Homework 3 (12 questions)

1. Are you someone who prefers to take risk or avoid risk?

A. You are given $5,000 to invest. You must choose between (i) a sure gain of $2,500 and (ii) a 0.50
chance of a gain of $5,000 and a 0.50 chance to gain nothing. What is the expected gain with each
strategy? Which strategy do you prefer (this is an opinion so no right answer!)?

B. You are given $10,000 to invest. You must choose between (i) a sure loss of $2,500 and (ii) a 0.50
chance of losing $5,000 and a 0.50 chance to lose nothing. What is the expected loss with each
strategy? Which strategy do you prefer (this is an opinion so no right answer!)?

2. A professor always assigns final grades such that 20% are A, 40% are B, 30% are C, 5% are D, and 5%
are F. The grade point scores are 4 for A; 3 for B; 2 for C; 1 for D; and 0 for F.

A. Create the probability distribution table for grade points for this professor.

B. Find the mean of this probability distribution and provide and interpretation of this mean.

C. Find the variance and standard deviation.

3. From a recent General Social Survey response to question, What is the ideal number of children for a
family to have? The probability distribution of X equal to the response is approximated by the
following table according to the sex of the person responding:

X = Ideal number children 0 1 2 3 4

Females: P(X = x) 0.00 0.03 0.63 0.23 0.11

Males: P(X = x) 0.04 0.03 0.57 0.23 0.13

A. Calculate the means for males and females.

B. Which probability distribution would you expect (dont calculate!) to have the larger standard
deviation and why?

4. Imagine a company with a large number of employees (e.g. over a thousand) from which it can
choose someone for management training. Furthermore, half of these available employees are female.
Since the management training program began, 10 employees have been selected and all were male.
What is the probability that out of 10 selected 0 would be female if there was no gender bias in the
selection process?

5. Assume each newborn baby has an approximate probability of 0.51 of being male. For a family of
four children Let X = number of children that are females.

A. Explain which each of the four conditions for X to have a binomial distribution.

B. Calculate the mean and standard deviation of X.

C. Find the probability that the family has exactly two girls and two boys.

6. A marketer uses random digit dialing to call people and try to interest them in donating to a national
charitable organization. From past experience, she is successful on 2% of her calls. In a typical work day
she makes 200 calls. Let X represent the number of calls on which she is successful.

A. Is X a binomial distribution? Explain.

B. Calculate the mean and standard deviation of X and provide an interpretation of the mean.

C. What is the probability that on any given day she has 0 successful calls?

7. A World Health Organization study of health in various countries reported that in Canada, the systolic
blood pressure readings (i.e. this is the top number of your blood pressure e.g. the 120 if your bp is
120/84) have a mean of 121 and a standard deviation of 16. A reading above 140 is considered to be
high blood pressure. Assuming these readings are approximately normal, answer the following.

A. What is the z-score for a blood pressure reading of 140?

B. What proportion of Canadians suffers from high blood pressure?

C. What proportion of Canadians has systolic blood pressures in the range of 110 to 140?

D. What blood pressure reading represents the 95th percentile?

8. Using a college cost estimator, the average of campus rental at Penn State is approximately $547 per
month. Suppose these rates are roughly normal with a standard deviation of $100. What proportion of
rentals:

A. is at least $600 per month?

B. is less than $400 per month?

C. is between $400 and $800 per month?

9. Two popular standardized tests use in the undergraduate admission process are the SAT and the ACT.
For the math portion of each test, the SAT has ( = 500 and = 100) while for the ACT these are ( = 21
and = 4.7). Both metrics have score distributions that are approximately normal. Which score is
relatively higher, and SAT score of 600 or an ACT score 0f 25? Explain.

10. Refer back to question 8. Say you take a random sample of 25 students living off campus.

A. What would be the mean and standard error for the distribution of the sample mean?

B. What is the probability that the sample mean would be at least $600?

C. How does this compare to your answer in problem 8 part A? Why do think there is a difference?

11. According to the Alzheimers Association, Alzheimers disease affects 1 in 10 people over the age of
65. A study was conducted on health issues facing by people over the age of 65. What would be the
shape, mean and standard error of the sampling distribution of the proportion who suffer from
Alzheimers disease if the sample size is 200 and if it were 800?

12. Referring back to problem 11, if the sample size were 200 what is the probability that the sample
proportion would be at least 12.5%? Does this outcome seem likely? Explain.