Chapter Two Applied Business Statistics

Probability Distributions

Probability Distribution
REVIEW OF RELEVANT PROBABILITY & STATISTICAL CONCEPTS

Population

 The set of all possible outcomes of an experiment (Experiment, in statistic, indicates any
operation/process of doing or observing something happens under certain conditions, resulting in certain
outcome.)
 or all possible values of an associated random variable

 Examples of population are the set of (heads, tails) for the toss of a coin.

 A population may be finite, when it consists of a given number of observations; or it

may be infinite, when it includes an infinite number of observations.

Sample

 Related to concept of a population is the concept of a sample. A sample is a set of

observations selected from population. The number of observations included in a sample
is called the size of the sample.

 In econometrics our attention is confined to samples drawn in accordance with some

chance mechanism. Such samples are called probability samples.

 An important type of probability sample is the random sample. In finite populations,

a random sample is obtained by giving every individual in the population an equal
chance of being selected. In case of infinite populations, a sample is random if each
observation is independent of each other observations.

 Population and samples are studied through their characteristics. The most
important of these characteristics are the mean, variance and standard deviations.
Characteristics of a population are called parameters; whereas characteristics of a
sample are called as statistics.

 Descriptive statistics is an area of statistics that summarizes the information contained

in a sample. Summaries can be tabular, graphical, or numerical. One common tabular
method of summarizing data is the frequency distribution. Intervals covering the range
of the data are constructed and the number of observations in each interval is then
tabulated and recorded. A graphical representation of frequency distribution is called a
histogram. From the frequency distribution or the histogram, one can obtain a quick

Dr. Md. Monimul Haque, Professor, Department of Finance, R.U. 1

Chapter Two Applied Business Statistics
Probability Distributions

picture of certain characteristics of the data. For example, the center of the data and how
much variability is present can be easily observed from a histogram. Numerical
summaries are single numbers computed from sample to describe some characteristics
of the data set. Some common numerical summaries are sample mean, sample
variance, and sample standard deviation.

 Statistics mainly deals with phenomena that can be measured or counted. With respect to
a phenomenon that can be measured, we speak of a variable– meaning a homogenous
quantity whose magnitude changes at different points of time. The antithesis of a
variable is a constant that does not change its value over different points of time. When
a constant is joined to a variable it is often referred to as the coefficient of that variable.
However, a coefficient may be symbolic rather than numerical; for example, symbol

"a" stands for given constant in the expression a  x , and is called the coefficient of
x . This symbol is supposed to represent a given constant, and yet, since no specific
value is has been assigned to it; it can virtually take any value. In short, therefore, it is a
constant that is variable. To identify its peculiar status, it is also termed as parametric
constant or simply parameter.

 If the quantity in question is not constant but a variable, one may be interested in
the source of variation so that it can be controlled. The variables whose values
cannot be fully controlled or determined prior to observations are called
random/stochastic variables. The 100% opposite case is known as non-
random/non-stochastic/deterministic variable.

Random Variable

 A variable whose value cannot be determined before it takes a value and can only be
described probabilistically is known as a Random Variable (hereafter, RV) Consider
tossing of two fair coins. The outcomes of this tossing (experiment) can be described
verbally. Let H denotes a head and T denotes a tail. Then we can denote the outcomes of
this experiment as:

HH, HT, TH, & TT Known as a Sample Space

 However, it would be much simpler if outcomes were expressed numerically. Consider

the variable “number of heads” in a toss of two coins. We will have the following
situation:

Dr. Md. Monimul Haque, Professor, Department of Finance, R.U. 2

Chapter Two Applied Business Statistics
Probability Distributions

Table 1: Sample Space for the Tossing of Two Coins

1ST coin 2ND coin No. of heads
T T 0
T H 1
H T 1
H H 2

 We call the variable “number of heads” as an RV. Alternatively, a variable whose

numerical value is determined by the outcomes of an experiment is called an RV.
Types of random variables

 An RV may be either discrete or continuous. A discrete RV takes on only a finite (or

countably infinite) number of values. In our example, in Table #1, the RV can take only
3 values (0, 1, & 2), and thus is a discrete RV. On the contrary, a continuous RV, is a
variable that can take on any value in some interval or a range of values. Thus,
temperature on a day is a continuous RVin the range of, say 20 to 30 degrees Celsius, it
can take any value depending on the precision of the measuring instrument.

