Discrete Distributions-Practice Questions

Discrete Probability Distributions
True / False Questions

1. A random variable is a function that assigns numerical values to the outcomes of a random
experiment.
True False
2. A discrete random variable X may assume an (infinitely) uncountable number of distinct

values.
True False
3. A continuous random variable X assumes an (infinitely) uncountable number of distinct

values.
True False
4. A probability distribution of a continuous random variable X gives the probability that X takes
on a particular value x, P(X = x).
True False
5. A cumulative probability distribution of a random variable X is the probability P(X = x), where
X is equal to a particular value x.
True False
6. The expected value of a random variable X can be referred to as the population mean.
True False
7. The variance of a random variable X provides us with a measure of central location of the
distribution of X.
True False
8. The relationship between the variance and the standard deviation is such that the standard
deviation is the positive square root of the variance.
True False
9. A risk-averse consumer may decline a risky prospect even if it offers a positive expected
value.
True False
10. A risk averse consumer ignores risk and makes his/her decisions solely on the basis of
expected value.
True False
11. Given two random variables X and Y, the expected value of their sum, E(X+Y), is equal to the
sum of their individual expected values, E(X) and E(Y) .
True False
12. A Bernoulli process consists of a series of n independent and identical trials of an experiment
such that in each trial there are three possible outcomes and the probabilities of each
outcome remain the same.
True False
13. A binomial random variable is defined as the number of successes achieved in n trials of a
Bernoulli process.
True False
14. A Poisson random variable counts the number of successes (occurrences of a certain event)
over a given interval of time or space.
True False
15. We use the hypergeometric distribution in place of the binomial distribution when we are
sampling with replacement from a population whose size N is significantly larger than the
sample size n.
True False
Multiple Choice Questions

16. Which of the following can be represented by a discrete random variable?
A. The number of obtained spots when rolling a six-sided die
B. The height of college students
C. The average outside temperature taken every day for two weeks
D. The finishing time of participants in a cross-country meet

A. The circumference of a randomly generated circle
B. The time of a flight between Chicago and New York
C. The number of defective light bulbs in a sample of five
D. The average distance achieved in a series of long jumps
18. Which of the following can be represented by a continuous random variable?
A. The time of a flight between Chicago and New York
B. The number of defective light bulbs in a sample of 5
C. The number of arrivals to a drive-thru bank window in a four-hour period
D. The score of a randomly selected student on a five-question multiple-choice quiz

A. The average temperature in Tampa, Florida, during a month of July
B. The number of typos found on a randomly selected page of this test bank
C. The number of students who will get financial assistance in a group of 50 randomly
selected students
D. The number of customers who visit a department store between 10:00 am and 11:00 am
on Mondays
20. What is a characteristic of the mass function of a discrete random variable X?

A. The sum of probabilities P(X=x) over all possible values x is 1.
B. For every possible value x, the probability P(X=x) is between 0 and 1.
C. Describes all possible values x with the associated probabilities P(X=x).
D. All of the above.
21. What are the two key properties of a discrete probability distribution?
A.
and
B.
and
C.
and
D.
and
22. Exhibit 5-1. Consider the following discrete probability distribution.
Refer to Exhibit 5-1. What is the probability that X is 0?

A. 0.10
B. 0.35
C. 0.55
D. 0.65
Refer to Exhibit 5-1. What is the probability that X is greater than 0?

A. 0.10
B. 0.35
C. 0.55
D. 0.65
Refer to Exhibit 5-1. What is the probability that X is negative?

A. 0.00
B. 0.10
C. 0.15
D. 0.35
Refer to Exhibit 5-1. What is the probability that X is less than 5?

A. 0.10
B. 0.15
C. 0.35
D. 0.45
26. Exhibit 5-2. Consider the following cumulative distribution function for the discrete random
variable X.
Refer to Exhibit 5-2. What is the probability that X is less than or equal to 2?
A. 0.14
B. 0.30
C. 0.44
D. 0.56
variable X.
Refer to Exhibit 5-2. What is the probability that X equals 2?

