COPPERBELT UNIVERSITY

SCHOOL OF GRADUATE STUDIES

CLASS WORK 2 MBA
Essential Readings
Tailoka F.P. Study Guide for Business Statistics and Economics worksheet one pages 4 to 6
Tailoka F.P. Business Mathematics and Statistics Questions & Answers Level 1and 2 Fourth
edition Chapter 3&4, Chapter 9, pages 98 to 103
Tailoka F.P. Lecture Notes, Chapters 1,2&3.
Other Readings
Paul Newbold, William L. Carlson, Betty M. Thorne. Statistics for Business and Economics,
Chapter 1 & 2.
Alan Agresti, Christine Franklin. Statistics, The Art and Science of Learning from Data, Chapter
1 &2.
James L. Kenkel. Introductory Statistics for management and Economics, Chapters 1,2,3, &4.

PROBABILITY
CLASS WORK 3 MBA
Essential Readings
Tailoka F.P. Study Guide for Business Statistics and Economics worksheet 2
Tailoka F.P. Business Mathematics and Statistics Questions & Answers Level 1and 2 Fourth
edition Chapter 8.
Tailoka F.P. Lecture Notes, Chapters 4.
Other Readings
Paul Newbold, William L. Carlson, Betty M. Thorne. Statistics for Business and Economics,
Chapter 3.

TAILOKA FRANK PATSON MBA Statistics/Quantitative Methods June 2019

Alan Agresti, Christine Franklin. Statistics, The Art and Science of Learning from Data, Chapter
5.
James L. Kenkel. Introductory Statistics for management and Economics, Chapter 5.

FUNDAMENTAL PRINCIPLE OF COUNTING

EXAMPLE ONE
Suppose a license plate has two distinct letters followed by three digits with the first not zero.
How many different license plates can be printed?
EXAMPLE TWO
A man has 3 jackets, 10 shirts, and 5 pairs of pants. If an outfit consists of a jacket, a shirt and a
pair of pant, how many different outfits can the man make?
EXAMPLE THREE
Evaluate each factorial
(a) 7! (b) 5! (c) 1! (d) 2! (e) 4!
EXAMPLE FOUR
A toy manufacturer makes a wooden toy in two parts; the top part may be painted red, white or
blue and the bottom part brown, orange, yellow or green. How may differently painted toys can
be produced?
EXAMPLE FIVE
Consider the set of letters a, b, c and d, find the number of permutations of
(i) The 4 letters (taken all at a time)
(ii) The letters taken 3 at a time
(iii) The 4 letters taken 2 at time
EXAMPLE SIX
Evaluate the following permutations
(a) 𝑃(5,1) (b) 𝑃(5,2) (c) 𝑃(5,3) (d) 𝑃(5,4) (e) 𝑃(6,6)
EXAMPLE SEVEN
In a stock room, 5 adjacent bins are available for storing 5 different items. The stock of each item
can be stored satisfactorily in any bin.
(i) In how many ways can we assign the 5 items to the 5 bins?
(ii) Suppose that there are 6 different parts to be stocked, but only 4 bins, in how many
ways can it be done?

TAILOKA FRANK PATSON MBA Statistics/Quantitative Methods June 2019

EXAMPLE EIGHT
How may many permutations are there of 3 objects say, a, b and c?
EXAMPLE NINE
Determine the number of ways in which 4 persons can take their places in a taxi having 6 seats.
PERMUTATION WITH REPETIONS
EXAMPLE TEN
Find the number of permutation of the word “SEE”.
EXAMPLE ELEVEN
Find the number of permutations of the words
(i) ACCOUNTANTS
(ii) MISSISSIPPI
EXAMPLE TWELVE
Find the number of ways in which 3 chickens and 7 goats can be distributed among 10 farmers
each receiving one animal.

