Chapter 7

7.1 a 0, 1, 2, …
b Yes, we can identify the first value (0), the second (1), and so on.
c It is finite, because the number of cars is finite.
d The variable is discrete because it is countable.

7.2 a any value between 0 and several hundred miles

b No, because we cannot identify the second value or any other value larger than 0.
c No, uncountable means infinite.
d The variable is continuous.

7.3 a The values in cents are 0 ,1 ,2, …

b Yes, because we can identify the first ,second, etc.
c Yes, it is finite because students cannot earn an infinite amount of money.
d Technically, the variable is discrete.

7.4 a 0, 1, 2, …, 100
b Yes.
c Yes, there are 101 values.
d The variable is discrete because it is countable.

7.5 a No the sum of probabilities is not equal to 1.

b Yes, because the probabilities lie between 0 and 1 and sum to 1.
c No, because the probabilities do not sum to 1.

7.6 P(x) = 1/6 for x = 1, 2, 3, 4, 5, and 6

7.7 a x P(x)
0 1218/101,501 = .012
1 32,379/101,501 = .319
2 37,961/101,501 = .374
3 19,387/101,501 = .191
4 7714/101,501 = .076
5 2842/101,501 = .028
b (i) P(X ≤ 2) = P(0) + P(1) + P(2) = .012 + .319 + .374 = .705
(ii) P(X > 2) = P(3) + P(4) + P(5) = .191 + .076 + .028 = .295
(iii) P(X ≥ 4) = P(4) + P(5) = .076 + .028 = .104

187
7.8 a P(2 ≤ X ≤ 5) = P(2) + P(3) + P(4) + P(5) = .310 + .340 + .220 + .080 = .950
P(X > 5) = P(6) + P(7) = .019 + .001 = .020
P(X < 4) = P(0) + P(1) + P(2) + P(3) = .005 + .025 + .310 + .340 = .680

b. b. E(X) = ∑ xP(x) = 0(.005) + 1(.025) + 2(.310) + 4(.340) +5(.080) + 6(.019) + 7(.001) =

3.066

c. σ 2 = V(X) = ∑ (x − µ) 2
P( x ) = (0–3.066) 2 (.005) + (1–3.066) 2 (.025) + (2–3.066) 2 (.310)
2 2 2 2
+ (3–3.066) (.340) + (4–3.066) (.220) + (5–3.066) (.080) + (6–3.066) (.019)
2
+ (7–3.066) (.001) = 1.178

σ= σ 2 = 1.178 = 1.085

7.9 P(0) = P(1) = P(2) = . . . = P(10) = 1/11 = .091

7.10 a P(X > 0) = P(2) + P(6) + P(8) = .3 + .4 + .1 = .8

b P(X ≥ 1) = P(2) + P(6) + P(8) = .3 + .4 + .1 = .8
c P(X ≥ 2) = P(2) + P(6) + P(8) = .3 + .4 + .1 = .8
d P(2 ≤ X ≤ 5) = P(2) = .3

7.11a P(3 ≤ X ≤ 6) = P(3) + P(4) + P(5) + P(6) = .04 + .28+ .42 + .21 = .95
b. P(X > 6) = P(X ≥ 7) = P(7) + P(8) = .02 + .02 = .04
c. P(X < 3) = P(X ≤ 2) = P(0) + P(1) + P(2) = 0 + 0 + .01 = .01

7.12 P(Losing 6 in a row) = .5 6 = .0156

7.13 a P(X < 2) = P(0) + P(1) = .05 + .43 = .48

b P(X > 1) = P(2) + P(3) = .31 + .21 = .52

188
7.14

a P(HH) = .25
b P(HT) = .25
c P(TH) = .25
d P(TT) = .25

7.15 a P(0 heads) = P(TT) = .25

b P(1 head) = P(HT) + P(TH) = .25 + .25 = .50
c P(2 heads) = P(HH) = .25
d P(at least 1 head) = P(1 head) + P(2 heads) = .50 + .25 = .75

7.16

189
7.17 a P(2 heads) = P(HHT) + P(HTH) + P(THH) = .125 + .125 + .125 = .375
b P(1 heads) = P(HTT) + P(THT) = P(TTH) = .125 + .125 + .125 = .375
c P(at least 1 head) = P(1 head) + P(2 heads) + P(3 heads) = .375 + .375 + .125 = .875
d P(at least 2 heads) = P(2 heads) + P(3 heads) = .375 + .125 = .500

7.18a. µ = E(X) = ∑ xP(x) = –2(.59) +5(.15) + 7(.25) +8(.01) = 1.40

σ 2 = V(X) = ∑ (x − µ) 2
P(x ) = (–2–1.4) 2 (.59) + (5–1.4) 2 (.15) + (7–1.4) 2 (.25) + (8–1.4) 2 (.01)

= 17.04

b. x –2 5 7 8
y –10 25 35 40
P(y) .59 .15 .25 .01

∑ yP( y) = –10(.59) + 25(.15) + 35(.25) + 40(.01) = 7.00

c. E(Y) =

V(Y) = ∑ ( y − µ) P( y) = (–10–7.00) (.59) + (25–7.00) (.15) + (35–7.00)

2 2 2 2
(.25)

2
+ (40–7.00) (.01) = 426.00
d. E(Y) = E(5X) = 5E(X) = 5(1.4) = 7.00
V(Y) = V(5X) = 5 2 V(X) = 25(17.04) = 426.00.

7.19a µ = E(X) = ∑ xP(x) = 0(.4) + 1(.3) + 2(.2) + 3(.1) = 1.0

σ 2 = V(X) = ∑ ( x − µ) 2 2 2 2
P ( x ) = (0–1.0) (.4) + (1–1.0) (.3) + (2–1.0) (.2) + (3–1.0) (.1)
2

= 1.0

σ= σ 2 = 1.0 = 1.0
b. x 0 1 2 3
y 2 5 8 11
P(y) .4 .3 .2 .1

∑ yP( y) = 2(.4) + 5(.3) + 8(.2) + 11(.1) = 5.0

c. E(Y) =

σ =V(Y) = ∑ ( y − µ) P( y) = (2 – 5) (.4) + (5 – 5) (.3) + (8 – 5)

2 2 2 2 2 2
(.2) + (11 – 5) (.1) = 9.0

σ= σ 2 = 9.0 = 3.0
d. E(Y) = E(3X + 2) = 3E(X) + 2 = 3(1) + 2 = 5.0

σ2 = V(Y) = V(3X + 2) = V(3X) = 3 2 V(X) = 9(1) = 9.0.

