2024 Chapter5
2024 Chapter5
Chapter 5
COMMONLY USED
DISCRETE DISTRIBUTIONS
1. The Bernoulli and The Binomial Distribution
2. The Hypergeometric Distribution
3. The Poisson Distribution
4. The Geometric Distribution
5. The Negative Binomial Distribution
6. The Discrete Uniform Distribution
3. Poisson Distribution
• A discrete random variable 𝑋 taking values 0, 1, 2, … is said to be a
Poisson random variable with parameter λ (λ>0) if
λ𝑘.𝑒 −λ
𝑃 𝑋 = 𝑘 = (𝑘 = 0; 1; 2 … )
𝑘!
• This expresses the probability of a number of events occurring in a
fixed period of time if these events occur with a known average
rate λ.
3. Poisson Distribution
If we consider a binomial random variable 𝑋 of parameters (𝑛, 𝑝) such
that 𝑛 is large and 𝑝 is small enough so that 𝑛𝑝 is moderate then the
binomial distribution can be well-approximated by the Poisson
distribution of parameter λ = 𝑛𝑝.
3. Poisson Distribution
Some examples of random variables that generally obey the Poisson
probability law are as follows:
• The number of misprints on a page (or a group of pages) of a book
• The number of people in a community who survive to age 100
• The number of wrong telephone numbers that are dialed in a day
• The number of packages of dog biscuits sold in a particular store each
day
• The number of customers entering a post office on a given day
• The number of vacancies occurring during a year in the federal
judicial system
3. Poisson Distribution
• The number of a-particles discharged in a fixed period of time from
some radioactive material
• The number of earthquakes occurring during some fixed time span
• The number of wars per year
• The number of electrons emitted from a heated cathode during a
fixed time period
• The number of deaths, in a given period of time, of the policyholders
of a life insurance company
3. Poisson Distribution
If 𝑋 is a Poisson random variable with parameter λ, then
𝐸(𝑋) = 𝑣𝑎𝑟(𝑋) = λ
3. Poisson Distribution
Example 5.10: There are 50 misprints in a book which has 250 pages
and assume these errors follow a Poisson distribution of parameter
λ = 50/250 = 0.2. Find the probability that page 100 has no
misprints. Find the probability that page 100 has 2 misprints.
3. Poisson Distribution
Example 5.11: During the noon lunch hour, 47 customers will walk
through the door of the post office. Assume that each person arrives at
a random time, independent of the other customers. What is the
probability that more than one person walks through the door during
the first minute?
3. Poisson Distribution
Example 5.12: Each year the London Metropolitan Police record around
160 murders, and this has been stable for the last 5 years. Each of
these murders is an individual crime that cannot be predicted. It may
appear strange, but this very randomness means that the overall
pattern of murders is in some ways quite predictable.
Assuming the number of murders are Poisson distributed, compute the
probability of having no murder during a day, 3 or more murders in one
day, a week without any murder.
3. Poisson Distribution
Example 5.13: Brain cancer is a rare disease. In any year there are
about 3.1 cases per 100000 of population (US figure from TIME).
Suppose a small medical insurance company has 150000 people on
their books. How many claims stemming from brain cancer should the
company expect in any year? What is the probability of getting more
than 2 claims related to brain cancer in a year?
𝑃 𝑋 = 𝑘 = (1 − 𝑝)𝑘−1 𝑝
We have
1
𝐸 𝑋 =
𝑝
1−𝑝
𝑉𝑎𝑟(𝑋) =
𝑝2
𝑟
𝐸 𝑋 =
𝑝
𝑟(1−𝑝)
𝑉𝑎𝑟 𝑋 =
𝑝2
𝑛+1
𝐸 𝑋 =
2
𝑛2 −1
𝑉𝑎𝑟 𝑋 =
12
Chapter 5 - Exercises
Exercise 1: A student takes a 10 question true-false test. He has not
attended class nor studied the material, and so he guesses on every
question. What is the probability that he gets
(a) exactly 5 questions correct;
(b) he gets 8 or more correct?
Chapter 5 - Exercises
Exercise 2: The United States Senate has 100 members. Suppose there
54 Republicans and 46 Democrats.
(a) If a committee of 15 is selected at random, what is expected
number of Republicans on this committee?