COMBINATIONS
EXAMPLE THIRTEEN
Evaluate the following
(a) 𝐶(5,1) (b) 𝐶(5,2) (c) 𝐶(5,3) (d) 𝐶(5,4) (e) 𝐶(5,5)
EXAMPLE FOURTEEN
Determine the number of combinations of the letters a, b, c and d taken 3 at a time.
EXAMPLE FIFTEEN
A perfume manufacturer who makes 10 fragrances wants to prepare a gift package containing 6
fragrances. How many combinations of fragrances are available?

EXAMPLE SIXTEEN
Find the number of handshakes that may be exchanged among a party of 12 students if each
student shakes hands once with each other

TAILOKA FRANK PATSON MBA Statistics/Quantitative Methods June 2019

 BASIC PROPABILITY
EXAMPLE ONE
Suppose a fair coin is tossed twice. Find the probability of the following:
(a) One head
(b) Two heads
(c) Three heads
(d) At least one head
EXAMPLE TWO
If a single playing card is drawn from an ordinary pack 52 – card bridge deck, find the
probability of each of the following events.
(a) An Ace is draw
(b) A face card is drawn
(c) A spade is drawn
(d) A spade or heart is drawn
(e) The card will be red or face card

EXAMPLE THREE
Considering Example one, set up a probability distribution for the number of heads.
EXAMPLE FOUR
2
Suppose the weather forecaster says that the probability of rain tomorrow is . Find the odds in
5
favour of rain tomorrow.
EXAMPLE FIVE
The odds that a particular bid will be a low bid are 8 to 13. Find the probability that the bid will
be the low bid.
EXAMPLE SIX
1. Suppose two fair dice are rolled. Find each of the following probabilities:
(a) The first die shows a 2 or the sum is 6
(b) The sum is 5 or the second die is 4.
(c) Obtaining a 4 on the first throw and an odd number on the second throw
(d) A 4 four on the first throw and an odd number on the second throw
(e) Neither throw results in a 4
(f) At least one throw results in a 4
2. Are the events a 4 is obtained on the first throw and odd number is obtained independent

TAILOKA FRANK PATSON MBA Statistics/Quantitative Methods June 2019

EXAMPLE SEVEN
The training Manager for a large stockbrokerage firm has noticed that some of the firm’s brokers
use the firm’s research advice, while other brokers tend to go with their findings of which stocks
will go up. To see if the research department is better than just the findings of the brokers, the
manager conducted a survey of 100 brokers, which result in the following table:
Picked stocks that Didn’t pick stocks Total
went up that went up
Used research 30 15 45
Didn’t use research 30 25 55
Totals 60 40 100

Find the following probabilities:

(a) A broker picked the stock that went up
(b) A broker didn’t pick the stock that went up
(c) The broker used research
(d) The broker didn’t use research
(e) Given that the broker who used research picks stocks that went up

EXAMPLE EIGHT
2 3
A class is 5 women and 5 men. Of the women, 25% are business majors. Find the probability that
a student chosen at random is a woman business major.

EXAMPLE NINE
Suppose an investment firm is interested in the following events:
𝐴 = {𝐶𝑜𝑚𝑚𝑜𝑛 𝑠𝑡𝑜𝑐𝑘 𝑖𝑛 𝑋𝑌𝑍 𝑐𝑜𝑟𝑝𝑜𝑟𝑎𝑡𝑖𝑜𝑛 𝑔𝑎𝑖𝑛𝑠 10% 𝑛𝑒𝑥𝑡 𝑦𝑒𝑎𝑟}
𝐵 = {𝐺𝑟𝑜𝑠𝑠 𝑁𝑎𝑡𝑖𝑜𝑛𝑎𝑙 𝑃𝑟𝑜𝑑𝑢𝑐𝑡 𝑔𝑎𝑖𝑛 10%𝑛𝑒𝑥𝑡 𝑦𝑒𝑎𝑟}
The firm has assigned the following probabilities on the basis of available information
𝑃(𝐴|𝐵) = 0.8 , and𝑃(𝐵) = 0.3. That is, the investment company believes the probability is 0.8
that the XYZ common stock will gain 10% in the next year assuming that the GNP gains 10% in
the same time period. In addition, the company believes the probability is only 0.3 that the GNP

TAILOKA FRANK PATSON MBA Statistics/Quantitative Methods June 2019

will gain 10% in the next year. Use the formula for calculating the probability of an intersection
to calculate the probability that XYZ common stock and GNP gain 10% in the next year.