σ= σ 2 = 9.0 = 3.0
The parameters are identical.

190
7.20a. P(X ≥ 2) = P(2) + P(3) = .4 + .2 = .6

∑ xP(x ) = 0(.1) + 1(.3) + 2(.4) + 3(.2) = 1.7

b. µ = E(X) =

σ = V(X) = ∑ ( x − µ) P( x ) = (0–1.7) (.1) + (1–1.7) (.3) + (2–1.7)

2 2 2 2 2 2
(.4) + (3–1.7) (.2) = .81

7.21 E(Profit) = E(5X) = 3E(X) = 3(1.7) = 5.1

V(Profit) = V(3X) = 3 2 V(X) = 9(.81) = 7.29

7.22 a P(X > 4) = P(5) + P(6) + P(7) = .20 + .10 + .10 = .40
b P(X ≥ 2) = 1– P(X ≤ 1) = 1 – P(1) = 1 – .05 = .95

7.23 µ = E(X) = ∑ xP(x) = 1(.05) + 2(.15) + 3(.15) + 4(.25) + 5(.20) + 6(.10) + 7(.10) = 4.1
σ2 = V(X) = ∑ ( x − µ) 2 2 2 2
P( x ) = (1–4.1) (.05) + (2–4.1) (.15) + (3–4.1) (.15) + (4–4.1) (.25)
2

2 2 2
+ (5–4.1) (.20) + (6–4.1) (.10) + (7–4.1) (.10) = 2.69

7.24 Y = .25X; E(Y) = .25E(X) = .25(4.1) = 1.025

2
V(Y) = V(.25X) = (.25) (2.69) = .168

7.25 a. x 1 2 3 4 5 6 7
y .25 .50 .75 1.00 1.25 1.50 1.75
P(y) .05 .15 .15 .25 .20 .10 .10

b. E(Y) = ∑ yP( y) = .25(.05) + .50(.15) + .75(.15) +1.00(.25) + 1.25(.20) + 1.50(.10) + 1.75(.10)

= 1.025

V(Y) = ∑ ( y − µ) 2 2 2
P( y) = (.25–1.025) (.05) + (.50–1.025) (.15) + (.75–1.025) (.15)
2

2 2 2 2
+ (1.00–1.025) (.25) + (1.25–1.025) (.20) + (1.50–1.025) (.10) + (1.75–1.1025)
(.10) = .168
c. The answers are identical.

7.26 a P(4) = .06

b P(8) = 0
c P(0) = .35
d P(X ≥ 1) = 1 – P(0) = 1 – .35 = .65

7.27 a P(X ≥ 20) = P(20) + P(25) + P(30) + P(40) + P(50) + P(75) + P(100)
= .08 + .05 + .04 + .04 + .03 + .03 + .01 = .28

191
b P(X = 60) = 0
c P(X > 50) = P(75) + P(100) = .03 + .01 = .04
d P(X > 100) = 0

7.28 a P(X = 3) = P(3) = .21

b P(X ≥ 5) = P(5) + P(6) + P(7) + P(8) = .12 + .08 + .06 + .05 = .31
c P(5 ≤ X ≤ 7) = P(5) + P(6) + P(7) = .12 + .08 + .06 = .26

7.29 a P(X > 1) = P(2) + P(3) + P(4) = .17 + .06 + .01 = .24
b P(X = 0) = .45
c P(1 ≤ X ≤ 3) = P(1) + P(2) + P(3) = .31 + .17 + .06 = .54

7.30 µ = E(X) = ∑ xP(x) = 0(.04) + 1(.19) + 2(.22) + 3(.28) + 4(.12) + 5(.09) + 6(.06) = 2.76
σ2 = V(X) = ∑ ( x − µ) 2 2 2 2
P( x ) = (1–2.76) (.04) + (2–2.76) (.19) + (3–2.76) (.28)

2 2 2
+ (4–2.76) (.12) + (5–2.76) (.09) + (6–2.76) (.06) = 2.302

σ= σ 2 = 2.302 = 1.517

7.31 Y = 10X; E(Y) = E(10X) = 10E(X) = 10(2.76) = 27.6

2
V(Y) = V(10X) = 10 V(X) =100(2.302) = 230.2

σ= σ 2 = 230.2 = 15.17

7.32 µ = E(X) = ∑ xP(x) = 1(.24) + 2(.18) + 3(.13) + 4(.10) + 5(.07) + 6(.04) + 7(.04) + 8(.20) =
3.86

σ2 = V(X) = ∑ ( x − µ) 2 2 2 2
P( x ) = (1–3.86) (.24) + (2–3.86) (.18) + (3–3.86) (.13) + (4–3.86)
2

(.10)
2 2 2 2
+ (5–3.86) (.07) +(6–3.86) (.04) + (7–3.86) (.04) + (8–3.86) (.20) = 6.78

σ= σ 2 = 6.78 = 2.60

7.33 Revenue = 2.50X; E(Revenue) = E(2.50X) = 2.50E(X) = 2.50(3.86) = 9.65

V(Revenue) = V(2.50X) = 2.50 2 (V(X) = 6.25(6.78) = 42.38

σ= σ 2 = 42.38 = 6.51

7.34 E(Value of coin) = 400(.40) + 900(.30) + 100(.30) = 460. Take the $500.

192
7.35 µ = E(X) = ∑ xP(x) = 0(.10) + 1(.20) + 2(.25) + 3(.25) + 4(.20) = 2.25
σ2 = V(X) = ∑ ( x − µ) 2 2 2 2
P( x ) = (0–2.25) (.10) + (1–2.25) (.20) + (2–2.25) (.25) + (3–2.25)
2

(.13)
2
+ (4–2.25) (.20) = 1.59

σ= σ 2 = 1.59 = 1.26

7.36 E(damage costs) = .01(400) + .02(200) + .10(100) + .87(0) = 18. The owner should pay up to
$18 for the device.

7.37 E(X) = ∑ xP(x) = 1,000,000(1/10,000,000) + 200,000(1/1,000,000) + 50,000(1/500,000)

+ 10,000(1/50,000) + 1,000(1/10,000) = .1 + .2 + .1 + .2 + .1 = .7
Expected payoff = 70 cents.