A. 0.14
B. 0.30
C. 0.44
D. 0.56
variable X.

A. 0.14
B. 0.30
C. 0.44
D. 0.56
29. We can think of the expected value of a random variable X as ________________.
A. The long-run average of the random variable values generated over 100 independent
repetitions
B. The long-run average of the random variable values generated over 1000 independent
repetitions
C. The long-run average of the random variable values generated over infinitely many
independent repetitions
D. The long-run average of the random variable values generated over a finite number of
30. The expected value of a random variable X can be referred to or denoted as _____.
A. µ
B. E(X)
C. The population mean
D. All of the above
31. Exhibit 5-3. Consider the following probability distribution.
Refer to Exhibit 5-3. The expected value is ___.

A. 0.9
B. 1.5
C. 1.9
D. 2.5
Refer to Exhibit 5-3. The variance is ____.

A. 0.89
B. 0.94
C. 1.65
D. 1.90
Refer to Exhibit 5-3. The standard deviation is _________.

A. 0.89
B. 0.94
C. 1.65
D. 1.90
Refer to Exhibit 5-4. The expected value is _____.

A. -1.0
B. -0.1
C. 0.1
D. 1.0
35. Exhibit 5-4. Consider the following probability distribution.1.14
Refer to Exhibit 5-4. The variance is _____.

A.
B. 1.29
C. 1.65
D. 1.94
Refer to Exhibit 5-4. The standard deviation is ____.

A. 1.14
B. 1.29
C. 1.65
D. 1.94
37. An analyst has constructed the following probability distribution for firm X's predicted return
for the upcoming year.
The expected value and the variance of this distribution are:
A. Option A
B. Option B
C. Option C
D. Option D
38. An analyst believes that a stock's return depends on the state of the economy, for which she
has estimated the following probabilities:
According to the analyst's estimates, the expected return of the stock is ____.
A. 7.8%
B. 11.4%
C. 11.7%
D. 13.0%
39. An analyst estimates that the year-end price of a stock has the following probabilities:
The stock's expected price at the end of the year is _______.
A. $87.50
B. $88.50
C. $89.00
D. $90.00
40. Exhibit 5-5. The number of homes sold by a realtor during a month has the following
probability distribution:
Refer to Exhibit 5-5. What is the probability that the realtor will sell at least one house during
a month?
A. 0.20
B. 0.40
C. 0.60
D. 0.80
Refer to Exhibit 5-5. What is the probability that the realtor sells no more than one house
during a month?
A. 0.20
B. 0.40
C. 0.60
D. 0.80
Refer to Exhibit 5-5. What is the expected number of homes sold by the realtor during a
month?
A. 1
B. 1.2
C. 1.5
D. 2
Refer to Exhibit 5-5. What is the standard deviation of the number of homes sold by the
realtor during a month?
A. 0.56
B. 0.75
C. 1
D. 1.2
44. Exhibit 5-6. The number of cars sold by a car salesman during each of the last 25 weeks is
the following:
Refer to Exhibit 5-6. What is the probability that the salesman will sell one car during a
week?
A. 0.20
B. 0.40
C. 0.60
D. 0.80
the following:
Refer to Exhibit 5-6. What is the probability that the salesman sells no more than one car
during a week?
A. 0.20
B. 0.40
C. 0.60
D. 0.80
the following:
Refer to Exhibit 5-6. What is the expected number of cars sold by the salesman during a
week?
A. 0
B. 0.8
C. 1
D. 1.5
the following:
Refer to Exhibit 5-6. What is the standard deviation of the number of cars sold by the
salesman during a week?
A. 0.56
B. 0.75
C. 0.80
D. 1
48. A consumer who is risk averse is best characterized as _______________.

A. A consumer who may accept a risky prospect even if the expected gain is negative
B. A consumer who demands a positive expected gain as compensation for taking risk
C. A consumer who completely ignores risk and makes his/her decisions based solely on
expected values
D. None of the above
49. A consumer who is risk neutral is best characterized as ______________.

A. A consumer who may accept a risky prospect even if the expected gain is negative
B. A consumer who demands a positive expected gain as compensation for taking risk
C. A consumer who completely ignores risk and makes his/her decisions based solely on
expected values
D. None of the above
50. How would you characterize a consumer who is risk loving?