 Note that a continuous RV is merely an idealization of reality; e.g.; the RV height of

average Bangladeshi is theoretically continuous, but the actual measurement will be at
discrete intervals depending on the accuracy of the measuring instruments. However, we
usually use the concept of continuous probability distribution because their mathematical
theory is simple but very strong. Suppose we are measuring the average heights of
students of a class at intervals of 1 inch. We can prepare a “frequency distribution”: the
number of students at each interval (i.e., in 1 inch). Dividing the number of people in each
interval by the total number of people we get the “probability distribution” for the continuous RV
“heights of average students in the class”.

Dr. Md. Monimul Haque, Professor, Department of Finance, R.U. 3

Chapter Two Applied Business Statistics
Probability Distributions

In this chapter we will discuss about different types of Probability Distribution – they are
Binomial, Poisson and Normal distribution. We will also discuss about Mathematical
Expectation, Population Mean and Variance. After discussing the theory of probability
distribution, we will see how we can solve different business problems with these statistical tools.

We now introduce the notion of a variable which is called random variable - a variate
value is a variable whose value can not be exactly predicted on any particular occasion. You
know when we toss a coin we can expect head or tail from the experiment but we are not sure
which one will be come up. But we know that either head or tail will be come up. This is certain.

Random variable has been defined as a function which assumes real values on the
outcomes of a random experiment. More precisely, a random variable must have a range or set
of possible values and a definable probability associated with each value.

A random variable X is a function which associates a real number to each outcome of a

sample space
A coin is tossed twice. Then the sample space obtained as HH, HT, TH, and TT

getting the Head or

X: 0 1 2
success Probability Distribution
probability f(X): 1/4 1/2 1/4

It is evident that the outcome of the above coin-tossing experiment can not be predicted
exactly but we know what values X can assume and we can also evaluate the probability
associated with these values. Hence we can say that X is a random variable.

Probability Distribution Functions (PDF)

 By the term Probability Distribution/Density Function (PDF for short) of an RV x we
mean the values taken by x and their associated probabilities. We use a function
f  x  to assign probabilities to x . This function is called the PDF of an RV. Note
that for continuous RVs, the probability distribution function is often called as
probability density function.
 In our example provided in Table 1, the RV x (number of heads) takes 3 values, that is
x  0 , 1, or 2 , in this case the PDF of x , f  x  , will be as follows:

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Chapter Two Applied Business Statistics
Probability Distributions

1 , 1,
f x   P x  0 f x   P x  1 
4 2
1 .1
f x   P x  2 
4

 The PDF of a continuous RV is conceptually similar to that of a discrete RV, except that
we need to measure the probability over a certain range or interval of values for a
continuous RV. In general, for a continuous RV, the occurrence of any particular/exact
value of x has zero probability. Therefore, for a continuous RV, probabilities are
only valid only for intervals. On the contrary, in order to obtain the PDF of a
discrete RV, we sum its probabilities at certain points. As a result, for the PDF of a
discrete RV, which assumes certain values, we need to change the integration sign to
summation while calculating the PDF of a continuous RV, because the PDF of a discrete
RV is only defined for certain values.
 The PDF of continuous and discrete RVs should satisfy some conditions. If x is a
continuous RV on the range  ,  , its PDF must satisfy:
f x   0 ,    x   Condition 1

 f  x dx  1 Condition 2

 Therefore, if x
is a discrete RV, its PDF, P  x , which defines the probability that x
assumes certain given values must satisfy:

P x   0 , for all x Condition 1

 P x   1 Condition 2
all x
 The 1st condition in both the continuous and discrete probability distributions indicates
that a PDF of an RV cannot assume negative values (otherwise the probabilities of some
events may be negative).
 Whereas, the 2nd condition for both the continuous and discrete RV shows that the
probability of the entire sample space/outcomes must be equal to 1. In our example,

1  1  1  1 .
4 2 4

 Examples of discrete PDF include the Binomial Distribution, Hypergeometric
Distribution and the Poisson Distribution. Whereas, the examples of continuous PDF
include the “Normal Distribution” and its derivatives, and the Exponential Distribution
and Gamma Distribution.

1 no. of favorable outcomes

no . of total outcomes

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Chapter Two Applied Business Statistics
Probability Distributions

Discrete Probability Distribution

If a variable X can assume a discrete set of values X1, X2, X3 ..... Xn with respective probabilities p1, p2,
p3......pn where p1 + p2 + p3 +......+ pn = 1, we say that a discrete probability distribution for X has been
defined. The function f (X) which has the respective value p1, p2, p3......pn for X = X1, X2, X3 ..... Xn is
called the probability function or probability mass function p.m.f.