7.38 µ = E(X) = ∑ xP(x) = 1(.05) + 2(.12) + 3(.20) + 4(.30) + 5(.15) + 6(.10) + 7 (.08) = 4.00
σ2 = V(X) = ∑ ( x − µ) 2 2 2 2 2
P( x ) = (1–4.0) (.05) + (2–4.0) (.12) + (3–4.0) (.20) + (4–4.0) (.30)

2 2 2
+ (5–4.0) (.15) +(6–4.0) (.10) + (7–4.0) (.08) = 2.40

7.39 Y = .25X; E(Y) = E(.25X) = .25E(X) = .25(4.0) = 1.0

2
V(Y) = V(.25X) = (.25) V(X) =.0625(2.40) = .15

7.40 µ = E(X) = ∑ xP(x) = 0(.10) + 1(.25) + 2(.40) + 3(.20) + 4(.05) = 1.85

7.41 Profit = 4X; Expected profit = E(4X) = 4E(X) = 4(1.85) = $7.40

7.42a P(X > 4) = P(5) + P(6) + P(7) + P(8) = .04 + .15 + .03 + .10 = .32
b P(X < 5) = P(1) + P(2) + P(3) + P(4) = .03 + .32 + .05 + .28 = .68
P(4≤ X ≤ 6) = P(4) + P(5) + P(6) = .28 + .04 + .15 = .47

7.43 µ = E(X) = ∑ xP(x) = 1(.03) + 2(.32) + 3(.05) + 4(.28) + 5(.04) + 6 (.15) + 7 (.03) + 8(.10)
= 4.05

193
σ2 = V(X) = ∑ ( x − µ) 2 2 2 2
P( x ) = (1–4.05) (.03) + (2–4.05) (.32) + (3–4.05) (.05) + (4–4.05)
2

2 2 2
(.28) + (5–4.05) (.04) +(6–4.05) (.15) + (7–4.05) (.03) + (8–4.05)2 (.10) = 4.11

σ= σ 2 = 4.11 = 2.03

7.44a P(X > 3) = P(4) + P(5) + P(6) = .02 + .01 + .01 = .04
b P(0) = .78
c P(3 ≤ X ≤ 5) = P(3) + P(4) + P(5) = .03 + .02 + .01 = .06

7.45 a x P(x)
1 .6
2 .4

b y P(y)
1 .6
2 .4

∑ xP(x ) = 1(.6) + 2(.4) = 1.4

c µ = E(X) =

σ = V(X) = ∑ ( x − µ) P( x ) = (1–1.4) (.6) + (2–1.4)

2 2 2 2
(.4) = .24

d µ = 1.4, σ2 = .24

7.46 a ∑ ∑ xyP(x, y) = (1)(1)(.5) + (1)(2)(.1) + (2)(1)(.1) + (2)(2)(.3) = 2.1

all x all y

COV(X, Y) = ∑ ∑ xyP(x, y) – µ
all x all y
xµ y = 2.1 – (1.4)(1.4) = .14

σ x = σ 2x = .24 = .49, σ y = σ 2y = .24 = .49

COV ( X, Y ) .14
ρ= = = .58
σxσy (. 49)(.49)

7.47 E(X + Y) = E(X) + E(Y) = 1.4 + 1.4 = 2.8

V(X + Y) = V(X) + V(Y) + 2COV(X, Y) = .24 + .24 + 2(.14) = .76

7.48 a x+y P(x + y)

2 .5

194
 3 .2
4 .3

b µ x+ y = E(X+Y) = ∑ (x + y)P(x + y) = 2(.5) + 3(.2) + 4(.3) = 2.8

= V(X+Y) = ∑ [(x + y) − µ
2 2 2
σ 2x+ y ] P( x + y) = (2–2.8) (.5) + (3–2.8)
x+y
2
(.2) + (4–2.8) (.3) =

.76
c Yes

7.49 a x P(x)
1 .4
2 .6
b y P(y)
1 .7
2 .3

c µ = E(X) =∑ xP(x) = 1(.4) + 2(.6) = 1.6

σ = V(X) = ∑ ( x − µ) P( x ) = (1–1.6) (.4) + (2–1.6)
2 2 2 2
(.6) = .24

d µ = E(Y) = ∑ yP( y) = 1(.7) + 2(.3) = 1.3

σ = V(Y) = ∑ ( y − µ) P( y) = (1–1.3) (.7) + (2–1.3)

2 2 2 2
(.3) = .21

7.50 a ∑ ∑ xyP(x, y) = (1)(1)(.28) + (1)(2)(.12) + (2)(1)(.42) + (2)(2)(.18) = 2.08

all x all y

COV(X, Y) = ∑ ∑ xyP(x, y) – µ
all x all y
xµ y = 2.08 – (1.6)(1.3) = 0

σ x = σ 2x = .24 = .49, σ y = σ 2y = .21 = .46

COV ( X, Y ) 0
ρ= = =0
σxσy (.49)(.46)

7.51 E(X + Y) = E(X) + E(Y) = 1.6 + 1.3 = 2.9

V(X + Y) = V(X) + V(Y) + 2COV(X, Y) = .24 + .21 + 2(0) = .45

7.52 a x + y P(x + y)
2 .28
3 .54
4 .18

b µ x+ y = E(X+Y) = ∑ (x + y)P(x + y) = 2(.28) + 3(.54) + 4(.18) = 2.9

195
σ 2x+ y = V(X+Y) = ∑ [(x + y) − µ x+y ]
2 2 2 2
P( x + y) = (2–2.9) (.28) + (3–2.9) (.54) + (4–2.9) (.18)

= .45
c Yes

7.53 a x P(x) y P(y)

1 .7 1 .6
2 .2 2 .4
3 .1

∑ xP(x) = 1(.7) + 2(.2) + 3(.1) = 1.4

b µ x = E(X) =

σ = V(X) = ∑ ( x − µ) P( x ) = (1–1.4) (.7) + (2–1.4) (.2) + (3–1.4) (.1) = .44

2 2 2 2 2

µ y = E(Y) = ∑ yP( y) = 1(.6) + 2(.4) = 1.4

σ = V(Y) = ∑ ( y − µ) P( y) = (1–1.4) (.6) + (2–1.4) (.4) = .24

2 2 2 2

∑ ∑ xyP(x, y) = (1)(1)(.42) + (1)(2)(.28) + (2)(1)(.12) + (2)(2)(.08) + (3)(1)(.06) +

all x all y

(3)(2)(.04) = 1.96
COV(X, Y) = ∑ ∑ xyP(x, y) – µ
all x all y
xµ y = 1.94 – (1.4)(1.4) = 0

