MODELING - PROBLEM SET 1 Review of Probability - Section 1 A survey of 1000 people determines that 80% like walking and 60% like biking, and all like at least one of the two activities. How many people in the survey like biking but not walking? AO Bd O2 D3 HA A life insurer classifies insurance applicants according to the following attributes: ‘M - the applicant is male A - the applicant is a homeowner ut of a large number of applicants the insurer has identified the following information: 40% of applicants are male, 40% of applicants are homeowners and 20% of applicants are female homeowners. Find the percentage of applicants who are male and do not own a home. A) 1 B) .2 Cc) 3 D) 4 E) 5 Let A, B,C and D be events such that B = A’, CAD =0, and Plaj=4, PiBj=4, Picja)=4, Picja|= 4, Pipja|=}, Pwpje}=t Calculate P[C UD]. \e BT OF DP Hi You are given that P[A] =.5 and P[AU B] =.7. Actuary I assumes that A and B are independent and calculates P[] based on that assumption. Actuary 2 assumes that A and 8 mutually exclusive and calculates P[] based on that assumption, Find the absolute difference between the two calculations, A) 0 B) 05 C) 10 D) .15 E) .20 A test for a disease correctly diagnoses a diseased person as having the disease with probability .85 ‘The test incorrectly diagnoses someone without the disease as having the disease with a probability of .10. If 1% of the people in a population have the disease, what is the chance that a person from this population who tests positive for the disease actually has the disease? A) 0085 B) .0791 —C) .1075--D) .1500_B) .9000 ‘Two bowls each contain 5 black and 5 white balls. A ball is chosen at random from bow! | and put into bowl 2. A ball is then chosen at random from bowl 2 and put into bowl 1. Find the probability that bow! | still has $ black and $ white balls. 4} Bi OF D} Scanned with CamScannerPeople passing by « city intersection are asked for the month in which they were born, Itis assumed that the population is uniformly divided by birth month, so that any randomly passing person has an equally likely chance of being born in any particular month. Find the minimum number of people needed so that the probability that no two people have the same birth month is less than 5. A)2 B)3 C4 D) Ss BE) 6 In a T-maze, a laboratory rat is given the choice of going to the left and getting food or going to the right and receiving a mild electric shock. Assume that before any conditioning (in trial number 1) rats are equally likely to go the left or to the right. After having received food on a particular trial, the probability of going to the left and right become .6 and .4, respectively on the following trial. However, after receiving a shock on a particular trial, the probabilities of going to the left and right on the next trial are .8 and .2, respectively. What is the probability that the animal will turn left on trial number 2? A)1 B)3 OS D) 7 E) .9 In the game show "Let's Make a Deal", a contestant is presented with 3 doors. There is a prize behind one of the doors, and the host of the show knows which one. When the contestant makes a choice of door, at least one of the other doors will not have a prize, and the host will open a door (one not chosen by the contestant) with no prize, ‘The contestant is given the option to change his choice after the host shows the door without a prize. If the contestant switches doors, what is the probability that he gets the door with the prize? A)O Bt OF D)} £) A supplier of a testing device for a type of component claims that the device is highly reliable, with P(A|B] = P[A'\B'| = .95,, where A= device indicates component is faulty, and B= component is faulty . ‘You plan to use the testing device on a large batch of