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This document provides solutions to problems involving expectation and variance of random variables. It defines key concepts like random variables, probability distribution functions, expectation, variance and standard deviation. It then calculates these values for random variables describing situations like the number of cups of coffee students drink, money won in a card game, transformations and sums of independent random variables, Bernoulli random variables and counting heads from coin flips.

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Sajib Jahan
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79 views8 pages

Very Important

This document provides solutions to problems involving expectation and variance of random variables. It defines key concepts like random variables, probability distribution functions, expectation, variance and standard deviation. It then calculates these values for random variables describing situations like the number of cups of coffee students drink, money won in a card game, transformations and sums of independent random variables, Bernoulli random variables and counting heads from coin flips.

Uploaded by

Sajib Jahan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Expectation and Variance Solutions

STAT-UB.0103 Statistics for Business Control and Regression Models

Random variables (review)


1. Let X be a random variable describing the number of cups of coffee a randomly-chosen NYU
undergraduate drinks in a week. Suppose that there is a 10% chance that the student has one
cup of coffee, 30% chance that the student has two cups of coffee, 40% chance that the student
has 3 cups of coffee, and a 20% chance stat the student has four cups of coffee.
(a) Let p(x) be the probability distribution function of X. Fill in the following table:
x
1
2
3
4
p(x)
Solution:
x
p(x)

1
.10

2
.30

3
.40

4
.20

(b) Find E(X), the expectation of X.


Solution:
E(X) = (.10)(1) + (.30)(2) + (.40)(3) + (.20)(4)
= 2.7.

(c) What is the interpretation of the expectation of X?


Solution: The long-run sample mean. If we performed the random experiment upon
which X is measured many times, getting a different value of X each time, then the
sample mean would be very close to the expectation of X.

Variance and Standard Deviation


2. This is a continuation of problem 1.

(a) Find var(X) and sd(X), the variance and standard deviation of X.
Solution:
var(X) = (.10)(1 2.7)2 + (.30)(2 2.7)2 + (.40)(3 2.7)2 + (.20)(4 2.7)2
= .81.
The standard deviation of X is given by
p
sd(X) = var(X) = 0.9.

(b) What is the interpretation of the standard deviation of X?


Solution: The long-run sample standard devation. If we performed the random experiment upon which X is measured many times, getting a different value of X each
time, then the sample standard deviation would be very close to the standard deviation of X. If the PDF of X is symmetric and mound-shaped, we can use the empirical
rule to make predictions about the value of X.

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3. Consider the following game:


1. You pay $6 to pick a card from a standard 52-card deck.
2. If the card is a diamond (), you get $22; if the card is a heart (), you get $6; otherwise,
you get nothing.
Perform the following calculations to decide whether or not you would play this game.
(a) Let W be the random variable equal to the amount of money you win from playing the
game. If you lose money, W will be negative. Find the PDF of W .
Solution: The sample points corresponding to the suit of the card are , , , and
; each of these has probability 41 . The values of the random variable W corresponding
to the sample points are as follow:
Outcome

-6
0
-6
16

Thus, the PDF of W is given by the table:


w
-6
0
p(w) 0.50 0.25

16
0.25

(b) What are your expected winnings? That is, what is , the expectation of W ?
Solution:
Using the PDF computed in part (a), the expected value of W is
= (.50)(6) + (.25)(0) + (.25)(16)
= 1.
On average, we win $1 every time we play the game.

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(c) What is the standard deviation of W ?


Solution:
Using the PDF computed in part (a), and the expected value computed in part (b),
we compute the variance of W as
2 = (.50)(6 1)2 + (.25)(0 1)2 + (.25)(16 1)2
= 81.
Thus, the standard deviation of W is
=

81 = 9.

(d) What are the interpretations of the expectation and standard deviation of W ?
Solution: If we played the game many many times, then the average of our winnings
over all times we played would be close to the $1, and the standard deviations of our
winnings over all times we played would be close to $9.

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Properties of Expectation and Variance


4. Affine Transformations. Let X be a random variable with expectation X = 2 and standard
deviation X = 3.
(a) What is the expectation of 5X + 2?
Solution:
5X + 2 = 12.

(b) What is the standard deviation of 5X + 2?


Solution:
|5|X = 15.

5. Sums of Independent Random Variables. Let X and Y be independent random variables


with X = 1, X = 3, Y = 5, Y = 4.
(a) What is E(X + Y )?
Solution:
E(X + Y ) = X + Y = 1 + (5) = 4.

(b) Find var(X + Y ) and sd(X + Y ).


Solution:
2
var(X + Y ) = X
+ Y2 = (3)2 + (4)2 = 25,
p
sd(X + Y ) = var(X + Y ) = 5.

6. Let X and Y be independent random variables with X = 2, X = 1, Y = 3, Y = 4.


(a) Find the expectation and standard deviation of 3X + 2.
Solution:
E(3X + 2) = 3X + 2 = 3(2) + 2 = 8,
sd(3X + 2) = | 3|X = 3(1) = 3.

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(b) Find the expectation and standard deviation of X + Y .


Solution:
E(X + Y ) = X + Y = 1,
2
var(X + Y ) = X
+ Y2 = (1)2 + (4)2 = 17,
p

sd(X + Y ) = var(X + Y ) = 17.

(c) Find the expectation and standard deviation of 3X + Y + 2.


Solution:
E(3X + Y + 2) = 3X + Y + 2 = 11,
2
var(3X + Y + 2) = (3)2 X
+ Y2 = (3)2 (1)2 + (4)2 = 25,
p
sd(3X + Y + 2) = var(3X + Y + 2) = 5.

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Advanced Problems
7. Bernoulli random variable. Suppose you flip a biased coin that lands Heads with probability
p and lands tails with probability 1 p. Define the random variable
(
1 if the coin lands Heads;
X=
0 if the coin lands Tails.
This random variable is called a Bernoulli random variable with success probability p.
(a) What is the PDF of X?
Solution:
x
p(x)

0
1p

1
p

(b) Find , the expectation of X


Solution:
= (1 p)(0) + (p)(1) = p.

(c) Find 2 , the variance of X.


Solution:
2 = (1 p)(0 p)2 + (p)(1 p)2 = p(1 p).

8. Suppose you have a biased coin that lands Heads with probability p and lands Tails with
probability 1 p. You flip the coin 2 times. Let Y be the number of times the coin lands
Heads.
(a) What is E(Y )?
Solution:
E(Y ) = p + p = 2p.

(b) What is var(Y )?


Hint: Y = X1 + X2 , where X1 and X2 are independent Bernoulli random variables corresponding to the 2 coin flips. Use the answer to problem 7(c).
Solution:
var(Y ) = p(1 p) + p(1 p).

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(c) Suppose instead that you flip the coin n times, and let Y count the number of Heads.
What are the expectation and variance of Y ?
Hint: Y = X1 + X2 + + Xn .
Solution:
E(Y ) = np;

var(Y ) = np(1 p).

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