Name : Gopala Krishna Chaitanya .

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PGID : 71710060

ASSIGNMENT 1 -- Solved

1. If a random variable has the normal distribution with μ = 77.0 and σ = 3.4, find the probability that
random variable is
(a) less than 72.6
(b) greater than 88.5
(c) between 81 and 84
(d) between 56 and 92

Sol:-

Here μ = 77.0 and σ = 3.4

(a) For Probability that Random variable is less than 72.6
P(X<72.6) = Φ(Z)
Where z is the value called z score at which we compute Φ(Z)
Where Z = (X- μ)/ σ
So P(X<72.6) = Φ((72.6-77.0) / 3.4 ) = Φ(-1.29411765) = 0.09853

(b) For Probability that Random variable is greater than 88.5

P(X>88.5) =1 - P(X<=88.5)
= 1- Φ((88.5-77.0) / 3.4 )
= 1- Φ(3.3823)
=1- 0.99964 =0.00036

(c) For Probability that Random variable is between 81 and 84

P(81<X<84) = Φ((84-77.0) / 3.4 ) - Φ((81-77.0) / 3.4 )
= Φ(2.0588) - Φ(1.1764)
= 0.97982 - 0.119718=0.860102

(c) For Probability that Random variable is between 56 and 92

(d) P(56<X<92) = Φ((92-77.0) / 3.4 ) - Φ((56-77.0) / 3.4 )
= Φ(4.41176) - Φ(-6.17647)
This range covers the almost entire distribution because the values are more than
three standard deviations away. So Probability is approximately 1.

2. In a car race, the finishing times are normally distributed with mean 145 minutes and standard
deviation of 12 minutes.
(a) Find percentage of car racers whose finish time is between 130 and 160 minutes.
(b) Find percentage of car racers whose finish time is less than 130 minutes.
Sol :

When μ and σ are given, the Probability Distribution function of Normal Distribution is
Here μ = 145.0 and σ = 12
(a) The percentage of car racers whose finish time is between 130 and 160 minutes is equal to
 P(130<X<160) = Φ((160-145) / 12 ) - Φ((130-145) / 12 )
= Φ(1.25) - Φ(-1.25)
= 0.89435 - 0.10565 =0.7887
Percentage of racers =0.7887 * 100 =78.87%
(b) Find percentage of car racers whose finish time is less than 130 minutes.

P(X<130) = Φ((130-145) / 12 )
=Φ(-1.25)
= 0.10565
Percentage of racers =0. 10565 * 100 =10.565%

3. A test-taker has recently taken an aptitude test with 15 questions. All of the questions are True-
False type in nature.
(a) What is the probability that the student got first five questions correct.
(b) What is the probability that the student got five questions correct.

Sol :
(a) What is the probability that the student got first five questions correct.

The probability of getting one question correct is 50% =0.5

The probability of getting one question wrong is 50% =0.5

The probability that the student got first five questions correct is

= 0.5*0.5*0.5*0.5*0.5 = 0.03125

(b) What is the probability that the student got five questions correct.

n!
P(X =x) = ( p)x(1- p)n- x
x!n- x!

= [15! /5!(15-5)! ] * (1/2)^5(1/2)^10 = 11*12*13*14*15/1*2*3*4*5 = 0.091644

4. 68% of the marks in exam are between 35 and 42. Assuming data is normally distributed, what are
the mean and standard deviation?

Sol: -
68.2% area is within one s.d (σ ) away from mean ( μ)
So 35 and 42 are exactly one Standard deviation away from Mean =>
Mean is mid point of 35 and 42 =>
Mean ( μ) = 35+42/2 = 38.5

Standard Deviation s.d (σ ) = 42-38.5 = 3.5.

Therefore (i) Mean ( μ) = 38.5
(ii) Standard Deviation s.d (σ ) = 3.5.

5. A professor asked students to take two exams. 30% of the class cleared both exams and 55% of the
class cleared the first exam. What percentage of class who cleared first exam also cleared the second
exam?