A. A consumer who may accept a risky prospect even if the expected gain is negative.
B. A consumer who demands a positive expected gain as compensation for taking risk.
C. A consumer who completely ignores risk and makes his/her decisions solely on the basis
of expected values.
D. None of the above.
57. Which of the following statements is most accurate about a binomial random variable?
A. It has a bell-shaped distribution.
B. It is a continuous random variable.
C. It counts the number of successes in a given number of trials.
D. It counts the number of successes in a specified time interval or region.
58. It is known that 10% of the calculators shipped from a particular factory are defective. What
is the probability that exactly three of five chosen calculators are defective?
A. 0.00729
B. 0.0081
C. 0.081
D. 0.03
is the probability that none in a random sample of four calculators is defective?
A. 0.0010
B. 0.2916
C. 0.3439
D. 0.6561
is the probability that at least one in a random sample of four calculators is defective?
A. 0.0010
B. 0.2916
C. 0.3439
D. 0.6561
61. Thirty percent of the CFA candidates have a degree in economics. A random sample of three
CFA candidates is selected. What is the probability that none of them has a degree in
economics?
A. 0.027
B. 0.300
C. 0.343
D. 0.900
62. Thirty percent of the CFA candidates have a degree in economics. A random sample of three
CFA candidates is selected. What is the probability that at least one of them has a degree in
economics?
A. 0.300
B. 0.343
C. 0.657
D. 0.900
63. Exhibit 5-9. On a particular production line, the likelihood that a light bulb is defective is 5%.
Ten light bulbs are randomly selected.
Refer to Exhibit 5-9. What is the probability that two light bulbs will be defective?
A. 0.0105
B. 0.0746
C. 0.3151
D. 0.5987
Refer to Exhibit 5-9. What is the probability that none of the light bulbs will be defective?
A. 0.0105
B. 0.0746
C. 0.3151
D. 0.5987
Refer to Exhibit 5-9. What are the mean and variance of the number of defective bulbs?
A. 0.475 and 0.475
B. 0.475 and 0.6892
C. 0.50 and 0.475
D. 0.50 and 0.6892
66. Exhibit 5-10. According to a study by the Centers for Disease Control and Prevention, about
33% of U.S. births are Caesarean deliveries (National Vital Statistics Report, Volume 60,
Number 2, November 2011). Suppose seven expectant mothers are randomly selected.
Refer to Exhibit 5-10. What is the probability that 2 of the expectant mothers will have a
Caesarean delivery?
A. 0.0147
B. 0.0606
C. 0.2090
D. 0.3088
Refer to Exhibit 5-10. What is the probability that at least 1 of the expectant mothers will
have a Caesarean delivery?
A. 0.0606
B. 0.2090
C. 0.9394
D. 0.9742
Refer to Exhibit 5-10. The expected number of mothers who will not have a Caesarean
delivery is ______.
A. 1.24
B. 2.31
C. 3.50
D. 4.69
Refer to Exhibit 5-10. What is the standard deviation of the number of mothers who will have
a Caesarean delivery?
A. 1.24
B. 1.54
C. 2.31
D. 4.69
70. Exhibit 5-11. For a particular clothing store, a marketing firm finds that 16% of $10-off
coupons delivered by mail are redeemed. Suppose six customers are randomly selected and
are mailed $10-off coupons.
Refer to Exhibit 5-11. What is the probability that three of the customers redeem the
coupon?
A. 0.0486
B. 0.1912
C. 0.3513
D. 0.4015
Refer to Exhibit 5-11. What is the probability that no more than one of the customers
redeems the coupon?
A. 0.2472
B. 0.3513
C. 0.4015
D. 0.7528
Refer to Exhibit 5-11. What is the probability that at least two of the customers redeem the
coupon?
A. 0.2472
B. 0.3513
C. 0.4015
D. 0.7528
Refer to Exhibit 5-11. What is the expected number of coupons that will be redeemed?
A. 0.81
B. 0.96
C. 3.42
D. 5.04
74. Exhibit 5-12. According to a Department of Labor report, the city of Detroit had a 20%
unemployment rate in May of 2011 (Bureau of Labor Statistics, May, 2011). Eight working-
age residents were chosen at random.
Refer to Exhibit 5-12. What is the probability that exactly one of the residents was
unemployed?
A. 0.0419
B. 0.1678
C. 0.2936
D. 0.3355
Refer to Exhibit 5-12. What is the probability that at least two of the residents were
unemployed?
A. 0.1678
B. 0.3355
C. 0.4967
D. 0.5033
Refer to Exhibit 5-12. What is the probability that exactly four residents were unemployed?
A. 0.0013
B. 0.0091
C. 0.0459
D. 0.1468
Refer to Exhibit 5-12. What was the expected number of unemployed residents, when eight
working-age residents were randomly selected?
A. 1.0
B. 1.6
C. 2.0
D. 6.4
78. Exhibit 5-13. Chauncey Billups, a current shooting guard for the Los Angeles Clippers, has a
career free-throw percentage of 89.4%. Suppose he shoots six free throws in tonight's game.
