Practice Problems

1. A company has two production lines for plastic bottles, A and B producing in equal
capacity. Two percent of the bottles coming off of line A are defective, and 8% of those
off of line B are defective. If a bottle is selected at random and found to be defective,
what is the probability that it came from line A?

2. The probability that a randomly selected employee is a participant in an optional

retirement program is 0.40. If 10 employees are chosen randomly, what is the probability
that the proportion of participants is at least 0.70?

3. Consider a population of consumers consisting of two types of consumers. The upper

class of consumers comprises 35% of the population and each member has a probability
of 0.8 purchasing of brand A of a product. Each member of the rest of the population has
a probability of 0.3 of purchasing brand A of the product. A consumer is chosen at
random and found to be buyer of the brand A. What is the probability that the buyer
belongs to middle and lower class of consumers?

4. An industrial salesman wants to know the average number of units he sells per sales call.
He checks his past sales records and comes up with the following probabilities:
Sales (units) 0 1 2 3 4 5
Probability .15 .2 .1 .05 .3 .2
You are expected to help the sales man in his objective.
If he makes a commission of Rs. 10,000 per unit he sells, what is his average commission?
5. Concert pianist Donna Prima has become quite upset at the number of coughs occurring in
the audience just before the start of the performance. Donna estimates that on average
eight coughs occur just before the start of her performance. Ms Prima has sworn to her
conductor that if she hears more than five coughs at tonight’s performance, She will refuse
to play. What is the probability that she will play tonight?

6. You are considering the risk return profiles of two mutual funds for investments. Fund A
promises an expected return of 8% with standard deviation of 14%. Fund B promises an
expected return and standard deviation of 4% and 5% respectively. Assume that the
returns are approximately normally distributed.
a) Which mutual fund will you pick if your objective is to minimize probability of
earning a negative return?
b) Which mutual fund will you pick if your objective is to maximize
probability of earning a return above 8%?
Support your answers with probabilities.

7. A public-interest group was planning to make a court challenge to auto insurance rates in
one of the three cities: Atlanta, Baltimore, and Cleveland. The probability that it would
choose Atlanta was 0.40; Baltimore, 0.35; and Cleveland, 0.25. The group also new that,
 it had 60% chance of favorable ruling if it chose Baltimore, 45% if it chose Atlanta, and
35% if it chose Cleveland. If the group did receive a favorable ruling, which city did it
most likely choose?

8. The latest nationwide political poll indicates that for Americans who are randomly
selected, the probability that they are conservative is 0.55, the probability that they are
liberal is .30, and the probability that they are middle- of – the –road is 0.15. Assuming
that these populations are accurate, answer the following questions pertaining to a
randomly chosen group of 10 Americans.
i. What is the probability that four are liberal?
ii. What is the probability that none are conservative?
iii. What is the probability that two are middle-of-the- road?
iv. What is the probability that at least eight are liberal?

9. A toll bridge charges $1.00 for passenger cars and $2.50 for other vehicles. Suppose that
during daytime hours, 60% of all vehicles are passenger cars. If 25 vehicles cross the
bridge during a particular daytime period, what is the resulting expected toll revenue?

10. Suppose that 40 percent of the employees in a large firm are in favor of union
representation, and a random sample of 10 employees are contacted and asked for an
anonymous response. What is the probability that (a) a majority of the respondents and
(b) fewer than half of the respondents will be in favor of union representation?

11. The chairman of a company asks the Data Processing manager whether a certain job can
be taken as priority basis and completed before 4.0 pm. On the same day. Even though
the job can be completed if everything runs smoothly, the DP manager considers
following possibilities before giving any commitment.
i. There may be power failure.
ii. The computer may develop some mal function
iii. The engineer may not be available to set right the computer in case of
malfunction.
Taking these probabilities as .25, .1 and .3, calculate the probability that the job is not
completed in time.

12. Harry Ohme is in charge of the electronics section of a large department store. He has
noticed that the probability that a customer who is just browsing will buy something is
0.3. Suppose that 15 customers browse in the electronics section each hour (Use Tables).
i. What is the probability that at least one browsing customer will buy
something during a specified hour?
ii. What is the probability at least four browsing customers will buy
something during a specified hour?
iii. What is the probability that no browsing customers will buy anything
during a specified hour?
 What is the probability that no more than four browsing customers will buy
something during a specified hour?
13. Martin Coleman, credit manager for Beck’s knows that the company uses three methods
to encourage collection of delinquent accounts. From past collection records, he learns
that 70 percent of the accounts are called on personally, 20 percent are phoned, and 10
percent are sent a letter. The probabilities of collecting an overdue amount from an
account with the three methods are 0.75, 0.6,0.65 respectively. Mr. Coleman had just
received payment from a past-due account. What is the probability that this account
(a) Was called on personally?
(b) Received a phone call?
(c) Received a letter?