components of which 5% are faulty Find the probability that the component is faulty given that the testing device indicates that the component is faulty . A)O B) 05 Cc) AS D) .25 E) .50 An insurer classifies flood hazard based on geographical areas, with hazard categorized as low, medium and high. ‘The probability of a flood occurring in a year in each of the three areas is ‘Area Hazard low medium high Prob. of Flood 001 02 2 The insurer's portfolio of policies consists of a large number of policies with 80% low hazard policies, 18% medium hazard policies and 2% high hazard policies. Suppose that a policy had a flood claim during a year. Find the probability that it is a high hazard policy. A) 50 B) .53 C) 56 D) .59 E) 62 Scanned with CamScanner12. One of the questions asked by an insurer on an application to purchase a life insurance policy is whether or not the applicant is a smoker. The insurer knows that the proportion of smokers in the general population is .30, and assumes that this represents the proportion of applicants who are smokers, The insurer has also obtained information regarding the honesty of applicants: 40% of applicants that are smokers say that they are non-smokers on their applications, none of the applicants who are non-smokers lie on their applications What proportion of applicants who say they are non-smokers are actually non-smokers? Ao Be OF DF B1 13, When sent a questionnaire, 50% of the recipients respond immediately. Of those who do not respond immediately, 40% respond when sent a follow-up letter. If the questionnaire is sent to 4 persons and a follow-up letter is sent to any of the 4 who do not respond immediately, what is the probability that at least 3 never respond? A) (3)! 4+-4(.3)°(0.7) B) 4(.3)°(.7) ©) (aE +4(.1)5(9) D) .4(.3)(.7)3 +(.7)" E) (.9)'+4(.9)5(.1) 14. A fair coin is tossed. If a head occurs, 1 fair die is rolled; if a tail occurs, 2 fair dice are rolled. IfY is the total on the die or dice, then P[Y = 6] = A) oF Dd oe en 2 SI oe 15, In Canada’s national 6-49 lottery, a ticket has 6 numbers each from 1 to 49, with no repeats. Find the probability of matching exactly 4 of the 6 winning numbers if the winning numbers are all randomly chosen. A).00095 —_B).00097_C).00099-—-D).00101_—~E) 00103 Scanned with CamScannerMODELING - PROBLEM SET 1 SOLUTIONS Let A= "like walking" and B = “like biking" . We use the interpretation that "percentage" and “proportion” are taken to mean "probability". Weare given P(A) = .8, P(B) =.6 and P(AUB)=1. From the diagram below we can see that since AUB = AU(BO A’) we have P(AUB) = P(A) + P(A'2) B) + P(A’ B) = 2 is the proportion of people who like but (and) not walking . Ina similar way we get P(AN B') = 4. A B An algebraic approach is the following. Using the rule P(A U B) = P(A) +P(B)—P(AN B), we get 1=.8+.6— P(AN B) + P(ANB) « Then, using the rule P(B) = P(BN A) + P(BN A’), we get (BNA) =6—.4=.2. Answer: C = 4, P[M']= 6, P[H| = 4, PiH'| = 6, P[M’a H] = to find P[M 0H]. From probability rules, we have 6 = P\H'| = PIM'0.H'] + PIM 0H’), and 6 = PIM’ = P[M'0 H+ PIM’ 9H’) =.24 P[M'N H']. Thus, Pld’ H'] = 4 and then P[M 1H'] = .2. The following diagram identifies the component probabilities. ‘The calculations above can also be summarized in the following table. The events across the top of the table categorize individuals as male (M) or female (M/'), and the events down the left side of the table categorize individuals as homeowners (H) or non-homeowners (H’). P(M) = 4, given P(M') =1-4=6 P(H)=4 P(MN H) « P(M'N H) =.2, given given = P(H) — P(M'n Hl) 2 4 P(H')=1-4 P(M H’) = P(M) — P(MO.H) = Answer: B Scanned with CamScannerSinceC and D have empty intersection, P{C UD] = P{C] + P\D]. Also, since A and Bare "exhaustive" events (since they are complementary events, their union is the entire sample space, with a combined probability of P[AU B] = P(A] + P[B] = 1). We use the rule P{C] = P[C Al + P[CNA’}, and the rule P[C|A] = Sar to get P(C| = PICA] - PA) + PIC|A]- PLA] = 3 - | Te and P[D| = P[D|A]- PIA] + P[D|4)]- Pl] = ¢ a Then, P[CUD| = P[C]+ PD] = 3%. Answer: C. Actuary 1: Since A and Bare independent, so are A’ and B’. PIA'N Bi] =1- P[AUB) = 3. But .3 = Pla’ B’) = Pl4']- P[B'] = (.5)P[B'] + P[B'} = 64 P[B] = 4 Actuary 2: .7 = P[AU B] = P[A] + P[B] =.5 + P[B]--P[B}= 2. Absolute difference is. |.4—.2| = .2. Answer? E We define the following events: D- a persor'fhas the disease, TP - a person tests positive for the disease. Weare given P(TP|D] = .85 and P(TP|D)|=.10 and PD} =.01 . We wish to find P[D|TP| . Using the formulation for conditional probability we have P(D|T'P] = ASOTT But P[DATP] = P{TP|D| - P[D] = (.85)(.01) = .0085 , and P[D' NTP] = P{TP|D'| - PD’) = (.10)(.99) = 099. ‘Then, PITP| =P|DN TP) + PID’ NTP) = 1075+ P[D|TP] = am = 0791. The following table summarizes the calculations. P[D] =.01, given = P(D|=1-PlD)=.99 4 4 P(DNTP| PID OTP) = P(TP|D]- P|D) = .0085 = P(TP|D)|- PD] =.099 y P(TP| = P|IDATP| + PID’ ATP| = .1075 4 PIDITP| = "pra! = yee = -0791.. Answer: B Scanned with CamScannerLet C be the event that bow! | has S black balls after the exchange. Let B, be the event that the ball chosen from bowl | is black, and let By be the event that the ball chosen from bowl 2 is black. Event C is the disjoint union of B) By and Bi 9 By (black-black or white-white picks), so that P[C] = P[B, By] + P[B, Nn By) . The black-black combination has probability (+,)(}) since there is a 3%; chance of picking black from bow! 1, and then (with 6 black in bow! 2, which now has 11 balls) 4; is the probability of picking black from bow! 2. This is P{B, 0 Ba| = P(B2|Bi) - P(B] = ()(3)- Ina similar ways the white white combination has probability (f)($) « Then PIC] = B)(5) + (BG) = F - Answer: C Ay = event that second person has different birth month from the first. P(A2) = H} = 9167. Ay = event that third person has different birth month from first and second, Then, the probability that all three have different birthdays is PlAs 9 Aa] = PlAs|Aa] (Aa) = (79 )(73) = +7639. Ay = event that fourth person has different birth month from first three. ‘Then, the probability that all four have different birthdays is P[A\ Ag 9 Aa] = P[AylAs0 Ao}: P[As 9 Aa) = PlAal As Ag] - P[As|Aa] » P(Aa) = (75) (43) (43) = 5729. As = event that fifth person has different birth month from first ie ‘Then, the probability that all five have different birthdays is, P[AsQ Ay Ag Ag] = P[As|Ay 0 Ay 9 Aa] - PLAY Ag AQ] [As|Aa 0 Asm Aa] - P[Ag|As 9 Aa] - P[As|A2] - P(A2) = (AGE) Bq) = 3819. Answer: D 21 = turn left on trial 1, R1 = turn right on trial 1, L2 = turn left on trial 2 We are given that P[L1] = P[RL P(L2| = P[L2M Li] + P[L2N Rij since £1, R1 forma partition . P(L2|L1] = .6 Gf the rat turns left on trial 1 then it gets food and has a .6 chance of turning left on trial 2). Then P[L2M L1 = P[L2\L1] - P{LA] = (.6)(.5 Ina similar way, PLM Ri] = P{L3|RI- {RI = (.8)(.5) — Answer: D Then, P|L2] = .3+ 4 Scanned with CamScannerWe define the events A = prize door is chosen after contestant switches doors , B = prize door is initial one chosen by contestant . Then P[B] = 3 , since each door is equally likely to hold the prize initially. To find P(A] we use the Law of Total Probability. P(A] = P[A|B]- P[B] + P[A|B']- P(B’) = (0)(4) + ()(9) = 3- If the prize door is initially chosen, then after switching, the door chosen is not the prize door, so that P[A|B] = 0. If the prize door is not initially chosen, then since the host shows the other non- prize door, after