(b) What is the variance of the number of Republicans?
Chapter 5 - Exercises
Exercise 3: An insurance company has 5,000 policyholders who have
had policies for at least 10 years. Over this period there have been a
total of 12,200 claims on these policies. Assuming a Poisson
distribution for these claims, answer each of the following.
(a) What is the average number of claims per policy per year?
(b) What is the probability that a policyholder will file less than 2 claims
in a year?
(c) If all claims are for $1,000, what is the mean claim amount for a
policyholder in a year?
Chapter 5 - Exercises
Exercise 4: If you roll a pair of fair dice, the probability of getting an 11
is 1/18. If you roll the dice repeatedly, what is the probability that the
first 11 occurs on the eighth roll?
Chapter 5 - Exercises
Exercise 5: A single fair die is rolled repeatedly.
(a) What is the probability that the fourth six appears on the twentieth
roll?
(b) What is the mean number of total rolls needed to get 4 sixes?
Chapter 5 - Exercises
Exercise 6: A telemarketer makes successful calls with probability 0.20.
What is the probability that her fifth sale will be on her sixteenth call?
Chapter 5 - Exercises
Exercise 7: A contestent on a game show selects a ball from an um
containing 25 balls numbered from I to 25. His prize is $1,000 times the
number of the ball selected. If X is the random variable for the
amount he wins, find the mean and standard deviation of X
Chapter 5 - Exercises
Exercise 8: If is the number of "6"'s that turn up when 72 ordinary dice
are independently thrown, find the expected value of 𝑋 2
Chapter 5 - Exercises
Exercise 9: Smith and Jones each take the same multiple choice test.
The test has 5 questions, and each question has 5 answers (exactly one
of which is right). Smith and Jones are not very well prepared for the
test and they answer the questions randomly.
(i) Find the probability that they both get the same number of answers
correct.
(ii) Find the probability that their papers are identical, assuming that
they have answered independently of one another.
Chapter 5 - Exercises
Exercise 10: Suppose that X is a discrete random variable that is
uniformly distributed on the even integers 𝑥 = 0, 2, 4, … , 22, so that
1
the probability function of X is 𝑝 𝑥 = for each even integer 𝑥 from
12
0 to 22. Find 𝐸 𝑋 and 𝑉𝑎𝑟 𝑋 .
Chapter 5 - Exercises
Exercise 11: The number of home runs in a baseball game is assumed
to have a Poisson distribution with a mean of 3. As a promotion, a
company pledges to donate $10,000 to charity for each home run hit
up to a maximum of 3. Find the expected amount that the company
will donate. Another company pledges to donate $C for each home run
over 3 hit during the game, and C is chosen so that the second
company's expected donation is the same as the first. Find C.
Chapter 5 - Exercises
Exercise 12: Assume that the number of hits, X, per baseball game, has
1
a Poisson distribution. If the probability of a no-hit game is , find
10000
the probability of having 4 or more hits in a particular game.
Chapter 5 - Exercises
Exercise 13: In tossing a fair die repeatedly (and independently on
successive tosses), find the probability of getting the first "1" on the 𝑡-
th toss. Find the expected number of tosses before the first "1" is
tossed.
Chapter 5 - Exercises
Exercise 14: In tossing a fair die repeatedly (and independently on
successive tosses), find the probability of getting the third "1" on the
𝑡 −th toss.
Chapter 5 - Exercises
Exercise 15: An urn contains 6 blue and 4 red balls. 6 balls are chosen at
random and without replacement from the urn. If X is the number of
red balls chosen, find the standard deviation of X.
Chapter 5 - Exercises
Exercise 16: X has a discrete uniform distribution on the integers
0, 1, 2, … , 𝑛 and Y has a discrete uniform distribution on the integers
1, 2, … , 𝑛. Find 𝑉𝑎𝑟(𝑋) – 𝑉𝑎𝑟(𝑌)
Chapter 5 - Exercises
Exercise 17: The probability that a particular machine breaks down in
any day is 0.20 and is independent of the breakdowns on any other
day. The machine can break down only once per day. Calculate the
probability that the machine breaks down two or more times in ten
days.