Sol :- Assuming Event of passing Exam 1 as A and Event of Passing Exam 2 as B

Probability of passing Exam 1 is P(A) and Probability of passing Exam 2 is P(B)
So Probability of passing exams 1 and 2 are P( A ∩ B)
P(B|A) = Propability of clearing first exam also clearing the second exam
P(B|A)= P(A ∩ B) /P(A) = 0.3/0.55 = 0.54545454

6. In India, 82% of all urban homes have a TV. 62% have a TV and DVD player. What is probability that
a home has a DVD player given that the home has a TV.

Sol :- Assuming Event of having TV as A and Event of having DVD as B

Probability of having TV is P(A) and Probability of having DVD is P(B)
So Probability of having TV and DVD player is P(A ∩ B)
P(B|A) = Propability of having a DVD player given that the home has a TV
P(B|A)= P(A ∩ B) /P(A) = 0.62/0.82 = 0.756097561

7. You toss a coin three times. Assume that the coin is fair. What is the probability of getting:
(a) All three heads
(b) Exactly one head
(c) Given that you have seen exactly one head, what is the probability of getting at-least two
heads?

Sol :- Assuming that the coin tosses are independent.

the probability of getting:
(a) All three heads =
P(HHH) = P(H)⋅P(H)⋅P(H) = (0.5) 3 = 1/8
(b) Exactly one head
P(HTT) + P(THT) + P(TTH) =3/8
(c) Given that you have seen exactly one head, what is the probability of getting at-least two
heads?
H-H-H
T-H-H
H-T-H
H-H-T
T-H-T
T-T-H
H-T-T
T-T-T
 Given that you have seen exactly one head means we need to consider calculating prob on
each toss

1. probability of seeing Head on first toss is 4/8 =0.5

2. Probabilty of seeing head on 2nd toss where Head is not seen on 1st toss and overall 2
heads atleast = 1/8
 The outcomes that have at least two heads in them are H-T-H, H-H-T, T-H-H and H-H-H.
Therefore, there are four of the eight outcomes that have two or more tails in them.

½+1/8= 5/8.
So given that We have seen exactly one head by 1st toss or second toss and overall atleast 2
heads = 5/8.

8. A small insurance agency has two salespersons who sell policies to retail clients. The amount of
insurance claims filed by clients served by first agent in a year (X1) can be approximated using a
normal distribution with mean μ1 = INR 1200 and variance = 90000. Similarly, the amount of claims
filed by clients served by the second agent (X2) can also be approximated using a normal distribution
with mean μ2 = INR 1800 and variance = 160000. What is the probability that the total amount of
claims filed by the second agent’s clients is lower? Assume that X1 and X2 are independent of each
another.
(a) 1.15%
(b) 88.5%
(c) 11.5%
(d) 98.85%
(e) 50%

Sol:-

Considering n1 as number of claims filed by first agent

n2 as number of claims filed by second agent
P(n1>n2)=> P(n1-n2>0)

N1-n2 = (Mean 1 –mean 2) /square root of (var1 + var 2) >0

 n2-n1= (0-( (1800-1200)/ square root(90000+160000))
 so Probability(n1-n2) > Probability(0-600/500)
 P(n1-n2>0) =P(-600/500)
 P(n1-n2>0)>0= P(-1.2)
 P(n1-n2) = 0.1151
So the Probability of number of claims filed by the second agent’s clients is lower than that of
first agent’s Clients = 0.1151* 100 = 11.51%

So the answer is (c) 11.51%

9. Your personal digital music collection has about 10000 songs, whose mean duration is 4.5 minutes
and the standard deviation is 100 seconds. You recently obtained legal software that randomly
packages your songs in play lists. A key setting available to the user is the number of songs in each list.
What sample size should you choose if you want the average duration of songs in these playlists to
have a standard deviation of 10 seconds?
(a) 100
(b) 200
(c) 300
(d) 400

Sol :