The probability mass function f(x) must satisfy the two conditions
i) f(x) ≥0
ii) ∑ f(x) = 1

Example:
Value(X): 3 6 7 11
P: 0.2 0.5 0.2 0.1

If X denotes the number of points obtained when an unbiased dice is thrown, the probability
distribution of x is

X: 1 2 3 4 5 6

P(X): 1/6 1/6 1/6 1/6 1/6 1/6

Expected value of a random variable

One of the most important quantities used to characterizes a random variable or its distribution is its
“expected value”
Let x be a discrete random variable with probability function as follows:

X: X1 X2 ....... ....... Xn

P(X): P(X1) P(X2) ........ ....... P(Xn)

The expected value or the mathematical expectation of X denoted by E(X), is defined as

n
E(X) = ∑ Xi P (Xi) = X1P(X1) +X2 P(X2) + .......... + Xn P(Xn)
i =1
 A fair dice is thrown and X denotes the number of points showing, what is the expected
value of X
The variate X assumes the values 1,2,...6 with probability 1/6 in each case
Hence, E(X) =1.1/6 +2 .1/6 +..........+ 6.1/6
= 1/6 ( 1+2+.....+6) = 21/6 = 3.5

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Chapter Two Applied Business Statistics
Probability Distributions

 A player tosses a dice, and if the numbers 1,2 or 3 appear, he receive 10 dollars, if 4 or 5
turns up, he receive 3 dollars, while the occurrence of a 6 costs him 12 dollars. What is the
expectation of the player? Ans. $4

# Mean of the Probability distribution is the expected value of X

# Variance of the probability distribution of the random variable X is defined as the expected
value of the sum of the squared deviations of the values of X from their mean.
var(X) = E [ X – E(X) ]2
= E ( X2) – [ E(X)]2

Properties of Expected value and Variance

E( C ) = C E(X+C) = E(X) + C
E( CX ) = CE(X) E(XY) = E(X) + E(Y)
E(X+Y) = E(X) + E(Y) Var (CX) = C2 Var (X)

# Anil company estimates the net profit on a new product it is lunching to be Tk. 3,000,000 during
the first year if it successful, Tk. 1,000,000 if it is moderately successful and a loss of Tk. 1,000,000 if
it is unsuccessful. The firm assigns the following probabilities to first year prospects for the product,
successful 0.15, moderately successful 0.25 and unsuccessful 0.60. What are the expected value and
Standard deviation of the first year net profit for the product?
E (X) = 3 x 0.15 + 1 x 0.25 + (-1) x 0.6 = 0.1 million
E (X2) = 9 x 0.15 + 1 x 0.25 + 1 x 0.6 = 2.2 million
Var (X) = E (X2) – [E(X)]2 = 2.2 – (.10)2 = 2. 19
S.D. = √2.19 = 1.48 million

Dr. Md. Monimul Haque, Professor, Department of Finance, R.U. 7

Chapter Two Applied Business Statistics
Probability Distributions

Binomial Distribution
Binomial distribution is a discrete probability distribution and is defined by the p.m.f

f(X) = P(X=x) nC x p x q n  x (X = 0, 1, 2......n)

Where p = the probability of a success in a single trial

q = the probability of a failure in a single trial = 1- p
n = number of trial
x = number of success

In a series of n independent trials, if the probability of success in each trial is a constant p, and the
probability of failure is q, then the probability of X success (and obviously n-x failures) is given by the
Binomial distribution.

X: 0 1 2 ........ ......... n
n
p =1
f(X): qn n
C1 p1q n 1 n
C 2 p 2 q n2 ......... ..........

The distribution is known as binomial because the probabilities are given by the binomial series
(q + p)n = qn + nC1 p1q n 1 + n C 2 p 2 q n  2 + ............+ pn

(a+b)2 = b2 + 2C1ab 2 1 + 2C2 a 2b 2  2 = a2 + 2ab + b2

The probability of getting exactly 2 heads in 6 tosses of a fair coin is

P (x = 2) = 6C2 (0.5) 2 (0.5)6  2 = 15/64

The probability of getting at least 4 heads in 6 tosses of a fair coin is

P (X ≥ 4 H) = p (X=4H) + p (X=5H) + p (X=6H)

= 6C4 (0.5) 4 (0.5) 6  4 + 6C5 (0.5)5 (0.5) 6  5 + 6C6 (0.5) 6 (0.5) 6  6

= 11/32

Problem.
Three coins are tossed. Find the probabilities of i) 0 Head ii) 2 Head iii) more than one head iv) at
least one head.