Chapter 5 - Exercises
Exercise 18: A company prices its hurricane insurance using the
following assumptions:
(i) In any calendar year, there can be at most one hurricane.
(ii) In any calendar year, the probability of a hurricane is 0.05 .
(iii) The number of hurricanes in any calendar year is independent of
the number of hurricanes in any other calendar year.
Using the company’s assumptions, calculate the probability that there
are fewer than 3 hurricanes in a 20-year period.
Chapter 5 - Exercises
Exercise 19: A study is being conducted in which the health of two
independent groups of ten policyholders is being monitored over a
one-year period of time. Individual participants in the study drop out
before the end of the study with probability 0.2 (independently of the
other participants).
What is the probability that at least 9 participants complete the study
in one of the two groups, but not in both groups?
Chapter 5 - Exercises
Exercise 20: A hospital receives 1/5 of its flu vaccine shipments from
Company X and the remainder of its shipments from other companies.
Each shipment contains a very large number of vaccine vials.
For Company X’s shipments, 10% of the vials are ineffective. For every
other company, 2% of the vials are ineffective. The hospital tests 30
randomly selected vials from a shipment and finds that one vial is
ineffective. What is the probability that this shipment came from
Company X?
Chapter 5 - Exercises
Exercise 21: A company establishes a fund of 120 from which it wants
to pay an amount, C, to any of its G 20 employees who achieve a high
performance level during the coming year. Each employee has a
2% chance of achieving a high performance level during the coming
year, independent of any other employee. Determine the maximum
value of C for G which the probability is less than 1% that the fund will
be inadequate to cover all payments for high performance.
Chapter 5 - Exercises
Exercise 22: Let X be a Poisson random variable with 𝐸(𝑋) = ln2.
Calculate 𝐸 𝑐𝑜𝑠 𝜋𝑋
Chapter 5 - Exercises
Exercise 23: An actuary has discovered that policyholders are three
times as likely to file two claims as to file four claims. If the number of
claims filed has a Poisson distribution, what is the variance of the
number of claims filed?
Chapter 5 - Exercises
Exercise 24: An insurance policy on an electrical device pays a benefit
of 4000 if the device fails during the first year. The amount of the
benefit decreases by 1000 each successive year until it reaches 0.
If the device has not failed by the beginning of any given year, the
probability of failure during that year is 0.4. What is the expected
benefit under this policy?
Chapter 5 - Exercises
Exercise 25: A tour operator has a bus that can accommodate 20
tourists. The operator knows that tourists may not show up, so he sells
21 tickets. The probability that an individual tourist will not show up
is 0.02, independent of all other tourists. Each ticket costs 50, and is
non-refundable if a tourist fails to show up. If a tourist shows up and a
seat is not available, the tour operator has to pay 100 (ticket cost + 50
penalty) to the tourist. What is the expected revenue of the tour
operator?
Chapter 5 - Exercises
Exercise 26: A fair die is tossed until a 2 is obtained. If X is the number
of trials required to obtain the first 2, what is the smallest value of for
1
which 𝑃 𝑋 ≤ 𝑥 ≥
2
Chapter 5 - Exercises
Exercise 27: A large pool of adults earning their first driver’s license
includes 50% low-risk drivers, 30% moderate-risk drivers, and 20%
high-risk drivers. Because these drivers have no prior driving record, an
insurance company considers each driver to be randomly selected from
the pool. This month, the insurance company writes 4 new policies for
adults earning their first driver’s license. What is the probability that
these 4 will contain at least two more high-risk drivers than low-risk
drivers?
Chapter 5 - Exercises
Exercise 28: A box contains 10 white and 15 black marbles. Let X
denote the number of white marbles in a selection of 10 marbles
𝑉𝑎𝑟 𝑋
selected at random and without replacement. Find
𝐸 𝑋
Chapter 5 - Exercises
Exercise 29: A multiple choice test has 10 questions, and each question
has 5 answer choices (exactly one of which is correct). A student taking
the test guesses randomly on all questions. Find the probability
that the student will actually get at least as many correct answers as
she would expect to get with the random guessing approach.
Chapter 5 - Exercises
Exercise 30: An analysis of auto accidents shows that one in four
accidents results in an insurance claim. In a series of independent
accidents, find the probability that the first accident resulting in an
insurance claim is one of the first 3 accidents.