= 100= 10000/n=> n= 10000/100 =10

Sample Size =100
The answer is (a) 100

10. Routine testing for illegal drug use is increasingly common in work places and schools. The
companies that perform these tests maintain that the tests are sensitive, which means that they are
likely to produce a positive result if there are drugs (or metabolites) in a sample, and specific, which
means that they are likely to yield a negative result if there are no drugs. Studies from the Journal of
the American Medical Association estimate that the sensitivity of common drug tests is about 60%
and the specificity is about 99%. Now suppose these tests are applied to a workforce where the actual
rate of drug use is 5%. Of the employees who test positive, approximately how many of them actually
use drugs?
(a) 0.24
(b) 0.49
(c) 0.61
(d) 0.76
(e) none of these options

Sol: - Sensitivity of drug test =60% =0.6

P(A) = P(A|B) P(B) + P(A|B’) P(B’)

LET P(B) = Use drugs =0.05

P(A)= Test +ve
Prob of yield –ve if no drugs= 0.99 . so Prob of yield +ve if no drugs = 0.01
Prob of yield +ve if drugs exists =0.6 . so Prob of yield -ve if drugs = 0.4
People to show +ve or P(A|B) = yield positive given use drugs= 0.6 * 0.05= 0.03

P(A|B) =0.6
P(A|B’)=0.01
P(B)= 0.05

P(A) = yield +ve= 0.6(0.05)+0.01*0.95 = 0.0395

P(B) = Actual Drug use rate = 5% =0.05
P(A|B)= Prob of yield +ve if drugs exists =0.6
P(B|A)= P(A|B)*P(B)/P(A) =0.6*0.05/0.395 =0.759493671 Approx =0.76

Answer is (d) 0.76.

11. The blue M&M was introduced in 1995. Before then, the color mix in a bag of plain M&Ms was
(30% Brown, 20% Yellow, 20% Red, 10% Green, 10% Orange, 10% Tan). Afterward it was (24% Blue,
20% Green, 16% Orange, 14% Yellow, 13% Red, 13% Brown). A friend of mine has two bags of M&Ms,
and he tells me that one is from 1994 and one from 1996. He won’t tell me which is which, but he
gives me one M&M from each bag. One is yellow and one is green. What is the probability that the
yellow M&M came from the 1994 bag?

Sol:- We have two cases here

A: Bag 1 is from 1994 and Bag 2 is from 1996
B: Bag 2 is from 1994 and Bag 1 is from 1996

Here P(A) = P(B) = 1/2. =0.5

Given
E: yellow from Bag 1, green from Bag 2

We get the likelihoods by multiplying the probabilities for the two M&M:

P(E|A) = (0.2)(0.2)
P(E|B) = (0.1)(0.14)

P(E|B) is the probability of a yellow M&M in 1996 (0.14) times the probability of a green M&M in 1994
(0.1).

so by using Bayes's theorem, we get P(A|E) = 40 / 54 ~= 0.74

12. Find the daily stock price of Wal-Mart for the last three months. (A good source for the data is
http://moneycentral.msn.com or Yahoo Finance or Google Finance (there are many more such
sources). You can ask for the three-month chart and export the data to a spreadsheet.)
(a) Calculate the mean and the standard deviation of the stock prices.
(b) Get the corresponding data for Kmart and calculate the mean and the standard deviation.
(c) The coefficient of variation (CV) is defined as the ratio of the standard deviation over the mean.
Calculate the CV of Wal-Mart and Kmart stock prices.
(d) If the CV of the daily stock prices is taken as an indicator of risk of the stock, how do Wal-Mart and
Kmart stocks compare in terms of risk? (There are better measures of risk, but we will use CV in this
exercise.)
(e) Get the corresponding data of the Dow Jones Industrial Average (DJIA) and compute its CV. How
do Wal-Mart and Kmart stocks compare with the DJIA in terms of risk?
(f) Suppose you bought 100 shares of Wal-Mart stock three months ago and held it. What are the
mean and the standard deviation of the daily market price of your holding for the three months?