The binomial distribution contains two constant n and p, which distinguish one distribution from
another. These constants are called parameters and empirical estimates of parameters are called
statistics.

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Chapter Two Applied Business Statistics
Probability Distributions

Mean and variance of binomial distribution

The mean of binomial random variable X. designated µ or E(X)

n
µ = E(X) =  X f (X )
x0

= 0.
n
C 0 p 0 q n  0 + 1. n C1 p 1 q n 1 + …….+ n. n C n p n q n  n
= np

2 = Variance = npq
 = S.D = npq

Note: If p = q and number of trial n < 30 the binomial distribution should be followed.

Problem
Find the probability that in a family of 4 children there will be (a) at least 1 boy and (b) at least 1 boy
and 1 girl.

Problem
Out of 2000 families with 4 children each, how many would you expect to have (a) at least 1 boy, (b)
2 boys, (c) 1 or 2 girls, and (d) no girls? Refer to the above problem.

Problem
If 20% of the bolt produced by a machine are defective, determine the probability that, out of 4 bolts
chosen at random, (a) 1, (b) 0, and (c) at most 2 bolts will be defective.

Problem Suppose that items coming off a production line are classified as defective or non defective.
The probability of a defective piece is .04. 10 items are drawn at random during a short period and
classified according to the above scheme. What is the probability of (a) no defective (b) at least two
defective or (c) one or two defectives?

In this example, n=10, p= .04

Hence, q = 1- p =0.96

P( X= 0) =
10
C0 .040.96100 = 1 .040 0.96 10 = 0.96 10 = .6648

p( X ≥ 2) = 1 – { p(X= 0) + P(X=1)} = 1{0.6648 + 10(0.04) (0.96)9 = 1 – 0.0418 = 0.0582

P(X=1) + p(X=2) = 0.277 + 0.519 = 0.329

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Chapter Two Applied Business Statistics
Probability Distributions

Poisson Distribution
A random variable x is said to have a Poisson distribution if it follows the probability law
e-m mx
p(x) = Where X = 0,1,2.........
x! m = np

Binomial distribution can be approximated by Poisson probabilities

when n ∞ and p 0 such that np = m, a constant i,e parameter of Poisson Distribution

Some typical examples of Poisson variable are

i) The number of misprints per page in a large volume of comparable printed material.
ii) The number of airlines arriving at a busy airport during an hour.
iii) The number of blind children in a city

The mean and variance of the Poisson distribution is the same

i,e Mean = Variance = np = m
Standard deviation = √ m
The Poisson distribution can frequently be used to approximate the binomial when n is large and p is
very small. In general, the approximation is good if p ≤ .01 and np ≤ 5

Problem
On the average, one in 400 items is defective. If the items are packed in Boxes of 100, what is the
probability that any given box of items will contain
i) No defective ii) less than two defective
ii) one or more defectives iv) more than three defectives

Here p = 1/400 = 0.0025 = probability of defective item which is very low

n = 100 = number of items packed in the box which is quite large
m = np = 100/400 or 0.0025* 100 = 0.25 average number of defective items in a box of 100
items.

i) Probability of non defective

e -0.25 ( 0.25)0
= p(X= 0) = e -0.25 = 0.7788
0!
ii) Probability of less than two defectives
p(X≤ 1) = p(X=0) + p(X=1)
e -0.25 ( 0.25)1
= 0.7788 + = 0.7788+ .1940 = .9735
1!
iii) p( X ≥ 1) = 1 – p(X= 0) = 1 – 0.7788 =0.2212

iv) p (x >3) = 1 – [ p (x = 0) + p (x = 1) +p (x =2 ) + p (x =3)] =1-[ .7788+.194+.02433+.002]

= 1-0.99913=.00087

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Chapter Two Applied Business Statistics
Probability Distributions

Normal Distribution
Let assume two results have found the success and failure in an experiment and if the possibility of
success and failure are tend to equal each time then this probability can not be determined by
binomial distribution. When the nos. of trials in binomial distribution becomes large and the
probability of success and failure tends to equal each trial then limiting form of binomial distribution
is called normal distribution.
Lt Binomial distribution = Normal distribution
n 
p  q
A random variable X is said to have a normal distribution with parameter µ (mean) and if the
density function is given by
2
1 x 
1  
2  

y = f(x) = e
 2
If we draw the graph of normal distribution, the curve obtained will be known as normal curve. The
graph of y = f(y) is a famous bell shaped curve.