EXAMPLE TEN
The probability that interest rates will rise has been assessed as 0.8. If they do rise, the
probability that the stock market index will drop is estimated to be 0.9. If the interest rates do not
rise, the probability that the stock market index will still drop is estimated at 0.4. What is the
probability that the stock market index will drop?
EXAMPLE ELEVEN
Suppose we toss a fair die, and let 𝐵 be the event observe a number less or equal to 4 and 𝐴 the
event an even number is observed. Are 𝐴 and 𝐵 independent event?
EXAMPLE TWELVE
(a) Suppose that we have two events, A and B, with
P A  0.5, P( B)  0.60 and P A  B  0.40.

(i) Find P A B  (ii) Find PB A

(iii) Are A and B independent? Why or why not?

(b) The following data from a sample of 80 families in a city show the record of
college attendance by fathers and their oldest sons.

Son
Attended Did not
College Attend
College
Attended 13 12
Father College
Did not Attend
College 20 35

TAILOKA FRANK PATSON MBA Statistics/Quantitative Methods June 2019

 (i) Show the joint probability table.

(ii) Use the marginal probabilities to comment on the comparison between

fathers and sons in terms of attending college.

(iii) What is the probability that a son attended college given that his father did
not attend college?

(iv) Is attending college by the son independent of whether or not his father
attended college? Explain, using probability values.

BAYES’ THEOREM
A POSTERIORI PROBABILITY
EXAMPLE THIRTEEN

(a) The prior probabilities for events

A1 , A2 , and A3 are P A1   0.28, P A2   0.50, and P A3   0.22. The
conditional probabilities of event B given
A1, A2 , and A3 are PB A1   0.50, PB A2   0.25, and PB A3   0.35.

(i) Compute PB  A1 , PB  A2  and PB  A3 .

(ii) Apply Bayes Theorem to compute the posterior probability PA2 B .

(iii) Use the tabular approach to applying Bayes’ theorem to compute

PA1 B , PA2 B , and PA3 B .

(b) A stockbroker is having a bad year. He is wondering whether to sack his financial
adviser. If he makes money on his next deal, the chance he will sack the adviser
is 0.55. if he does not make money, the chance is 0.85. The probability that he
will make money on the next deal is 0.03.

(i) Find the probability that the financial adviser is sacked.

TAILOKA FRANK PATSON MBA Statistics/Quantitative Methods June 2019

 (ii) If you are told that the adviser was sacked, what is the probability that the
stockbroker made money on his next deal?

EXAMPLE FOURTEEN

In a certain city, 40% of the people consider themselves Movement for Multiparty Democracy
(MMD), 35 % percent consider themselves to be United Party for National Development
(UPND) and 25 % consider themselves to be independents (I). During a particular election, 45
percent of the MMDs voted, 40 percent of the UPND voted and 60 percent of the independents
voted. Suppose a person is randomly selected:
(a) Find the probability that the person voted
(b) If the person voted, find the probability that the voter is
(i) MMD
(ii) UPND
(iii) Independent
EXAMPLE FIFTEEN
Three girls Chanda, Mumba, and chileshe, pack okra in a factory. From the batch allocated to
them Chanda packs 55%, Mumba 30% and chileshe 15%. The probability that Chanda breaks
some okra in a pack is 0.7, and the respective probabilities for Mumba and Chileshe are 0.2 and
0.1. what is the probability that a packet with broken okra found by the Checker was packed by
(a) Chanda?
(b) Mumba?
(c) Chileshe?
EXAMPLE SIXTEEN
A publisher sends advertising material to an accounting text to 80% of all professors teaching the
appropriate Accounting Course. Thirty percent of the Professors who received this material
adopted the books, as did 10% of the professors who did not receive the material. What is the
probability that a Professor who adopts the book has received the advertising material?