Refer to Exhibit 5-13. What is the probability that Billups makes all six free throws?
A. 0.1070
B. 0.3632
C. 0.5105
D. 0.6530
Refer to Exhibit 5-13. What is the probability that Billups makes five or more of his free
throws?
A. 0.3632
B. 0.5105
C. 0.8737
D. 0.8940
Refer to Exhibit 5-13. What is the expected number of free throws that Billups will make?
A. 0.636
B. 5.364
C. 5.686
D. 6.000
Refer to Exhibit 5-13. What is the standard deviation of the number of free throws that
Billups will make?
A. 0.5364
B. 0.5686
C. 0.7540
D. 5.6860
82. Which of the following statements is most accurate about a Poisson random variable?
A. It counts the number of successes in a given number of trials.
B. It counts the number of successes in a specified time or space interval.
C. It is a continuous random variable.
D. It has a bell-shaped distribution.
83. Exhibit 5-14. The foreclosure crisis has been particularly devastating in housing markets in
much of the south and west United States, but even when analysis is restricted to relatively
strong housing markets the numbers are staggering. For example, in 2011 an average of three
residential properties were auctioned off each weekday in the city of Boston, up from an
average of one per week in 2005.
Refer to Exhibit 5-14. What is the probability that exactly four foreclosure auctions occurred
on a randomly selected weekday of 2011 in Boston?
A. 0.1680
B. 0.1954
C. 0.2240
D. 0.8153
Refer to Exhibit 5-14. What is the probability that at least one foreclosure auction occurred in
Boston on a randomly selected weekday of 2011?
A. 0.0498
B. 0.1494
C. 0.8009
D. 0.9502
Refer to Exhibit 5-14. What is the probability that no more than two foreclosure auctions
occurred on a randomly selected weekday of 2011 in Boston?
A. 0.1991
B. 0.2240
C. 0.4232
D. 0.5768
Refer to Exhibit 5-14. What is the probability that exactly 10 foreclosure auctions occurred
during a randomly selected five-day week in 2011 in Boston?
A. 0.0008
B. 0.0486
C. 0.1185
D. 0.9514
87. Exhibit 5-15. A bank manager estimates that an average of two customers enter the tellers'
queue every five minutes. Assume that the number of customers that enter the tellers' queue
is Poisson-distributed.
Refer to Exhibit 5-15. What is the probability that exactly three customers enter the queue in
a randomly selected five-minute period?
A. 0.0902
B. 0.1804
C. 0.2240
D. 0.2707
Refer to Exhibit 5-15. What is the probability that less than two customers enter the queue in
A. 0.1353
B. 0.2707
C. 0.4060
D. 0.6767
Refer to Exhibit 5-15. What is the probability that at least two customers enter the queue in
A. 0.1353
B. 0.2707
C. 0.4060
D. 0.5940
Refer to Exhibit 5-15. What is the probability that exactly seven customers enter the queue in
a randomly selected 15-minute period?
A. 0.0034
B. 0.1033
C. 0.1377
D. 0.1606
91. Cars arrive randomly at a tollbooth at a rate of 20 cars per 10 minutes during rush hour. What
is the probability that exactly five cars will arrive over a five-minute interval during rush
hour?
A. 0.0378
B. 0.0500
C. 0.1251
D. 0.5000
92. A roll of steel is manufactured on a processing line. The anticipated number of defects in a
10-foot segment of this roll is two. What is the probability of no defects in 10 feet of steel?
A. 0.0002
B. 0.1353
C. 0.1804
D. 0.8647
93. Exhibit 5-16. According to geologists, the San Francisco Bay Area experiences five
earthquakes with a magnitude of 6.5 or greater every 100 years.
Refer to Exhibit 5-16. What is the probability that no earthquakes with a magnitude of 6.5 or
greater strike the San Francisco Bay Area in the next 40 years?
A. 0.0067
B. 0.0337
C. 0.1353
D. 0.2707
Refer to Exhibit 5-16. What is the probability that more than two earthquakes with a
magnitude of 6.5 or greater will strike the San Francisco Bay Area in the next 40 years?
A. 0.1353
B. 0.2706
C. 0.3233
D. 0.8754
Refer to Exhibit 5-16. What is the probability that one or more earthquakes with a magnitude
of 6.5 or greater will strike the San Francisco Bay Area in the next year?
A. 0.0488
B. 0.1353
C. 0.4878
D. 0.9512
Refer to Exhibit 5-16. What is the standard deviation of the number of earthquakes with a
magnitude of 6.5 or greater striking the San Francisco Bay Area in the next 40 years?
A. 1.414
B. 2.000
C. 2.236
D. 5.000
Essay Questions
104.A six-sided, unfair (weighted) die has the following probability distribution.
Find the probability of rolling a 3 or less.
105.Does the following table describe a discrete probability distribution?
106.An analyst estimates that a stock has the following probabilities of year-end prices.
a. Calculate the expected price at year-end.