σ x = σ 2x = .44 = .66, σ y = σ 2y = .24 = .49

COV ( X, Y ) 0
ρ= = =0
σxσy (.66)(.49)

c x+y P(x + y)
2 .42
3 .40
4 .14
5 .04

7.54 x
y 0 1 2
1 .42 .21 .07
2 .18 .09 .03

7.55 x

196
 y 0 1
1 .04 .16
2 .08 .32
3 .08 .32

7.56 a Refrigerators, x P(x)

0 .22
1 .49
2 .29
b Stoves, y P(y)
0 .34
1 .39
2 .27

c µ x = E(X) = ∑ xP(x) = 0(.22) + 1(.49) + 2(.29) = 1.07

σ = V(X) = ∑ ( x − µ) P( x ) = (0–1.07) (.22) + (1–1.07) (.49) + (2–1.07) (.29) = .505
2 2 2 2 2

d µ y = E(Y) = ∑ yP ( y) = 0(.34) + 1(.39) + 2(.27) = .93

σ = V(Y) = ∑ ( y − µ) P( y) = (0–.93) (.34) + (1–.93) (.39) + (2–.93) (.27) = .605

2 2 2 2 2

e ∑ ∑ xyP ( x , y) = (0)(0)(.08) + (0)(1)(.09) + (0)(2)(.05) + (1)(0)(.14) + (1)(1)(.17)

all x all y

+ (1)(2)(.18) + (2)(0)(.12) + (2)(1)(.13) + (2)(2)(.04) = .95

COV(X, Y) = ∑ ∑ xyP(x, y) – µ
all x all y
xµ y = .95 – (1.07)(.93) = –.045

σ x = σ 2x = .505 = .711, σ y = σ 2y = .605 = .778

COV ( X, Y ) −.045
ρ= = = –.081
σxσy (.711)(.778)

7.57 a Bottles, x P(x)

0 .72
1 .28
b Cartons, y P(y)
0 .81
1 .19

∑ xP(x) = 0(.72) + 1(.28) = .28

c µ x = E(X) =

σ = V(X) = ∑ ( x − µ) P( x ) = (0–.28) (.72) + (1–.28)

2 2 2 2
(.28) = .202

197
 ∑ yP( y) = 0(.81) + 1(.19) = .19
d µ y = E(Y) =

σ = V(Y) = ∑ ( y − µ) P( y) = (0–.19) (.81) + (1–.19) (.19) = .154

2 2 2 2

e ∑ ∑ xyP ( x , y) = (0)(0)(.63) + (0)(1)(.09) + (1)(0)(.18) + (1)(1)(.10) = .100

all x all y

COV(X, Y) = ∑ ∑ xyP(x, y) – µ
all _ x all _ y
xµ y = .100 – (.28)(.19) = .0468

σ x = σ 2x = .202 = .449, σ y = σ 2y = .154 = .392

COV ( X, Y ) .0468
ρ= = = .266
σxσy (.449)(.392)

7.58 a P(X = 1 | Y = 0) = P(X =1 and Y = 0)/P(Y = 0) = .14/.34 = .412

b P(Y = 0 | X = 1) = P(X =1 and Y = 0)/P(X = 1) = .14/.49 = .286
c P(X = 2 | Y = 2) = P(X =2 and Y = 2)/P(Y = 2) = .04/.27 = .148

7.59 a P(CMD = 0 and SD = 2) = .06

b P(CMD = 2 and SD = 0) = 0
c P(CMD ≥ 1 and SD ≥ 1) = .07 + .01 + .10 + .05 + .04 + .02 = .29

7.60 a P(CMD = 1 and SD = 2) = .10

b. P(SD = 2 | CMD = 1) = .10/.24 = .4167
c P(CMD = 1 | SD = 2) = .10/.21 = .4762

7.61 a P(CMD = 0) = .68, P(CMD = 1) = .24, P(CMD = 2) = .08

∑ xP(x) = 0(.68) + 1(.24) + 2(.08) = .40

b µ = E(X) =

σ = V(X) = ∑ ( x − µ) P( x ) = (0–.40) (.68) + (1–.40) (.24) + (2-.40) (.08) = .40

2 2 2 2 2

σ = σ 2 = .40 = .632

7.62a. P(SD = 0) = .45, P(SD=1) = .23, P(SD = 2) = .21, P(SD = 3) = .11

∑ xP(x ) = 0(.45) + 1(.23) + 2(.21) + 3(.11) = .98

b. µ = E(X) =

σ = V(X) = ∑ ( x − µ) P( x ) = (0–.98) (.45) + (1–.98) (.23) + (2-.98) (.21) + (3-.98) (.11)

2 2 2 2 2 2

= 1.100

σ = σ 2 = 1.100 = 1.049

198
7.63a P(Home Team > Visiting Team) = .11 + .09 + .10 + .05 + .02 + .01 = .38
b P(Tie) = .14 + .10 + .04 + 0 = .28
c P(Home Team < Visiting Team) = .12 + .09 + .03 + .07 + .02 + .01 = .34

7.64a. P(HT = 0) = .38, P(HT = 1) =.30, P(HT = 2) = .19, P(HT = 3) = .13

∑ xP(x ) = 0(.38) + 1(.30) + 2(.19) + 3(.12) = 1.07

b. µ = E(X) =

σ = V(X) = ∑ ( x − µ) P( x ) = (0–1.07) (.38) + (1–1.07) (.30) + (2-1.07) (.19) + (3-1.07) (.12)

2 2 2 2 2 2

= 1.085

σ = σ 2 = 1.085 = 1.042

7.65a. P(VT = 0) = .44, P(VT = 1) = .29, P(VT = 2) = .21, P(VT = 3) = .06

∑ xP(x ) = 0(.44) + 1(.29) + 2(.21) + 3(.06) = .89

b. µ = E(X) =

σ = V(X) = ∑ ( x − µ) P( x ) = (0–.89) (.44) + (1–.89) (.29) + (2-.89) (.21) + (3-.89) (.06)