14. If the probability of defective bolts is 0.1, find (a) the mean and standard deviation for the
distribution of defective bolts in a total of 500

15. The incidence of a certain disease is such that on the average 20% of workers suffer from
it. If 10 workers are selected at random, find the probability that (i) Exactly 2 workers
suffer from the disease, (ii) not more than 2 workers suffer from the disease. Calculate
the probability up to fourth decimal place.

16. As the administrator of a hospital, Cindy Turner wants to know what is the probability
that a person checking into the hospital will require X- ray treatment and will also have
hospital insurance that will cover the X-ray treatment. She knows that during the past 5
years, 23 percent of the people entering the hospital required X- rays, and that during the
same period, 72 percent of the people checking into the hospital had insurance that
covered X- ray treatments. What is the correct probability? Do any additional
assumptions need to be made?

17. The Committee on Student Life at a university conducted a survey of 375 undergraduate
students regarding satisfaction with student governance. Results of the survey are shown
in the table by class rank.
Freshman Sophomore Junior Senior Total
Satisfied 57 49 64 61 231
Neutral 23 15 16 11 65
Not satisfied 21 18 14 26 79
Total 101 82 94 98 375
a. If a survey participant is selected at random, what is the probability that he or she is a junior?
b. If a survey participant is selected at random, what is the probability that he or she is satisfied
AND is a junior?
c. If a survey participant is selected at random, what is the probability that he or she is satisfied
 OR is a junior?
18. On average, six people per hour use an electronic teller machine during the prime
shopping hours in a department store. What is the probability that
a. exactly six people will use the machine during a randomly selected hour?
b. fewer than five people will use the machine during a randomly selected hour ?
c. no one will use the facility during a 10-min interval?
d. No one will use the facility during a 5-min interval?
19. The mean of binomial distribution is 6 and the standard deviation is √ 2 , calculate the
probability of success., probability of at least one success and at the most 2 successes.

20. Assume that the price of a share of TWA stock is normally distributed with mean 48 and
standard deviation 6. What is the probability that on a randomly chosen day in the period
for which our assumptions are made, the price of the stock will be more than $60 per
share? Less than $60 per share? More than $40 per share? Between $40 and $50 per
share?

21. Models of the pricing of stock options make the assumption of a normal distribution. An
analyst believes that the price of an IBM stock option is a normally distributed random
variable with mean $8.95 and variance 4. The analyst would like to determine a value
such that there is a 0.90 probability that the price of the option will be greater than that
value. Find the required value.
22. The lifetime of a certain kind of battery is a random variable having a normal distribution
with a μ=300 hours and σ 35hours. Find the probability that one of those batteries will
have a life time more than 320 hours. Also find the value above which we can expect to
find the best 25% of these batteries?
23. The ‘Carmate’ automobile batteries have average length of useful life as 48 months.
However, the guarantee stipulated is only 36 months. The company, in order to assure
customers about the quality, also stipulates that if a battery fails in less than 24 months, it
will pay a ‘goodwill’ compensation of Rs. 1,000 in addition to the replacement of the
battery. Assuming that the s.d. of the life is 8 months, and that the distribution is normal,
find
(i) What percentage of batteries would have to be replaced free of cost?
24.The average starting salary for this year's graduates at a large university (LU) is $20,000
with a standard deviation of $8,000.
Furthermore, it is known that the starting salaries are normally distributed.
a. What is the probability that a randomly selected LU graduate will have a starting salary of at
least $30,400?

b. Individuals with starting salaries of less than $15,600 receive a low-income tax break.
What percentage of the graduates will receive the tax break?
 c. What are the minimum and the maximum starting salaries of the middle 95% of the
LU graduates?

d. If 189 of the recent graduates have salaries of at least $32,240, how many students graduated
this year from this university?
e. What is the minimum salary required to be in
the top 10 %?

25. Data form a sample of 50 coffee drinkers is given below. Analyse the data and state your
inference.
Starbucks Costa Coffee Café Coffee Day
Café Coffee Day Café Coffee Day Costa Coffee
Café Coffee Day Tim Hortons Café Coffee Day
Tim Hortons Café Coffee Day Starbucks
Tim Hortons Café Coffee Day Café Coffee Day
Costa Coffee Costa Coffee Tim Hortons
Tim Hortons Café Coffee Day Café Coffee Day
Costa Coffee Costa Coffee Costa Coffee
Starbucks Starbucks Starbucks
Tim Hortons Starbucks Café Coffee Day
Café Coffee Day Tim Hortons Café Coffee Day
Starbucks Costa Coffee Starbucks
Café Coffee Day Tim Hortons Costa Coffee
Starbucks Starbucks Tim Hortons
Tim Hortons Costa Coffee Café Coffee Day
Café Coffee Day Starbucks Starbucks
Starbucks Tim Hortons

26. Given below is the life in hours of two brands of bulbs, A and B. Analyse the data using
numerical measures and present it graphically. Which brand is better? Why?

Brand A Brand B
246 139
162 181
221 143
178 158
210 203
152 231
181 147
203 261
157 227
197 262
230 203
237 280
163 212
186 234
235 181
221 169
238 266
241 270
182 147
235 250
207 166
240 299
159 198
246 240
246 218