BA 203: Statistical Methods for Economics

Assignment 2
Instructions:
1. The last date to submit the assignment is November 18, 2019 (Monday).
No assignment will be accepted after this date.
2. Use only white A4 papers to write your assignment.
3. Answer the questions in sequence.
4. Use of only blue/black ink is allowed.
5. Spiral bind the assignment pages. No other file/folder will be accepted.
6. Revise the topics from class notes while doing the assignment.
7. Assignments found to be copied from other student(s) will be rejected and
awarded 0 marks.
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Topics Covered:
1. Probability Density Functions (Devore Section 4.1)
2. Cumulative Distribution Functions and Expected Values of
Continuous Random Variables (Devore Section 4.2)
3. Normal Distribution (Devore Section 4.3)
4. Exponential Distribution (Devore Section 4.4)
5. Jointly Distributed Random Variables (Devore Section 5.1)
6. Expected Values, Covariance and Correlation (Devore Section 5.2)

Q1. A college professor never finishes his lecture before the end of the hour and
always finishes his lectures within 2 min after the hour. Let X be the time that
elapses between the end of the hour and the end of the lecture and suppose the
pdf of X is

𝑘𝑥 2 , 0 ≤ 𝑥 ≤ 2
𝑓(𝑥) = {
0, 𝑜𝑡ℎ𝑒𝑟𝑤𝑖𝑠𝑒
a. Find the value of k.
b. What is the probability that the lecture ends within 1 min of the end of the
hour?
c. What is the probability that the lecture continues beyond the hour for between
60 and 90 sec?
d. What is the probability that the lecture continues for at least 90 sec beyond the
end of the hour?

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Q2. The weekly demand for propane gas (in 1000s of gallons) from a particular
facility is a random variable X with pdf

1
𝑓(𝑥) = { 2 (1 − 𝑥2
), 1 ≤ 𝑥 ≤ 2
0, otherwise
(i) Obtain the cdf of X.
(ii) Compute E(X) and V (X). (Use ln 2 = 0.6931)
(iii) Obtain an expression for the (100p) th percentile. What is the value
of the median?

Q3. The IQs of 600 applicants for CAT examination are normally distributed with
mean 115 and variance 144.
(i) If the college requires an IQ of at least 95, how many of these students will be
rejected on this basis regardless of their qualifications?
(ii) If a college picks up applicants above 99.4th percentile, what is the IQ of the
last applicant chosen?
(iii) If the lowest 40% applicants are not allowed to take the test next year, what
is the minimum IQ needed to be allowed to take the test next year?
Q4. Find the mean, variance and cumulative distribution function of a random
variable X whose pdf is given by

𝑓(𝑥) = { 𝜆𝑒 −𝜆𝑥 , 𝑥≥0

Q5. Suppose that 10% of all steel shafts produced by a certain process are
nonconforming but can be reworked (rather than having to be scrapped). Consider
a random sample of 200 shafts, and let X denote the number among these that are
nonconforming and can be reworked. What is the (approximate) probability that
X is
(i) At most 30?
(ii) Less than 30?
(iii) Between 15 and 25 (inclusive)?

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Q6. You are given the following continuous joint probability function:
𝑥+𝑦
, 0 < 𝑥 < 2 𝑎𝑛𝑑 0 < 𝑦 < 2
𝑓(𝑥, 𝑦) = { 𝑘
0, otherwise
(i) For what value of k is f (x, y) a valid joint pdf?
(ii) Find the expected value of y.
(iii) Derive marginal probability density function of x.
(iv) Find P (x < 1 and y > 0.5)

Q7. Let X and Y be two random variables each taking three values -1, 0 and 1,
and having the joint probability as given in the table below:

X -1 0 1

-1 0 0.1 0.1

0 0.2 0.2 0.2

1 0 0.1 0.1

Obtain the marginal probability distributions of X and Y and hence their expected
values.

Q8. You are given the following discrete joint probability function:

f (x, y) = k(x2 + y2)

x = -1, 0, 1, 3 and y = -1, 2, 3

(i) Construct a joint probability distribution table with all probabilities

(ii) For what value of k is f(x, y) a valid joint probability mass

(iii) Find the expected value of y.

(iv) Find the variance of y.

Q9. Find the mean, variance and cumulative distribution function of a continuous
random variable which follows a uniform distribution over the interval [A, B]
with the following pdf:
1
𝑓𝑜𝑟 𝐴 < 𝑋 < 𝐵
f (x; A, B) = {𝐵−𝐴
0, 𝑜𝑡ℎ𝑒𝑟𝑤𝑖𝑠𝑒
Q10. If X has the probability density
𝑒 −𝑥 , 𝑓𝑜𝑟 𝑥 > 0
𝑓(𝑥) = {
0, 𝑜𝑡ℎ𝑒𝑟𝑤𝑖𝑠𝑒

Find the expected value of g(X) = 𝑒 3𝑋/4

Q11. Suppose the probability density function of the magnitude X of a dynamic

1 3
𝑓(𝑥) = {8 + 8 𝑥, 0≤𝑥 ≤2
0, otherwise
(i) Find F (x).
(ii) Find the probability that the load is between 1 and 1.5.
(iii) Find the probability that the load exceeds 1.

Q12. The yield strength for A36 grade steel is normally distributed with mean =
43 and standard deviation =4.5.

i. What is the probability that yield strength is at most 40? Greater than 60?

ii. What yield strength value separates the strongest 75% from the others?

Q13. Suppose that 25% of all students at a large public university receive
financial aid. Let X be the number of students in a random sample of size 50 who
receive the financial aid. Find the approximate probability that

i. At most 10 students receive the aid

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Q14. Prove that the correlation between two independent random variables is 0.

Q15. The joint pdf of two random variables X and Y is given by

Find Cov (X, Y).