2 2 2 2 2 2

= .878

σ= σ 2 = .878 = .937

7.66 a. P(T = 0) = .14, P(T = 1) = .23, P(T = 2) = .28, P(T = 3) = .25, P(T = 4) = .08, P(T = 5)
= .02, P(T = 6) = 0

∑ xP(x ) = 0(.14) + 1(.23) + 2(.28) + 3(.25) + 4(.08) + 5(.02) + 6(0) = 1.96

b. µ = E(X) =

σ = V(X) = ∑ ( x − µ) P( x ) = (0–1.96) (.14) + (1–1.96) (.23) + (2-1.96) (.28) + (3-1.96) (25) +

2 2 2 2 2 2

(4-1.96)2(.08) + (5-1.96)2(.02) + (6-1.96)2(0) = 1.538

σ = σ 2 = 1.538 = 1.240

c. ∑ ∑ xyP(x, y) = (0)(0)(.14) + (0)(1)(.12) + (0)(2)(.09) + (0)(3)(.03) + (1)(0)(.11) +

all x all y

(1)(1)(.10) + (1)(2)(.07) + (1)(3)(.02) + (2)(0)(.09) + (2)(1)(.05) + (2)(2)(.04) + (2)(3)(.01) +

(3)(0)(.10) + (3)(1)(.02) + (3)(2)(.01) + (3)(3)(0) = .74

COV(X, Y) = ∑ ∑ xyP(x, y) – µ
all x all y
xµ y = .74 – (1.07)(.89) = -.212

COV ( X , Y ) −.212
ρ= = = –.217
σ xσ y (1.085)(.937 )

7.67 E (∑ X ) = ∑ E(X ) = 18 + 12 + 27 + 8 = 65
i i

199
V (∑ X ) = ∑ V(X ) = 8 + 5 + 6 + 2 = 21
i i

(∑ X ) = ∑ E(X ) = 35 + 20 + 20 + 50 + 20 = 145
7.68 E i i

V (∑ X ) = ∑ V (X ) = 8 + 5 + 4 + 12 + 2 = 31
i i

(∑ X ) = ∑ E(X ) = 8 + 14 + 5 + 3 + 30 + 30 + 10 = 100
7.69 E i i

V (∑ X ) = ∑ V (X ) = 2 + 5 + 1 + 1 + 8 +10 + 3 = 30
i i

(∑ X ) = ∑ E(X ) = 10 + 3 + 30 + 5 + 100 + 20 = 168

7.70 E i i

V (∑ X ) = ∑ V (X ) = 9 + 0 + 100 + 1 + 400 + 64 = 574

i i

7.71 The expected value does not change. The standard deviation decreases.

7.2 E(Rp) = w1E(R1) + w2E(R2) = (.30)(.12) + (.70)(.25) = .2110

a. V(Rp) = w12 σ12 + w22 σ22 + 2 w1 w2 ρ σ1 σ2

= (.30) 2 (.02) 2 + (.70) 2 (.15 2 ) + 2(.30)(.70)(.5)(.02)(.15) = .0117

σ R p = .0117 = .1081

b. V(Rp) = w12 σ12 + w22 σ22 + 2 w1 w2 ρ σ1 σ2

= (.30) 2 (.02) 2 + (.70) 2 (.15 2 ) + 2(.30)(.70)(.2)(.02)(.15) = .0113

σ R p = .0113 = .1064

c. V(Rp) = w12 σ12 + w22 σ22 + 2 w1 w2 ρ σ1 σ2

= (.30) 2 (.02) 2 + (.70) 2 (.15 2 ) + 2(.30)(.70)(0)(.02)(.15) = .0111

σ R p = .0111 = .1052

7.73 a She should choose stock 2 because its expected value is higher.
b. She should choose stock 1 because its standard deviation is smaller.

7.74 E(Rp) = w1E(R1) + w2E(R2) = (.60)(.09) + (.40)(.13) = .1060

V(Rp) = w12 σ12 + w22 σ22 + 2 w1 w2 ρ σ1 σ2

= (.60) 2 (.15) 2 + (.40) 2 (.212 ) + 2(.60)(.40)(.4)(.15)(.21) = .0212

200
σ R p = .0212 = .1456

7.75 E(Rp) = w1E(R1) + w2E(R2) = (.30)(.09) + (.70)(.13) = .1180

V(Rp) = w12 σ12 + w22 σ22 + 2 w1 w2 ρ σ1 σ2

= (.30) 2 (.15) 2 + (.70) 2 (.212 ) + 2(.30)(.70)(.4)(.15)(.21) = .0289

σ R p = .0289 = .1700

The statistics used in Exercises 7.66 to 7.83 were computed by Excel. The variances were taken
from the variance-covariance matrix. As a result they are the population parameters. To convert
to statistics multiply the variance of the portfolio returns by n/(n–1).

7.76 a .0074 .0667

b .0056 .0675
c .0064 .0590
d (a)
e (b)

7.77 a .0158 .0425

b .0153 .0461
c .0143 .0439
d (a) has the largest mean and the smallest standard deviation.

7.78 a .0080 .0394

b .0084 .0397
c .0059 .0437
d (c) has the smallest mean and the largest standard deviation.

7.79 a .0016 .0327

b .0120 .0307
c .0121 .0315
d (c)
e (b)

7.80 a .0101 .0338

b .0097 .0339

201
c .0110 .0360
d (c)
e (a)

7.81 a .0080 .0448

b .0062 .0472
c .0098 .0428
d (c) has the largest mean and the smallest standard deviation.

7.82 a .0103 .0276

b .0085 .0282
c .0120 .0315
d (c)
e (a)

7.84 .0100 .0267

7.85 Because all the stocks are bank stocks there is very little diversification.

7.86

7.87 a .0131 .0364

b .0118 .0424
c .0127 .0531
d (a) has the largest mean and the smallest standard deviation.

7.88 a .0119 .0350

b .0135 .0326
c .0142 .0372
d (c)
e (b)

202
7.89 a .0096 .0350
b .0115 .0536
c .0093 .0357
d (b)
e (a)

7.90 a .0065 .0277

b .0096 .0303
c .0047 .0371
d (b)
e (a)

7.91 a .0077 .0362

b .0102 .0341
c .0086 .0324
d (b)
e (c)

7.93 .0100 .0315

7.94 a .0128 .0456

b .0161 .0491
c .0117 .0437
d (b)
e (c)

7.95 a .0154 .0464

b .0172 .0465
c .0165 .0519
d (b)
e (a)

7.96 a .0186 .0468

b .0185 .0592
c .0213 .0752
d (c)
e (a)

203
7.97 a .0147 .0454
b .0212 .0463
c .0119 .0482
d (b)
e (a)

7.99 .0200 .0444

n!
7.100 P(X = x) = p x (1 − p) n − x
x! (n − x )!