b. Calculate the variance and the standard deviation.
107.You have inherited a lottery ticket that may be a $5,000 winner. You have a 35% chance of
winning the $5,000 and a 65% chance of winning $0. You have an opportunity to sell the
lottery for $1500. What should you do if are risk neutral?
108.You have inherited a lottery ticket worth $10,000. You have a 0.25 chance of winning the
$10,000 and a 0.75 chance of winning $0. You have an opportunity to sell the lottery ticket for
$2,500. What should you do if you are risk averse?
111.Suppose your firm is buying five new computers. The manufacturer offers a warranty to
replace any computer that breaks down within three years. Suppose there is a 25% chance
that any given computer breaks down within three years.
a. What is the probability that exactly one of the computers breaks down within five years?
b. What is the probability that at least one of the computers breaks down within five years?
c. Suppose the warranty for five computers costs $700, while a new computer costs $600. Is
the warranty less expensive than the expected cost of replacing the broken computers?
112.Lisa is in a free-throw shooting contest where each contestant attempts 10 free throws. On
average, Lisa makes 77% of the free throws she attempts.
a. What is the probability that she makes exactly eight free throws?
b. What is the probability she makes at least nine free throws?
c. What is the probability she makes less than nine free throws?
d. Lisa is competing against Bill to see who can make the most free throws in 10 attempts.
Suppose Bill goes first and makes seven. Should we expect Lisa to make at least as many as
Bill? Explain.
113.George buys six lottery tickets for $2 each. In addition to the grand prize, there is a 20%
chance that each lottery ticket gives a prize of $4. Assume that these tickets are not grand
prize winners.
a. What is the probability that the tickets pay out more than George spent on them?
b. What is the probability that none of the tickets are winners?
c. What is the probability that at least one of the tickets is a winner?
114.A car salesman has a 5% chance of landing a sale with a random customer on his lot.
Suppose 10 people come on the lot today.
a. What is the probability that he sells exactly three cars today?
b. What is the probability he sells less than two cars today?
c. What is the expected number of cars he is going to sell today?
115.A company is going to release four quarterly reports this year. Suppose the company has a
32% chance of beating analyst expectations each quarter.
a. What is the probability that the company beats analyst expectations every quarter of this
year?
b. What is the probability the company beats analyst expectations more than half the time
this year?
c. What is the probability of the expected number of times the company will beat analyst
expectations this year?
116.Assume that the mean success rate of a Poisson process is six successes per hour.
a. Find the expected number of successes in a 40-minute period.
b. Find the expected number of successes in a three-hour period.
c. Find the probability of at least two successes in a 30-minute period.
118.Due to turnover and promotion, a bank manager knows that, on average, she hires four new
tellers per year. Suppose the number of tellers she hires is Poisson-distributed.
a. What is the probability that in a given year, the manager hires exactly five new tellers?
b. What is the average number of tellers the manager hires in a six-month period?
c. What is the probability that the manager hires at least one new teller in a given six-month
period?
119.A telemarketer knows that, on average, he is able to make three sales in a 30-minute period.
Suppose the number of sales he can make in a given time period is Poisson-distributed.
a. What is the probability that he makes exactly four sales in a 30-minute period?
b. What is the probability that he makes at least two sales in a 30-minute period?
c. What is the probability that he makes five sales in an hour-long period?
120.A construction company found that on average its workers get into four car accidents per
week.
a. What is the probability of exactly six car accidents in a random week?