switching the contestant definitely has the prize door, so that P(A] B'] = 1. Answer: E We are given P[B] = .05. We can calculate entries in the following table in the order indicated. A a B P[A|B] = .95 (given) P[A'|B!] =.95 (given) PIB)=.05 1. PIAN B) = P{A\B]- P[B] = .0475 (given) B 3. PIANB)) 2 PIA'N B’] PIB’) [B’] — P[A'n B’) = P(A'|B’| P[B’] =1- PIB) .95 — .9025 = .0475 = 95? = .9025 = 95 4. P(A] = P[AN B] + P[AN BY = .095 5. (pla) = “heal = This is a classical Bayesian probability situation, Let C denote the event that a flood claim occurred, We wish tofind. P(H|C) . 0475 095 5. Answer: E ‘We can summarize the information in the following table, with the order of calculations indicated. LE, P(b)=.8 M, P(M) = 18 H, P(H) (given) (given) (gi Cc P(C\L) = .001 P(C|M) = .02 P(C\|H) = 25 (given) (given) (given) 1 P(CNL) 2 P(CNM) 3. P(COH) P(C|L) + P(L) = P(C|M)- P(M) = P(C|H): P(H) = .0008 = 0036 4. P(C) = P(CNL) + PCM) +P(C OH) = 0094. 5. P(H|C) = oe = AB = 532. Answer: B Scanned with CamScannerWe identify the following events: S- the applicant is asmoker, VS - the applicant is a non-smoker = S” DS - the applicant declares 10 be a smoker on the application DN - the applicant declares to be non-smoker on the application = DS’. ‘The information we are given is P(S] =.3, wish to find PINS|DN] = “ Wecaleulate 4 = PIDN|S| = RES! = PPX , pipwns|=.12, and 0 = P[DS|Ns] = F005) _ Pussy” + P[DSANS]=0. PINS] =.7, PIDN|S]=.4, P(DS|NS] =0. We Using the rule P[A] = P[A 9B] + P[AN BJ, and noting that DS = DN’ and S = NS’ wehave P[DSNS] = P[S]— PIDN NS] =.3—.12=.18, and P(DN ONS] = P[NS] — P[DSONS] = .7-0=.7,and P[DN] = P\DN ONS] + P[DN NS] =.7 + 12=.82. 7 Then, PINS|pN] = “ee. ze ‘These calculations can be summarized in the order indicated in the following table. P(S), 3 2" L. PUS)=1- P(S)=7 siven 4 6.D8 = 8. P(DSN8) 2. P(DS|NS) = 0,, given P(DS) = P(S) ~ P(DN NS) P(DS ANS) = P(DSN 8) = 3-42-18 + P(DS NS) = 18+0=.18 4 tt 7.DN 4. P(DN|S) = 4 3. P(DN AS) = P(DN) given = P(NS) - P(DS NS) =1- PWS) PDN OS) =7-0=7 Laas P(DN|S) - P(S) 82 A)(.3) = Then, 8 PIVS|DN| = “RSE ~ f= Answer: D ‘The probability that an individual will not respond to either the questionnaire or the follow-up letter is (.5)(.6) =.3. The probability that all 4 will not respond to either the questionnaire or the follow-up letter is (.3)*. P[3 don't respond] = P{I response on Ist round, no additional responses on 2nd round] + P{no responses on Ist round, 1 response on 2nd round] = Af(.5)*(.6)°] + 4[(.5)*(.6)°(.4)] = 4(.3)°(.7) . Then, Plat least 3 don't respond] = (.3)* + 4(.3)°(.7) - Answer: A Scanned with CamScanner14. If | fair die is rolled, the probability of rolling a 6 is j , and if 2 fair dice are rolled, the probability of rolling a 6 is 3 (of the 36 possible rolls from a pair of dice, the rolls 1-5, 2-4, 3-3, 4-2 and 5-1 result ina total of 6), Since the coin is fair, the probability of rolling a head or tail is 5. ‘Thus, the probability that Y = 6 is (.5)(4) +(.5)( Suppose you have bought a lottery ticket. There are ($) = 15 ways of picking 4 numbers from the 6 numbers on your ticket. Suppose we look at one of those subsets of 4 numbers from your ticket. In order for the winning ticket number to match exactly those 4 of your 6 numbers, the other 2 winning ticket numbers must come from the 43 numbers between | and 49 that are not numbers on your ticket, There are (8) = 342 — 903 ways of doing that, and since there are 15 subsets of 4 numbers on your ticket, there are 15 x 903 = 13,545 ways in which the winning ticket numbers match exactly 3 of your ticket numbers, Since there are a total of 13,983,816 ways of picking 6 out of 49 numbers, your chance of matching exactly 4 of the winning numbers is 00096862 Answer: B Scanned with CamScanner