Chapter 5 - Exercises
Exercise 31: An insurer has 5 independent one-year term life insurance
policies. The face amount on each policy is 100,000. The probability of
a claim occurring in the year for any given policy is 0.2. Find
the probability the insurer will have to pay more than the total
expected claim for the year.
Chapter 5 - Exercises
Exercise 32: The number of claims per year from a particular auto
insurance policy has a Poisson distribution with a mean of 1, and
probability function 𝑝𝑘 . Based on a number of years of experience,
the insurer decides to change the distribution, so that the new
probability of 0 claims is 𝑝0∗ = 0.5, and the new probability 𝑝𝑘∗ for
𝑘 ≥ 1 are proportional to the old (Poisson) probabilities according
to the relationship 𝑝𝑘∗ = 𝑐𝑝𝑘 for 𝑘 ≥ 1. Find the mean of the new
claim number distribution.
Chapter 5 - Exercises
Exercise 33: Find the probability generating function of the Poisson
random variable with mean 2
Chapter 5 - Exercises
Exercise 34: An insurer issues two independent policies to individuals of
the same age. The insurer models the distribution of the completed
number of years until death for each individual, and uses the geometric
distribution 𝑃 𝑁 = 𝑘 = 0.99 𝑘 . 0.01 where 𝑘 = 0, 1, 2 … and N is
the completed number of years until death for each individual.
Find the probability that the two individuals die in the same year.
Chapter 5 - Exercises
Exercise 35: An insurer uses the Poisson distribution with mean 4 as the
model for the number of warranty claims per month on a particular
product. Each warranty claim results in a payment of 1 by the insurer.
Find the probability that the total payment by the insurer in a given
month is less than one standard deviation above the average monthly
payment.
Chapter 5 - Exercises
Exercise 36: As part of the underwriting process for insurance, each
prospective policyholder is tested for high blood pressure. Let X
represent the number of tests completed when the first person with
high blood pressure is found. The expected value of X is 12.5.
Calculate the probability that the sixth person tested is the first one
with high blood pressure.
Chapter 5 - Exercises
Exercise 37: Let X be a random variable with moment generating
function
𝑡 9
2+𝑒
𝑀𝑋 𝑡 = ,𝑡 ∈ 𝑅
3
Calculate the variance of X.
Chapter 5 - Exercises
Exercise 38: According to the house statistician, a casino estimates that
it has a 51% chance of winning on any given hand of blackjack. The
casino also assumes that blackjack hands are independent of one
another. The casino randomly monitors its blackjack dealers, and as
soon as a dealer is found to lose 5 hands in a row, the casino stops the
game at that dealer's table and checks the deck of cards that the dealer
is using. The casino has just started monitoring a dealer. What is the
chance that the game will be stopped at the table sometime within the
next 8 hands of blackjack?
Chapter 5 - Exercises
Exercise 39: A company takes out an insurance policy to cover accidents
that occur at its manufacturing plant. The probability that one or more
accidents will occur during any given month is 0.6. The number of
accidents that occur in any given month is independent of the number
of accidents that occur in all other months. Calculate the probability
that there will be at least four months in which no accidents occur
before the fourth month in which at least one accident occurs.
Chapter 5 - Exercises
Exercise 40: Each time a hurricane arrives, a new home has a 0.4
probability of experiencing damage. The occurrences of damage in
different hurricanes are independent. Calculate the mode of the
number of hurricanes it takes for the home to experience damage from
two hurricanes.
Chapter 5 - Exercises
Exercise 41: For a certain discrete random variable on the non-negative
integers, the probability function satisfies the relationships
1
𝑃 0 = 𝑃 1 𝑎𝑛𝑑 𝑃 𝑘 + 1 = 𝑃(𝑘) for 𝑘 = 1, 2, 3 … Find 𝑃(0)
𝑘
Chapter 5 - Exercises
Exercise 42: Let X represent the number of customers arriving during
the morning hours and let Y represent the number of customers
arriving during the afternoon hours at a diner. You are given
• X and Y are Poisson distributed
• The first moment of X is less than the first moment of Y by 8
• The second moment of X is 60% the second moment of Y.
Calculate the variance of Y