TAILOKA FRANK PATSON MBA Statistics/Quantitative Methods June 2019

 PROBABILITY DISTRIBUTION

CLASS WORK 2 MBA

Essential Readings
Tailoka F.P. Study Guide for Business Statistics and Economics worksheet 2.
Tailoka F.P. Business Mathematics and Statistics Questions & Answers Level 1and 2 Fourth
edition Chapter 9 & 10.
Tailoka F.P. Lecture Notes, Chapters 5.
Other Readings
Paul Newbold, William L. Carlson, Betty M. Thorne. Statistics for Business and Economics,
Chapter 5.
Alan Agresti, Christine Franklin. Statistics, The Art and Science of Learning from Data, Chapter
6.
James L. Kenkel. Introductory Statistics for management and Economics, Chapters 8.
EXAMPLE ONE
(a) The table below shows a probability distribution for the random variable x.

(i) Compute Ex  , the expected value of x.

(ii) Compute  2 , the variance of x.

(iii) Compute  , the standard deviation of x.

x 3 6 9
f x  0.24 0.49 0.27

(b) A financial report showed that 35% of accountants are employed in public
accounting. Assume that this percentage applies to a group of 10 college

TAILOKA FRANK PATSON MBA Statistics/Quantitative Methods June 2019

 graduates just entering the accounting profession. What is the probability that at
least three graduates will be employed in public accounting?

(c) PC has observed that calculators fail and need to be replaced at the rate of three
every 25 days.

(i) What is the expected number of calculators that will fail in 30 days?

(ii) What is the probability that at least two will fail in 50 days?

(iii) What is the probability that exactly three will fail in 10 days?

EXAMPLE TWO
Suppose you have a normal distribution variable𝑋, 𝜇 = 50 and𝜎 = 15. Find the probability that
𝑋 will fall within the interval 30 and 70.
EXAMPLE THREE
Determine the area to the right of the 𝑍 score 1.64 for the standard normal distribution, i.e.,
find𝑃(𝑍 > 1.64).
EXAMPLE FOUR
Find the probability that the value of the standard normal variable will be between -1.23 and 1.14
EXAMPLE FIVE
Find the probability that the value of the standard normal variable will be between 0.43 and 1.55.
EXAMPLE SIX
(a) The time needed to complete a final examination in a particular college course is
normally distributed with a mean of 80 minutes and a standard deviation of 10
minutes.

(i) What is the probability of completing the exam in one hour or less?

(ii) What is the probability that a student will complete the exam in more than
60 minutes but less than 75 minutes?

TAILOKA FRANK PATSON MBA Statistics/Quantitative Methods June 2019

 (iii) Assume that the class has 60 students and that the examination period is
90 minutes in length. How many students do you expect will be unable to
complete the exam in the allotted time?

(b) A food processor packages instant orange juice in small jars. The weights of the
contents of the jars are approximately normally distributed with mean 12.05
ounces and standard deviation 0.32 ounce.

(i) Find the probability that the content of a randomly selected jar of instant
orange juice will be less than 12 ounces.

(ii) Find the value x which makes the following statement true:
The contents of five percent of the jars packaged by this food processor
weigh less than 𝑥 ounces.

THE NORMAL DISTRIBUTION AS AN APPROXIMATION TO THE BINOMIAL

DISTRIBUTION
EXAMPLE SEVEN
1
The probability that a machine will be down for repairs next is week is . A firm has 100 such
2
machines and whether one is down, is statistically independent of whether another is not down.
What is the probability that at least 60 machines will be down?