b. What is the probability that there are less than two car accidents in a random week?
c. What is the probability that there are exactly eight car accidents over the course of three
weeks?
121.During an hour of class, a professor anticipates six questions on average.
a. What is the probability that in a given hour of class, exactly six questions are asked?
b. What is the expected number of questions asked in a 20-minute period?
c. What is the probability that no questions are asked over a 20-minute period?
122.A plane taking off from an airport in New York can expect to run into a flock of birds once out
of every 1,250 take-offs.
a. What is the expected number of bird strikes for 10,000 take-offs?

b. What is the standard deviation of the number of bird strikes for 10,000 take-offs?
c. What is the probability of running into seven flocks of birds in 10,000 take-offs?
Discrete Probability Distributions Answer Key
True / False Questions
1. A random variable is a function that assigns numerical values to the outcomes of a

random experiment.
TRUE
2. A discrete random variable X may assume an (infinitely) uncountable number of distinct

values.
FALSE
A discrete random variable X assumes a countable number of distinct values—that is, the
possible values of X can be put in a finite or infinite sequence.
3. A continuous random variable X assumes an (infinitely) uncountable number of distinct

values.
TRUE
The (infinitely) uncountable values cannot be put in a sequence. In particular, an interval
has an uncountable number of values.
4. A probability distribution of a continuous random variable X gives the probability that X

takes on a particular value x, P(X = x).
FALSE
If X is a continuous random variable, then P(X = x) = 0 for any value x.
5. A cumulative probability distribution of a random variable X is the probability P(X = x),
where X is equal to a particular value x.
FALSE
A cumulative distribution function of a random variable X is the probability P(X ≤ x), where
X is less than or equal to a particular value x.
6. The expected value of a random variable X can be referred to as the population mean.
TRUE
7. The variance of a random variable X provides us with a measure of central location of the
distribution of X.
FALSE
The mean µ provides us with a measure of the central location of the distribution of X,
while the variance is a measure of dispersion around µ.
8. The relationship between the variance and the standard deviation is such that the
standard deviation is the positive square root of the variance.
TRUE
9. A risk-averse consumer may decline a risky prospect even if it offers a positive expected
value.
TRUE
A risk averse consumer also incorporates risk in his/her decision to accept a risky
prospect. Even with a prospect with a positive expected value, the risk averse consumer
must also be compensated for risk.
10. A risk averse consumer ignores risk and makes his/her decisions solely on the basis of
expected value.
FALSE
A risk averse consumer incorporates risk in his/her decision to accept a risky prospect.
11. Given two random variables X and Y, the expected value of their sum, E(X+Y), is equal to
the sum of their individual expected values, E(X) and E(Y).
TRUE
12. A Bernoulli process consists of a series of n independent and identical trials of an

experiment such that in each trial there are three possible outcomes and the probabilities
of each outcome remain the same.
FALSE
A Bernoulli process consists of a series of n independent and identical trials of an
experiment such that in each trial there are only two possible outcomes (success and
failure), and in each trial the probability of a success (and failure) remains the same.
13. A binomial random variable is defined as the number of successes achieved in n trials of a
Bernoulli process.
TRUE
14. A Poisson random variable counts the number of successes (occurrences of a certain
event) over a given interval of time or space.
TRUE
15. We use the hypergeometric distribution in place of the binomial distribution when we are
sampling with replacement from a population whose size N is significantly larger than the
sample size n.
FALSE
We use the hypergeometric distribution in place of the binomial distribution when
sampling without replacement from a population whose size N is not significantly larger
than the sample size n.
A. The number of obtained spots when rolling a six-sided die
B. The height of college students
C. The average outside temperature taken every day for two weeks
D. The finishing time of participants in a cross-country meet
A discrete random variable assumes a countable number of possible values, whereas a
continuous random variable is characterized by uncountable values. The result of rolling a
die in answer a is the only one of the four random variables that assumes a countable
number of possible values. These values are 1, 2, 3, 4, 5, and 6.

