Problem Set 1

Siria Angino
Claudia Vittori

24/09/2014

• You can work on these problems in group (up to 4 students).

• In order to be able to take the midterm, you should turn in ALL the problem sets.

• IMPORTANT: If you send the problem set by email, the subject line should be ASE2014PS1
for the first problem set, ASE2014PS2 for the second problem set, and so on.

1. Suppose X ∼ N (0, 1). Calculate the following probabilities:

(a) P (X ≤ −1.96)
(b) P (X ≤ −1.64)
(c) P (X ≤ 0)
(d) P (X ≤ 1.64)
(e) P (|X| ≤ 1.96)

2. Consider two random variables X and Z, with E[X] = 2, E[Z] = 1, V ar[X] = V ar[Z] = 1,
a = 0.5, b = 3, c = 0.2, d = 2.
(a) Calculate E[aX + b].
(b) Calculate V ar[aX + b].
(c) Assuming that X and Z are independent, calculate V ar[X + Z] and SD[X + Z].
(d) Assuming that Cov(X, Z) = 1, calculate Cov(aX + b, cZ + d).
(e) Generalize previous results for any finite E[X], E[Z], V ar[X], var[Z], a, b, c and d.
(f) Assuming again Cov(X, Z) = 1, what can you say about Corr(X, Z)?

1
3. Given two variables X and Y :
(a) Show that Corr(a + bX, c + dY ) = Corr(X, Y );
(b) What is the unit of measure for Corr(X, Y )?

4. Let X ∼ N (0, 1) and Y = X 2 .

(a) Calculate E[Y |X].
(b) Calculate E[Y ].
(c) Calculate E[XY ] (recall that, for a variable Z ∼ N (0, 1), E[X 2n+1 = 0] for all n ∈ N).
(d) Calculate Cov(X, Y ) and Corr(X, Y ) = 0.
As you will find out in this example, Corr(X, Y ) = 0 does not imply E[Y|X]=0. However the
opposite is true: E[Y |X] = 0 ⇒ Corr(X, Y ) = 0.

5. Suppose (X1 , . . . , Xn ) are iid random variables with E[Xi ] = µ and V ar(Xi ) = σ 2 . Let X̄ =
Pn
i=1 Xi /n.

(a) Construct a 95% confidence interval for µ

(b) Suppose that σ 2 = 0.4. You observed X̄ = 0.6. How many observations you need in order
to obtain a confidence interval of length 0.2?