10!
a P(X = 3) = (.3) 3 (1 − .3)10 −3 = .2668
3! (10 − 3)!

10!
b P(X = 5) = (.3) 5 (1 − .3)10 −5 = .1029
5! (10 − 5)!

10!
c P(X = 8) = (.3) 8 (1 − .3)10 −8 = .0014
8!(10 − 8)!

7.101 a P(X = 3) = P(X ≤ 3) – P(X ≤ 2) = .6496 – .3828 = .2668

b P(X = 5) = P(X ≤ 5) – P(X ≤ 4) = .9527 – .8497 = .1030
c P(X = 8) = P(X ≤ 8) – P(X ≤ 7) = .9999 – .9984 = .0015

7.102 a .26683
b .10292
c .00145

n!
7.103 P(X = x) = p x (1 − p) n − x
x! (n − x )!

6!
a. P(X = 2) = (.2) 2 (1 − .2) 6 − 2 = .2458
2! (6 − 2)!

6!
b. P(X = 3) = (.2) 3 (1 − .2) 6 −3 = .0819
3! (6 − 3)!

6!
c. P(X = 5) = (.2) 5 (1 − .2)5 = .0015
5! (6 − 5)!

7.104 a P(X = 2) = P(X ≤ 2) – P(X ≤ 1) = .9011 – .6554 = .2457

b P(X = 3) = P(X ≤ 3) – P(X ≤ 2) = .9830 −.9011 = .0819

204
c P(X = 5) = P(X ≤ 5) – P(X ≤ 4) = .9999 – 9984 = .0015

7.105 a .24576
b .08192
c .00154

7.106 a P(X = 18) = P(X ≤ 18) – P(X ≤ 17) = .6593 – .4882 = .1711
b P(X = 15) = P(X ≤ 15) – P(X ≤ 14) =.1894 – .0978 = .0916
c P(X ≤ 20) = .9095
d P(X ≥ 16) = 1 – P(X ≤ 15) = 1 – .1894 = .8106

7.107 a .17119
b .09164
c .90953
d .81056

7.108 Binomial distribution with p = .25

4!
a P(X = 1) = (.25)1 (1 − .25) 4 −1 = .4219
1! (4 − 1)!

b Table 1 with n = 8: p(2) = P(X ≤ 2) – P(X ≤ 1) = .6785 – .3671 = .3114

c Excel: p(3) = .25810

7.109 Table 1 with n = 25 and p = .3: P(X ≤ 10) = .9022

7.110 Table 1 with n = 25 and p = .90

a P(X = 20) = P(X ≤ 20) – P(X ≤ 19) = .0980 – .0334 = .0646
b P(X ≥ 20) = 1 – P(X ≤ 19) = 1 – .0334 = .9666
c P(X ≤ 24) = .9282
d E(X) = np = 25(.90) = 22.5

7.111 Table 1 with n = 25 and p = .75: P(X ≥ 15) = 1 – P(X ≤ 14) = 1 – .0297 = .9703

4!
7.112 P(X = 0) = (.7) 0 (1 − .7) 4 − 0 = .0081
0!(4 − 0)!
4!
P(X = 1) = (.7)1 (1 − .7) 4−1 = .0756
1!(4 − 1)!

205
 4!
P(X = 2) = (.7) 2 (1 − .7) 4−2 = .2646
2!(4 − 2)!
4!
P(X = 3) = (.7) 3 (1 − .7) 4−3 = .4116
3!(4 − 3)!
4!
P(X = 4) = (.7) 4 (1 − .7) 4−4 = .2401
4!(4 − 4)!

7.113 Excel with n = 5 and p = .27:

a. P(X ≤ 2) = .8743
b P(X = 0) = .2073
c P(X ≥ 3) = 1 – P(≤ 2) = 1-.8743 = .1257

7.114 Excel with n = 10 and p = .30

a P(X = 3) = .2668
b .P(X ≥ 3) = 1 – P(X ≤ 2) = 1 - .3828 = .6172

7.115 Excel with n = 10 and p = .25

a. P(X ≤ 3) = .7759
b. E(X) = np = 100(.25) = 25

20!
7.116 P(X = 20) = (.75) 20 (1 − .75) 20 − 20 = .00317
20! (20 − 20)!

7.117 Excel with n = 4 and p = .72

a. P(X = 4) = .2687
b. P(X = 2) = .2439
c E(X) = np = 4(.72) = 2.88

7.118 Excel with n = 10 and p = .29

a. P(X ≤ 3) = .6761
b. P(X = 0) = .0326
c. E(X) = np = 10(.29) = 2.9

7.119a Excel with n = 10 and p = 244/495: P(X ≥ 5) = 1 – P(X ≤ 4) = 1 – .39447 = .60553

b E(X) = np =100(244/495) = 49.29

206
 5!
7.120 a P(X = 2) = (.45) 2 (1 − .45) 5 − 2 = .3369
2! (5 − 2)!

b Excel with n = 25 and p = .45: P(X ≥ 10) = 1 – P(X ≤ 9) = 1 – .24237 = .75763

7.121 a Table 1 with n = 5 and p = .5: P(X = 2) = P(X ≤ 2) – P(X ≤ 1) = .5 – .1875 = .3125

b: Table 1 with n = 25 and p = .5: P(X ≥ 10) = 1 – P(X ≤ 9) = 1 – .1148 = .8852

5!
7.122 a P(X = 2) = (.52) 2 (1 − .52)5 − 2 = .2990
2!(5 − 2)!
b Excel with n = 25 and p = .52: P(X ≥ 10) = 1 – P(X ≤ 9) = 1 – .08033 = .91967

7.123 a Excel with n = 25 and p = 2/38: P(X ≥ 2) = 1 – P(X ≤ 1) = 1 – .61826 = .38174

b Excel with n = 25 and p = 2/38: P(X = 0)) = .25880
c Excel with n = 25 and p = 18/38: P(X ≥ 15) = 1 – P(X ≤ 14) = 1 – .85645 = .14355
d Excel with n = 25 and p = 18/38: P(X ≤ 10) = .29680