A. The circumference of a randomly generated circle
B. The time of a flight between Chicago and New York
C. The number of defective light bulbs in a sample of five
D. The average distance achieved in a series of long jumps
continuous random variable is characterized by uncountable values. The number of
defects in a sample of five light bulbs is the only one of the four random variables with a
countable number of possible values. These values are 0, 1, 2, 3, 4, and 5.
A. The time of a flight between Chicago and New York

B. The number of defective light bulbs in a sample of 5
C. The number of arrivals to a drive-thru bank window in a four-hour period
D. The score of a randomly selected student on a five-question multiple-choice quiz
continuous random variable is characterized by uncountable values. The time of a flight
between Chicago and New York is the only one of the four random variables without a
countable number of possible values; this time may take any value from a time interval.
A. The average temperature in Tampa, Florida, during a month of July

B. The number of typos found on a randomly selected page of this test bank
C. The number of students who will get financial assistance in a group of 50 randomly
selected students
D. The number of customers who visit a department store between 10:00 am and 11:00
am on Mondays
continuous random variable is characterized by uncountable values. The average
temperature is the only one of the four random variables without a countable number of
possible values. (Measured temperatures are typically rounded to a single degree, but the
measurements actually represent a continuous scale.)
20. What is a characteristic of the mass function of a discrete random variable X?
A. The sum of probabilities P(X=x) over all possible values x is 1.

B. For every possible value x, the probability P(X=x) is between 0 and 1.
C. Describes all possible values x with the associated probabilities P(X=x).
D. All of the above.
21. What are the two key properties of a discrete probability distribution?
A.
and
B.
and
C.
and
D.
and
The two key properties are and .

Refer to Exhibit 5-1. What is the probability that X is 0?
A. 0.10
B. 0.35
C. 0.55
D. 0.65
Distractors: Wrong answers include the probability that X is -10, more than 0, and is at
least 0.
A. 0.10
B. 0.35
C. 0.55
D. 0.65
Distractors: Wrong answers include the probability that X is -10, 0, and at least 0.
Refer to Exhibit 5-1. What is the probability that X is negative?
A. 0.00
B. 0.10
C. 0.15
D. 0.35
Distractors: Wrong answers include the probability that X is 0 and X is 10.
Refer to Exhibit 5-1. What is the probability that X is less than 5?
A. 0.10
B. 0.15
C. 0.35
D. 0.45
Distractors: Wrong answers include the probability that X is -10, 0, or 10.

26. Exhibit 5-2. Consider the following cumulative distribution function for the discrete
random variable X.
Refer to Exhibit 5-2. What is the probability that X is less than or equal to 2?
A. 0.14
B. 0.30
C. 0.44
D. 0.56
Distractors: Wrong answers include , , and .
random variable X.
Refer to Exhibit 5-2. What is the probability that X equals 2?
A. 0.14
B. 0.30
C. 0.44
D. 0.56

random variable X.
A. 0.14
B. 0.30
C. 0.44
D. 0.56

29. We can think of the expected value of a random variable X as ________________.
A. The long-run average of the random variable values generated over 100 independent
repetitions
B. The long-run average of the random variable values generated over 1000 independent
repetitions
C. The long-run average of the random variable values generated over infinitely many
D. The long-run average of the random variable values generated over a finite number of
30. The expected value of a random variable X can be referred to or denoted as _____.
A. µ
B. E(X)
C. The population mean
D. All of the above
The expected value of a random variable X is denoted by E(X), and can be referred to as
the population mean for which the typical notation is μ.
Refer to Exhibit 5-3. The expected value is ___.
A. 0.9
B. 1.5
C. 1.9
D. 2.5
= 0(0.1) + 1(0.2) + 2(0.4) + 3(0.3) = 1.9

Refer to Exhibit 5-3. The variance is ____.
A. 0.89
B. 0.94
C. 1.65
D. 1.90
= 0(0.1) + 1(0.2) + 2(0.4) + 3(0.3) = 1.9
= (0 - 1.9)2(0.1) + (1 - 1.9)2(0.2) + (2 -
1.9)2(0.4) + (3 - 1.9)2(0.3) = 0.361 + 0.162 + 0.004 + 0.363 = 0.890
Distractors: Wrong answers include the mean and the standard deviation.
Refer to Exhibit 5-3. The standard deviation is _________.
A. 0.89
B. 0.94
C. 1.65
D. 1.90
= 0(0.1) + 1(0.2) + 2(0.4) + 3(0.3) = 1.9
= (0 - 1.9)2(0.1) + (1 - 1.9)2(0.2) + (2 - 1.9)2(0.4)