The top of the bell is directly above the mean µ

-∞ x= ∞
The normal distribution is approximate to binomial distribution, whether or not p is equal to q, the
binomial tends to the form of the continues curve when n becomes large at least for the material
part of the range.
Lt Binomial distribution = Normal distribution
n 
p  q
A random variable with any mean and standard deviation can be transformed to a standardized
normal variable by subtracting the mean and dividing by the standard deviation.
For a normal distribution with mean µ and standard deviation  , the standardized variable
x-µ
z =

A value z represents the distance, expressed as a multiple of the standard deviation, that the value x
lies away from the mean. The z is called a standard normal variate which has mean zero and
standard deviation one.
The probability density function of the standard normal variate z is

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Chapter Two Applied Business Statistics
Probability Distributions

1
1  Z2
y = f(z) = e 2

2
Properties of normal curve
1. The normal curve is symmetrical about the mean (skew ness =0).
2. The height of the normal curve is at its maximum at the mean. Mean, median a mode are all
equal
3. Area under the normal curve is one.
4. Normal distribution is a continuous random variable.
5. Two parameters µ and standard deviation 

Area under the normal curve

By using the standard probability Index table, we can find the probability for the area under the
normal curve between z = 0 and any other specified value of z. As the normal curve is symmetrical,
therefore the area under the normal curve is given only for half of the positive side of the curve.
The probability of the whole area and the curve is one i,e.
p( -  ≤ z ≤  ) = 1
and p( -  ≤ z ≤ 0 ) = p( 0 ≤ z ≤  ) = 0.5

p ( z = 1) = 0.3413
p( z = -1) = 0.3413
here, p( - 1 ≤ z ≤ 1 )
= 0.3413+ 0.3413
Z = -1 Z =0 Z=1
= 0.6826

p(z = z1) = p( -  ≤ z ≤ o) + p( 0 ≤ z ≤ z1 )
z1 = 1.27
p(z ≤ 1.27) = 0.5 + .3980 = .8980
p(z ≤ -1.27) = 0.5 – ( -1.27 ≤ z ≤ 0)

## A normal curve has µ = 20,  = 10 , find the area between X1 = 15 and X2 = 40

z1 = (15-20) / 10 = - .5
z2 = (40-20) /10 = + 2

Dr. Md. Monimul Haque, Professor, Department of Finance, R.U. 12

Chapter Two Applied Business Statistics
Probability Distributions

Problem
A filling machine is set to power 952 ml of wine into bottles. The amounts of fill are normally
distributed with a mean of 952 ml and a standard deviation of 4 ml. using standard normal table to
find the probability that a bottle contains between 952 and 956 ml.

x-µ
z=

At X = 952, which is the mean
z = ( 952 - 952) / 4 = 0
Thus, as always, z = 0 at the mean
At x = 956, we find, z = (956-9520 / 4 = 1
The x interval 952 to 956 becomes the z interval from 0 to 1, from the table
p ( 0 to 1) = p( 0≤ z ≤ 1) = 0.3413
i,e. the probability that a bottle contains between 952 and 956 ml is 0.3413. On other way, 34.13%
of filled bottle will contain between 952 and 956 ml.

Problem
Test scores are normally distributed with mean 70 and sd 8. Find the percent of test scores in the
interval from 54 to 84.
At x = 54, z = -2 and at x = 84, z = 1.75
p( 0 to -2) + p( 0 to 1.75) = p( - 2 ≤ z ≤ o) + p( 0 ≤ z ≤ 1.75) = .4772 + .4599 = .9371
Hence, 93.71 % of the test scores are in the interval from 54 to 84.

Problem
A wholesale distributor of fertilizer products finds the annual demand for one type of fertilizer is
normally distributed with a mean of 120 tones and standard deviation of 16 tones. If he orders only
once a year, what quantity should be ordered to ensure that there is only a 5 percent chance of
running short? (Given that at the level of 5% chance the value of Z = 1.64)

According to the South Dakota Department of Health, the mean number of hours of TV viewing
per week is higher among adult women than men. A recent study showed women spent an average
of 34 hours per week watching TV and men 29 hours per week. Assume that the distribution of
hours watched follows the normal distribution for both groups, and that the standard deviation
among the women is 4.5 hours and is 5.1 hours for the men.
i) What percent of the women watch TV less than 40 hours per week?
ii) What percent of the men watch TV more than 25 hours per week?