7.124 a Excel with n = 100 and p = .52: P(X ≥ 50) = 1 – P(X ≤ 49) = 1 – .30815 = .69185
b Excel with n = 100 and p = .36: P(X ≤ 30) = .12519
c Excel with n = 100 and p = .06: P(X ≤ 5) = .44069

7.125 Excel with n = 20 and p = .38: P(X ≥ 10) = 1 – P(X ≤ 9) = 1 – .81032 = .18968

7.126a. Excel with n = 10 and p = .23: P(X ≥ 5) = 1 – P(X ≤ 4) = 1 – .94308 = .05692

b. Excel with n = 25 and p = .23: P(X ≤ 5) = .47015

7.127 Excel with n = 100 and p = .53

a P(X > 50) = 1 - P(X ≤ 50) = 1 - .3078 = .6922
b p(X > 60) = 1 – P(X ≤ 60) = 1 - .9341 = .0659
cE(X) = np = 100(.53) = 53

e −µ µ x e −2 2 0
7.128 a P(X = 0) = = = .1353
x! 0!

e −µ µ x e −2 2 3
b P(X = 3) = = = .1804
x! 3!

e −µ µ x e −2 2 5
c P(X = 5) = = = .0361
x! 5!

207
 e −µ µ x e −.5 .5 0
7.129a P(X = 0) = = = .6065
x! 0!

e −µ µ x e −.5 .51
b P(X = 1) = = = .3033
x! 1!

e −µ µ x e −.5 .5 2
c P(X = 2) = = = .0758
x! 2!

7.130 a Table 2 with µ = 3.5: P(X = 0) = P(X ≤ 0) = .0302

b Table 2 with µ = 3.5: P(X ≥ 5) = 1 – P(X ≤ 4) = 1 – .7254 = .2746

c Table 2 with µ = 3.5/7: P(X = 1) = P(X ≤ 1) – P(X ≤ 0) = .9098 – .6065 = .3033

e −µ µ x e −14 / 3 (14 / 3) 5
7.131 a P(X = 5 with µ = 14/3) = = = .1734
x! 5!

e −µ µ x e −1 / 3 (1 / 3)1
b. P(X = 1 with µ = 14/3) = = = .2388
x! 1!

e −µ µ x e −2 ( 2 ) 0
7.132 a P(X = 0 with µ = 2) = = = .1353
x! 0!

e −µ µ x e −14 (14)10
b P(X = 10 with µ = 14) = = = .0663
x! 10!

7.133 a Table 2 with µ = 5: P(X ≥ 10) = 1 – P(X ≤ 9) = 1 – .9682 = .0318

b Table 2 with µ = 10: P(X ≥ 20) = 1 – P(X ≤ 19) = 1 – .9965 = .0035

7.134 a Excel with µ = 30: P(X ≥ 35) = 1 – P(X ≤ 34) = 1 – .79731 = .20269

b Excel with µ = 15:P(X ≤ 12 = .26761

7.135 a Excel with µ = 1.8: P(X ≥ 3) = 1 – P(X ≤ 2) = 1 – .73062 = .26938

b Table 2 with µ = 9: P(10 ≤ X ≤ 15) = P(X ≤ 15) – P(X ≤ 9) = .9780 – .5874 = .3906

e −µ µ x e −.4 (.4) 0
7.136 P(X = 0 with µ = 80/200) = = =.6703
x! 0!

7.137 Poisson with µ = 2.5

a P(X ≥ 5) = 1 – P(X ≤ 4) = 1 - .8912 = .1088
b P(0) = .0821

208
c P(X ≤ 3) =.7576

7.138 Poisson with µ = 4

a P(X ≥ 5) = 1 – P(X ≤ 4) = 1 - .6288 = .3712
b P(X ≤ 3) = .4335
c P(X = 4) = .1954

7.139 Poisson with µ = 5

a P(X ≤ 3) = .2650
b P(X ≥ 6) = 1 – P(X ≤ 5) = 1 – .6160 = .3840
c P(X ≤ 8) = .9319

7.140 Poisson with µ = 1

a P(X = 0) = .3679
b P(X ≥ 5) = 1 – P(X ≤ 4) = 1 - .9963 = .0037

7.141 Poisson with µ = 2

a P(X = 0) = .1353
b P(X ≥ 4) = 1 – P(X ≤ 3) = 1 – .8571 = . 1429
c P(X ≤ 2) = .6767

7.142 a Table 2 with µ = 1.5: P(X ≥ 2) = 1 – P(X ≤ 1) = 1 – .5578 = .4422

b Table 2 µ = 6: P(X < 4) = P(X ≤ 3) = .1512

e −µ µ x e −5 (5)1
7.143 a P(X = 1 with µ = 5) = = = .0337
x! 1!
b Table 2 with µ = 15: P(X > 20) = P(X ≥ 21) = 1 – P(X ≤ 20) = 1 – .9170 = .0830

e −µ µ x e −1.5 (1.5) 0
7.144 a P(X = 0 with µ = 1.5) = = = .2231
x! 0!
b Table 2 with µ = 4.5: P(X ≤ 5) = .7029

c Table 2 with µ = 3.0: P(X ≥ 3) = 1 – P(X ≤ 2 = 1 – .4232 = .5768

7.145 Binomial with n = 25 and p = .20

a P(X ≤ 5) = .6167
b P(X ≥ 7) = 1 – P(X ≤ 6) = 1 – .7800 = .2200
c P(X = 5) = .1960

209
7.146 Binomial with n = 20 and p = .15
a P(X = 3) = .2428
b P(X ≤ 5) = .9327
c P(X ≥ 3) = 1 – P(X ≤ 2) = 1 - .4049 = .5951

5!
7.147 P(X = 5) = (.774) 5 (1 − .774) 5 − 5 = .2778
5! (5 − 5)!

7.148 a E(X) = np = 40(.02) = .8

40!
b P(X = 0) = (.02) 0 (1 − .02) 40 − 0 = .4457
0!(40 − 0)!

