3p2(1-p) X =2
P(SFF)=p(1-p)2
P(X = 1) = 3p(1-p)2 X=1
SS
P(FSS)=(1-p)p 2

P(X = 0) = (1- p)3 X=0

P(FSF)=(1-p)p(1-p)
P(FFS)=(1-p)2p
This multiplier is calculated in the following formula

P(FFF)=(1-p)3
Calculating the Binomial Probability
In general, The binomial probability is calculated by:

P( X  x)  p( x)  C p (1  p)
n
x
x n x

n n!
where C 
x
x! (n  x)!

“!” Is called a factorial:

If we had 3! it converts to 1 x 2 x 3 = 6
If we had 5! It converts to 1 x 2 x 3 x 4 x 5 = 120
Calculating the Binomial Probability

 Example 7.9 & 7.10 on pg. 227 and pg. 228

 Pat Statsdud is registered in a statistics course and
intends to rely on luck to pass the next quiz.
 The quiz consists of 10 multiple choice questions with 5 possible
choices for each question, only one of which is the correct
answer.
 Pat will guess the answer to each question
 Find the following probabilities
• Pat gets no answer correct (7.9)
• Pat gets two answer correct? (7.9)
• Pat fails the quiz (7.10)
Calculating the Binomial Probability
 Solution
 Checking the conditions
• An answer can be either correct or incorrect.
• There is a fixed finite number of trials (n=10)
• Each answer is independent of the others.
• The probability p of a correct answer (.20) does not change
from question to question.
Calculating the Binomial Probability
 Solution – Continued
 Determining the binomial probabilities:
Let X = the number of correct answers

P( X  x)  p( x)  C p (1  p)n
x
x n x

n!
where C nx 
x! (n  x)!

10! 0 10  0
P( X  0)  (.20) (.80)  .1074
0! (10  0)!
Calculating the Binomial Probability
 Solution – Continued
 Determining the binomial probabilities:
Let X = the number of correct answers

P( X  x)  p( x)  C p (1  p)n
x
x n x

n!
where C nx 
x! (n  x)!
10!
P( X  2)  (.20) 2 (.80)10 2  .3020
2! (10  2)!
Calculating the Binomial Probability
 Solution – Continued
 Determining the binomial probabilities:
Pat fails the test if the number of correct answers is
less than 5, which means less than or equal to 4.

P(X4) = p(0) + p(1) + p(2) + p(3) + p(4)

= .1074 + .2684 + .3020 + .2013 + .0881
=.9672

This is called cumulative probability

Mean and Variance of Binomial Variable

E(X) =  = np
V(X) = 2 = np(1-p)
 Example 7.11, on pg. 230
 If all the students in Pat’s class intend to guess the
answers to the quiz, what is the mean and the
standard deviation of the quiz mark?
 Solution
  = np = 10(.2) = 2.
 2 = np(1-p) = 10(.2)(.8) = 1.6
   1.2649
Using Binomial Tables
 We can also solve Binomial problems by using tables
in the back of the text - Appendix B – Table 1
 Find the following probabilities
 Suppose X is a binomial random variable with n=25
and p=0.7. Use Table 1 to find the following:
 P(X=18)

 P(X=15)

 P(X<20)

 P(X>16)
Using Binomial Tables
a) P(X = 18)
= P(X < 18) - P(X < 17)
Notice that when
= .659 - .488 we are solving all
the inequalities
= .171 are “  ”. This is
because we are
dealing with a
b) P(X = 15) cumulative
= P(X < 15) - P(X < 14) distribution table.

=.189 - .098
= .091
Using Binomial Tables
c) P(X < 20)
= .910 Notice that when
we are solving all
the inequalities
d) P(X > 16) are “  ”. This is
= 1 - P(X < 15) because we are
dealing with a
= 1 - .189 cumulative
distribution table.
= .811
THE END 
Sample Questions
Remember these are just sample questions
and you should be doing as many questions
from the textbook as possible.
Sample Question 1
A table, formula, or graph that shows all possible values
a random variable can assume, together with their
associated probabilities, is called a(n):
a. probability distribution.
b. discrete random variable.
c. expected value of a discrete random variable.
d. None of these choices.
Sample Question 2
Which of the following is a discrete random variable?
a. The Dow Jones Industrial average.
b. The volume of water in Michigan Lakes.
c. The time it takes you to drive to school.
d. The number of employees of a soft drink company.
Sample Question 3
The probability distribution of a discrete random variable X
is shown below, where X represents the number of
motorcycles owned by a family.
x 0 1 2 3
p(x) 0.25 0.40 0.20 0.15

Find the following probabilities:

a. P(X > 1)
b. P(X < 2)
c. P(1 < X < 2)
d. P(0 < X < 1)
e. P(1 < X < 3)
Sample Question 4
A recent survey in Montana revealed that 60% of the vehicles traveling on highways,
where speed limits are posted at 70 miles per hour, were exceeding the limit. Suppose
you randomly record the speeds of ten vehicles traveling on US 131 where the speed
limit is 70 miles per hour. Let X denote the number of vehicles that were exceeding the
limit.

A) Find the expected number of vehicles that are traveling on Montana highways and
exceeding the speed limit.
B) Find the standard deviation of number of vehicles that are traveling on Montana
highways and exceeding the speed limit.
C) Find P(4 < X < 9).
Sample Question 5
 If E(x) = 5 and V(x) = 10, find:
A. E(6x+5)
B. E(x+10)
C. V(3x+10)
D. V(x + 4)
E. V(5)
F. E(3)
Solutions to Sample Questions
 1: A
 2: D
 3: a.
b.
0.35
0.85
c. 0.60
d. 0.00
e. 0.60

 4:
 A) E(X) = 6
 B) s = 1.549

 C) P(4 < X < 9) = P(5 < X < 8) = .1662 - 0.9536 =

0.7874 (USING TABLES)
Solutions to Sample Questions
 5: where E(x) = 5 and V(x) = 10
A. E(6x+5) = 6E(x) + 5 = 6*5+5 = 35
B. E(x+10) = E(x) + 10 = 5 + 10 = 15
C. V(3x+10) = 9V(x) = 9*10 = 90
D. V(x + 4) = V(x) = 10
E. V(5) = 0
F. E(3) = 3