Dr. Md. Monimul Haque, Professor, Department of Finance, R.U. 13

Chapter Two Applied Business Statistics
Probability Distributions

In recent years a new type of taxi service has evolved in more than 300 cities worldwide, where the
customer is connected directly with a driver via a smartphone. The idea was first developed by Uber
Technologies, which is headquartered in San Francisco, California. It uses the Uber mobile app,
which allows customers with a smartphone to submit a trip request which is then routed to a Uber
driver who picks up the customer and takes the customer to the desired location. No cash is
involved, the payment for the transaction is handled via a digital payment. Suppose the weekly
income of Uber drivers follows the normal probability distribution with a mean of $1,000 and a
standard deviation of $100. What is the z value of income for a driver who earns $1,100 per week?
For a driver who earns $900 per week? What is the likelihood of selecting a driver whose weekly
income is between $1,000 and $1,100?

Sol.
The z values corresponding to the two x values ($1,100 and $900) are:

We have already converted $1,100 to a z value of 1.00, from the Z table value we find the area
under the normal curve between $1,000 and $1,100 is .3413. We could also say 34.13% of Uber
drivers earn between $1,000 and $1,100 weekly, or the likelihood of selecting a driver and finding
his or her income is between $1,000and $1,100 is .3413.
This information is summarized in the following diagram

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Chapter Two Applied Business Statistics
Probability Distributions

Problems of Normal Distribution

1. In recent years a new type of taxi service has evolved in more than 300 cities worldwide,
where the customer is connected directly with a driver via a smartphone. The idea was
first developed by Uber Technologies, which is headquartered in San Francisco,
California. It uses the Uber mobile app, which allows customers with a smartphone to
submit a trip request which is then routed to a Uber driver who picks up the customer
and takes the customer to the desired location. No cash is involved, the payment for the
transaction is handled via a digital payment. Suppose the weekly income of Uber drivers
follows the normal probability distribution with a mean of $1,000 and a standard
deviation of $100. What is the z value of income for a driver who earns $1,100 per week?
For a driver who earns $900 per week? What is the likelihood of selecting a driver whose
weekly income is between $1,000 and $1,100?

2. A wholesale distributor of fertilizer products finds the annual demand for one type of
fertilizer is normally distributed with a mean of 120 tones and standard deviation of 16
tones. If he orders only once a year, what quantity should be ordered to ensure that there
is only a 5 percent chance of running short? (Given that at the level of 5% chance the
value of Z = 1.64)

3. According to the South Dakota Department of Health, the mean number of hours of TV
viewing per week is higher among adult women than men. A recent study showed
women spent an average of 34 hours per week watching TV and men 29 hours per week.
Assume that the distribution of hours watched follows the normal distribution for both
groups, and that the standard deviation among the women is 4.5 hours and is 5.1 hours
for the men.
i) What percent of the women watch TV less than 40 hours per week?
ii) What percent of the men watch TV more than 25 hours per week?

4. A recent study of the hourly wages of maintenance crew members for major airlines
showed that the mean hourly salary was $20.50, with a standard deviation of $3.50.
Assume the distribution of hourly wages follows the normal probability distribution. If
we select a crew member at random, what is the probability the crew member earns:
i) Between $20.50 and $24.00 per week?
ii) More than $24.00 per week?
iii) Less than $19.00 per week?

5. The heights of students in Rajshahi University are normally distributed with a mean of 66
inches and a standard deviation of 4 inches. What proportion or percentage of the
students in Rajshahi University has a height greater than 72 inches? What is probability
that a student selected at random will has height between 64 inches and 68 inches?

6. The mean inside diameter of a sample of 200 washers produced by a machine is 5.02mm,
and the standard deviation is 0.05mm. The purpose for which these washers are intended

Dr. Md. Monimul Haque, Professor, Department of Finance, R.U. 15

Chapter Two Applied Business Statistics
Probability Distributions

allows a maximum tolerance in the diameter of 4.96 to 5.08 mm; otherwise, the washers
are considered defective. Determine the percentage of defective washers produced by the
machine, assuming that the diameters are normally distributed.

7. The registrar of a university studied the grade point average (GPA) of students over
many years. He has discovered that the distribution is approximately normal with a mean
of 2.80 and a standard deviation of 0.40.
i) What is the probability that a randomly selected student has a GPA of from 2.00
up to 3.00?
ii) What percent of the students have a GPA less than 2.00?
iii) The student population at the university is 10,000. How many students are on the
Dean’s list, that is, have GPAs of 3.70 or higher?

Dr. Md. Monimul Haque, Professor, Department of Finance, R.U. 16