Sol: - (a) Calculate the mean and the standard deviation of the stock prices.
All the solutions for this question are computed in the excel sheet and submitted separately. The
solutions are computed using STDEV and AVERAGE functions in excel for Standard deviation and
Mean values correspondingly.
 Q.12 Walmart and
KMart 3 months daily stock data.xlsx

The mean μ = 69.70806

The Standard Deviation σ = 1.398350977

These values are calculated in Excel using Available functions in Excel. “Average” for Mean and
“STDDEV” for Standard Deviation.

(b) Get the corresponding data for Kmart and calculate the mean and the standard deviation.

The mean μ = 10.82113

The Standard Deviation σ = 1.571424231

(c) The coefficient of variation (CV) is defined as the ratio of the standard deviation over the mean.
Calculate the CV of Wal-Mart and Kmart stock prices.
The coefficient of variation (CV) for Wal-mart = σ / μ = (1.398350977/ 69.70806) = 0.0200601046
The coefficient of variation (CV) for Kmart = σ / μ = (1.571424231/ 10.82113) =0.145218127

(d) If the CV of the daily stock prices is taken as an indicator of risk of the stock, how do Wal-Mart and
Kmart stocks compare in terms of risk? (There are better measures of risk, but we will use CV in this
exercise.)
Looking at the values of coefficient of variation (CV) for Wal-mart and Kmart, it appears that the risk
is low in investing Walmart as the coefficient of variation (CV) is low in value when compared to the
risk in investing in Kmart stocks

(e) Get the corresponding data of the Dow Jones Industrial Average (DJIA) and compute its CV. How
do Wal-Mart and Kmart stocks compare with the DJIA in terms of risk?

The coefficient of variation (CV) for DJIA = σ / μ = (658.8207217 /19343.74) = 0.034058601

Looking at the values of coefficient of variation (CV) for DJIA, Wal-mart and Kmart, it appears that
the risk is low in investing Walmart as the coefficient of variation (CV) is low in value when
compared to the risk in investing in DJIA, Kmart stocks
Investing in DJIA also holds lower risk as the value is very low.

(f) Suppose you bought 100 shares of Wal-Mart stock three months ago and held it. What are the
mean and the standard deviation of the daily market price of your holding for the three months?
Three months ago the price for one stock in Wal-mart is 66.73.

For 100 stocks the cost is 66.73 *100 = 6673.00 USD

Mean of 100 stocks I purchased = 69.70806 * 100 = 6970.806

Standard Deviation of my stocks is |stock price - Mean|

= 6970.806-6673.00 = 287.806 (if the scale is 100 stocks)

Per one stock SD = 287.806/100 = 2.87806.

13. For this problem, consider the dataset Prob_Assignment_Dataset.xlsx attached. As the vigilant
monitors of the Zappos.com website, we are obsessed with who is coming to our website and what
they do during their visit. This challenge requires you to look at data similar to that which Analytics
teams at Zappos would use to assess the overall Performance of the business.
The data set is a fictional representation of actual data sets that we work with. Perform uni-variate
descriptive analysis on the variables, and Submit a short description explaining any insights or trends
you discovered. Include graphs, data tables, and other helpful visuals to communicate your
discoveries. You do not have to work on all of the variables (select any 3-4 that are of most interest to
you).
Sol: - The analysis is done in R File. The R file includes the step by step analysis and observations of data
by using Univariate analysis. This solution is separately submitted in an R file.

Assignment-1 Q 13 & Q14.R

14. Consider the same dataset as earlier. Now perform bi-variate data analysis as discussed in last
class to find out relationships between different variables. Write a short description on what you find
in the analyses along with any tables, graphs. You do not have to analyze all variables, any 3-4 that
interest you most should be the focus here.
Sol :- - The analysis is done in R File. The R file includes the step by step analysis and observations of
data by using Bivariate analysis. This solution is separately submitted in an R file.

Assignment-1 Q 13 & Q14.R