7.149 a µ = E(X) = ∑ xP(x) = 0(.48) + 1(.35) + 2(.08) + 3(.05) + 4(.04) = .82

σ2 = V(X) = ∑ ( x − µ) 2 2 2 2
P( x ) = (0–.82) (.48) + (1–.82) (.35) + (2–.82) (.08)

2 2
+ (3–.82) (.05) + (4–.82) (.04) = 1.0876

σ= σ 2 = 1.0876 = 1.0429

e −µ µ x e −8 (8)10
7.150 a P(X = 10 with µ = 8) = = = .0993
x! 10!
b Table 2 with µ = 8: P(X > 5) = P(X ≥ 6) = 1 – P(X ≤ 5) = 1 – .1912 = .8088

c Table 2 with µ = 8: P(X < 12) = P(X ≤ 11) = .8881

7.151 Binomial with n = 10 and p = .80

a P(X ≥ 9) = 1 – P(X ≤ 8) = 1 – .6242 = .3758
b P(X = 8) = .3020
c P(X ≤ 7) = .3222

7.152 Table 1 with n = 10 and p = .3: P(X > 5) = P(X ≥ 6) = 1 – P(X ≤ 5) = 1 – .9527 = .0473

7.153 a µ = E(X) = ∑ xP(x) = 0(.05) + 1(.16) + 2(.41) + 3(.27) + 4(.07) + 5(.04) = 2.27
σ2 = V(X) = ∑ ( x − µ) 2 2 2 2
P( x ) = (0–2.27) (.05) + (1–2.27) (.16) + (2–2.27) (.41)

2 2 2
+ (3–2.27) (.27) + (4–2.27) (.07) + (5–2.27) (.04) = 1.1971

σ= σ 2 = 1.1971 = 1.0941

210
7.154 Poisson with µ = 5
a P(X = 1) = .0337
b P(X ≤ 5) = .6160
c P(X ≥ 8) = 1 – P(X ≤ 7) = 1 - .8666 = .1334

7.155 Binomial with n = 25 and p = .10

a P(X ≥ 3) = 1 – P(X ≤ 2) = 1 - .5371 = .4629
b P(X = 2) = .2659
c P(X ≤ 3) = .7636

7.156 Binomial with n = 10 and p = .50

a P(X = 6) = .2051
bP(X ≥ 8) = 1 – P(X ≤ 7) = 1 – .9453 = .0547
c P(X ≤ 4) = .3770

7.157 Poisson with µ = 1.5

a P(X = 1) = .3347
b P(X ≥ 3) = 1 – P(X ≤ 2) = 1 – .8088 = .1912
c P(X ≤ 4) = .9814

7.158 Table 1 with n = 10 and p = .20: P(X ≥ 6) = 1 – P(X ≤ 5) = 1 – .9936 = .0064

10!
7.159 a P(X = 2) = (.05) 2 (1 − .05)10 − 2 = .0746
2!(10 − 2)!
b Excel with n = 400 and p = .05: P(X = 25) = .04455
c .05

7.160 a Excel with n = 80 and p = .70: P(X > 65) = P(X ≥ 66) = 1 – P(X ≤ 65) = 1 – .99207 =
.00793
b E(X) = np = 80(.70) = 56

c σ= np(1 − p) = 80(.70)(1 − .70) = 4.10

7.161 a Excel with µ = 9.6: P(X ≥ 10) = 1 – P(X ≤ 9) = 1 − .5089 = .4911

b. Excel with µ = 6: P(X ≤ 5) = .4457

c Excel with µ = 2.3: P(X ≥ 3) = 1 – P(X ≤ 2) = 1 − .5960 = .4040

211
7.162 Table 1 with n = 25 and p = .40:
a P(X = 10) = P(X ≤ 10) – P(X ≤ 9) = .5858 – .4246 = .1612
b P(X < 5) = P(X ≤ 4) = .0095
c P(X > 15) = P(X ≥ 16) = 1 – P(X ≤ 15) = 1 – .9868 = .0132

7.163 Excel with n = 100 and p = .45:

a P(X > 50) = P(X ≥ 49) = 1 – P(X ≤ 50) = 1 – .86542 = .13458
b P(X < 44) = P(X ≤ 43) = .38277
c P(X = 45) = .07999

7.164 a. µ = E(X) = ∑ xP(x) = 0(.36) + 1(.22) + 2(.20) + 3(.09) + 4(.08) + 5(.05) = 1.46
σ2 = V(X) = ∑ ( x − µ) 2 2 2 2
P( x ) = (0–1.46) (.36) + (1–1.46) (.22) + (2–1.46) (.20)

2 2 2
+ (3–1.46) (.09) + (4–1.46) (.08) + (5–1.46) (.05) = 2.23

σ= σ 2 = 2.23 = 1.49

∑ xP(x) = 0(.15) + 1(.18) + 2(.23) + 3(.26) + 4(.10) + 5(.08) = 2.22

b. µ = E(X) =

σ = V(X) = ∑ ( x − µ) P( x ) = (0–2.22) (.15) + (1–2.22) (.18) + (2–2.22) (.23)

2 2 2 2 2

2 2 2
+ (3–2.22) (.26) + (4–2.22) (.10) + (5–2.22) (.08) = 2.11

σ= σ 2 = 2.11 = 1.45

7.165a Binomial with n = 5 and p = .350: P(X ≥ 1) = 1 – P(0) = 1 - .1160 = .8840

b Probability of at least 1 hit in 56 consecutive games = (.8840)56 = .00100

7.166 Binomial with n = 10 and p = .80

a P(X = 10) = .1074
b P(X ≥ 8) = 1 – P(X ≤ 7) = 1 - .3222 = .6778
c P(X ≤ 8) = .6242

7.167 Binomial with n = 20 and p = .60

a P(X ≥ 15) = 1 – P(X ≤ 14) = 1 – .8744 = .1256
b P(X ≤ 12) = .5841
c P(X = 12) = .1797

7.168 Binomial with n = 5 and p = .01. (using Excel)

212
 x p(x)
0 .95099
1 .04803
2 .00097
3 .00001
4 0
5 0

7.169 Binomial with n = 100 and p = .01

a P(X = 0) = .3660
b P(X = 1) = .3697
c P(X = 2) = .1849

7.170 p = .08755 because P(X ≥ 1) = 1– P(X = 0 with n = 10 and p = .08755) = 1– .40 = .60

Case 7.1
Expected number of runs without bunting = .85.
If batter bunts:
Bases Expected Number
Outcome Probability Occupied Outs of Runs

1 .75 2nd 1 .69 .5175

2 .10 1st 1 .52 .0520
3 .10 none 2 .10 .0100
4 .05 1st and 2nd 0 1.46 .0730
Expected number of runs = .6255
Decision: Don’t bunt.

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