SOLUTION EIGHT
Note that the question is Binomial distribution question because of the fact that there are two
possible out outcomes. Either the machine is working or is down. The probability that the
1 1
machine will be down 𝑃 = 2 and the machine is not down is𝑞 = 1 − 𝑝 = 2. The number of
machines 100 is very large
100
100
1 𝑥 1 100−𝑥
𝑃(𝑋 ≥ 60) = ∑ 𝑥𝐶 ( ) ( )
2 2
𝑥=60

This is tedious; hence we use the normal distribution to approximate the binomial distribution.

1 1 1
𝜇 = 𝑛𝑝 = (100) (2) = 50 , and 𝜎 = √𝑛𝑝𝑞 = √100 (2) (2) = √25 = 5 . Note that the
binomial distribution is discrete and the normal distribution is continuous, this requires the use of
a continuity factor, in our case we subtract 0.5. Therefore, we compute,

TAILOKA FRANK PATSON MBA Statistics/Quantitative Methods June 2019

 59.5 − 50
𝑃(𝑋 ≥ 59.5) = 𝑃 (𝑍 ≥ ) = 𝑃(𝑍 ≥ 1.9) = 0.5 − 0.4713 = 0.0287
5
Normal Approximation to the Binomial Distribution
If 𝑛 (the number of trials) is large and 𝑃 (the probability of success) is not close to 0 or 1, the
probability of the number of successes occurring in 𝑛 Bernoulli trials can be approximated by a
normal distribution. Experience indicates that the approximation is fairly accurate as long as
𝑛𝑝 ≥ 5 and 𝑛𝑞 ≥ 5. A continuity correction factor, a value of 0.5 is added and /or subtracted
from a value of 𝑥 when the continuous normal probability distribution is used to approximate the
discrete binomial probability distribution.
Poisson Approximation to the Binomial distribution
If 𝑛 (the number of trials) is large and 𝑃 (the probability of success) is close to 1, in which case
variance equal to the mean of a Poisson random variable we can use the Poisson distribution to
approximate the Binomial distribution
Consider the following example if a fault in a piece of precision equipment is 0.0002 and each
completed machine has 500 components, what is the probability of there being at least two
faults?
SOLUTION
Let 𝜇 = 𝑛𝑝 = (500)(0.0002) ≈ 0.1 ; 𝜎 2 = 𝑛𝑝𝑞 = 500(0.0002)(0.9998) = 0.09998 ≈ 0.1

Using the Poisson probability distribution, we get 𝑃(𝑋 ≥ 2) = 1 − 𝑃(𝑋 ≤ 1)

(0.1)0 𝑒 −0.1
𝑃(𝑥 = 0) = ≈ 0.9048
0!
(0.1)1 𝑒 −0.1
𝑃(𝑥 = 1) = ≈ 0.09048
1!
Therefore the required probability is 1 − 0.99528 = 0.00472
Using the Binomial probability distribution, we get
𝑃(𝑋 ≥ 2) = 1 − 𝑃(𝑋 ≤ 2)
500 0 500
𝑃(𝑥 = 0) = 0𝐶(0.0002) (0.9998) ≈ 0.9048
500 1 499
𝑃(𝑥 = 0) = 1𝐶(0.0002) (0.9998) ≈ 0.0905
Therefore the required probability is 1 − 0.9953 = 0.0047

We get the same probability to four decimal places 0.0047.

TAILOKA FRANK PATSON MBA Statistics/Quantitative Methods June 2019

 Finance and MSc Accounting Only Students.
EXAMPLE ONE
A business executive has observed from long experience that his appointments
show up any time from 15 minutes early to 30 minutes late. Assume the
distribution of appointment arrival times is uniform over the interval between -15
and 30, with 0 representing scheduled appointment time.

(a) Find the probability that the executive’s next appointment is not late.
(b) What fraction of all his appointments arrive within five minutes of the
scheduled time?

EXAMPLE TWO
An advertisement claims that a smoke detector system will last for an average of
two years before the batteries have to be replaced. If we assume the life length of
the system has an exponential distribution, what proportion of all systems sold
will last at least two years?

TAILOKA FRANK PATSON MBA Statistics/Quantitative Methods June 2019