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1
e
2
1 x
f(x)
f(x)
2.
P(0<Z<1.5)
P(Z<1.5)
P(-1.4<Z<.6)
P(Z>2.03)
P(Z>-1.44)
P(1.14<Z<2.43)
P(-.91<Z<-.31)
3.
Find Z0
2.
3.
4.
Solutions
Set 1:
Solutions
Set 2:
P(Z > Z0) = .04. Thus, P(Z < Z0) = 0.96. The corresponding Z0= 1.75
With Excel use: =normsinv(.96)
P(Z < Z0) = .02. The value of Z0 must be negative, therefore, if we want to use
the text table we need to use symmetry. Instead of finding Z0 as requested,
well first find Z0, which of course has a positive value! For convenience lets
call this value Z1
P(Z > Z1) = .02. So, P(Z < Z1) = 0.98. Thus Z1 = 2.055 (or so). This means
that the value we are seeking Z0 = -2.055.
P(-Z0 < Z < Z0) = 0.65. Then P(Z < Z0) P(Z <- Z0) = 0.65. However since
P(Z < -Z0) = P(Z > Z0) = 1 P(Z < Z0), we have:
P(-Z0 < Z < Z0) = P(Z < Z0) [1 P(Z < Z0)] = 2P(Z < Z0) 1 = 0.65. From
here we have P(Z < Z0) = 0.825, which yields Z0 =~0.935.
Another solution: Note that P(Z<-Z0)+ P(-Z0 < Z < Z0) +P(Z>Z0)=1, but
P(Z<-Z0)=P(Z>Z0) so, P(Z<-Z0)=.175, and Z0 can be found.
Solutions
Set 3:
Solutions
4.
0.98
-Z0
Solutions
5.
0.20
Z0
Sampling Distributions
Notes and review problems
2.
The heights of North American women are normally distributed with a mean of
64 inches and a standard deviation of 2 inches.
3.
What is the probability that a randomly selected woman is taller than 66 inches?
A random sample of 40 women is selected. What is the probability that the sample
mean height is greater than 66 inches?
If the population of heights is not normally distributed, would you change your answer
to part 2?
The manufacturer of cans of salmon claims the average can weight is 6.05
ounces. He further states the actual weight per can is a normal variable with a
mean of 6.05 and standard deviation of 0.18 ounces. A random sample of 36
observations is drawn.
a.
b.
Solutions
Problem 1
Problem 2
Let X be a woman height.
A portfolio can be composed of either one of two stocks, or of both. The mean and
standard deviation of the rate of return for each stock are .12 and .05. The returns
are normally distributed
a.
b.
If an investor decides to invest in one stock only, what is the probability that the
portfolio loses money? Earns more than 20%?
if the investor decides to invest in both stocks, one dollar in each stock, and assuming
the return on each stock is independent on the other
c.
d.
Now assume the return and standard deviation for stock 2 are .24 and .15 respectively.
Answer again parts a and b. For part b the portfolio return and standard deviation
depend on the proportion of the portfolio invested in each stock. Assume for simplicity
that the ratio is as before - a dollar for dollar.
Try to resolve part c when the ratio of investments in the two stocks for the portfolio is
2 dollars in stock 1 for 1 dollar in stock 2. Note that the return in this case is .
67R1+.33R2 for each dollars invested in the portfolio. From this relationship you can
determine the mean and standard deviation of the portfolio.
Solutions
4.
b.
c.
d.
Well not repeat part a, being very similar to the one solved before. For part b
we continue as follows: X = X1 + X2, so x = 1+2 =.12+.24 =.36, and x2 = 12
+22=.052+.152 =.025. So the standard deviation for X is x = .0251/2 = .1581.
From this we have:
P(X<0) = P(Z<(0 - .36)/(.1581) = P(Z<-2.27)
Repeat part C, but this time
x =.67(.12)+.33(.24), and x2 = (.672)(.052)+(.332)(.152)
Solutions
5.
1140
71.75 75
a. P(X1+X2++X16>1140)= P X
P(Z 1.5)
P Z
16
10 / 16
2.
Solutions
1.
2.
[.5(1-.5)/600]1/2