+ (3 - 1.9)2(0.3) = 0.361 + 0.162 + 0.004 + 0.363 = 0.890
Distractors: Wrong answers include the mean and the variance.
Refer to Exhibit 5-4. The expected value is _____.
A. -1.0
B. -0.1
C. 0.1
D. 1.0
= -2(0.2) + -1(0.1) + 0(0.3) + 1(0.4) = -0.1

Refer to Exhibit 5-4. The variance is _____.
A. 1.14
B. 1.29
C. 1.65
D. 1.94
= -2(0.2) + -1(0.1) + 0(0.3) + 1(0.4) = -0.1
= (-2 + 0.1)2(0.2) + (-1 + 0.1)2(0.1) + (0 +

0.1)2(0.3) + (1 + 0.1)2(0.4) = 0.722 + 0.081 + 0.003 + 0.484 = 1.290
Distractors: Wrong answers include the standard deviation.
Refer to Exhibit 5-4. The standard deviation is ____.
A. 1.14
B. 1.29
C. 1.65
D. 1.94
= -2(0.2) + -1(0.1) + 0(0.3) + 1(0.4) = -0.1
= (-2 + 0.1)2(0.2) + (-1 + 0.1)2(0.1) + (0 +

0.1)2(0.3) + (1 + 0.1)2(0.4) = 0.722 + 0.081 + 0.003 + 0.484 = 1.290
Distractors: Wrong answers include the variance.

37. An analyst has constructed the following probability distribution for firm X's predicted
return for the upcoming year.
The expected value and the variance of this distribution are:
A. Option A
B. Option B
C. Option C
D. Option D
Distractors: Wrong answers include the unweighted average and the standard deviation.
38. An analyst believes that a stock's return depends on the state of the economy, for which
she has estimated the following probabilities:
According to the analyst's estimates, the expected return of the stock is ____.
A. 7.8%
B. 11.4%
C. 11.7%
D. 13.0%
= 0.15(0.1) + 0.13(0.6) + 0.07(0.3) = 0.114

39. An analyst estimates that the year-end price of a stock has the following probabilities:
The stock's expected price at the end of the year is _______.
A. $87.50
B. $88.50
C. $89.00
D. $90.00
= 80(0.1) + 85(0.3) + 90(0.4) + 95(0.02) = 88.50

Refer to Exhibit 5-5. What is the probability that the realtor will sell at least one house
during a month?
A. 0.20
B. 0.40
C. 0.60
D. 0.80
Refer to Exhibit 5-5. What is the probability that the realtor sells no more than one house
during a month?
A. 0.20
B. 0.40
C. 0.60
D. 0.80

Refer to Exhibit 5-5. What is the expected number of homes sold by the realtor during a
month?
A. 1
B. 1.2
C. 1.5
D. 2
= 0(0.2) + 1(0.4) + 2(0.4) = 1.

Distractors: Wrong answers include the unweighted mean
Refer to Exhibit 5-5. What is the standard deviation of the number of homes sold by the
realtor during a month?
A. 0.56
B. 0.75
C. 1
D. 1.2
Distractors: Wrong answers include the variance, expected value, and unweighted mean.
44. Exhibit 5-6. The number of cars sold by a car salesman during each of the last 25 weeks
is the following:
Refer to Exhibit 5-6. What is the probability that the salesman will sell one car during a
week?
A. 0.20
B. 0.40
C. 0.60
D. 0.80

is the following:
Refer to Exhibit 5-6. What is the probability that the salesman sells no more than one car
during a week?
A. 0.20
B. 0.40
C. 0.60
D. 0.80
is the following:
Refer to Exhibit 5-6. What is the expected number of cars sold by the salesman during a
week?
A. 0
B. 0.8
C. 1
D. 1.5
= 0(0.4) + 1(0.4) + 2(0.2) = 0.

Distractors: Wrong answers include unweighted mean.
is the following:
Refer to Exhibit 5-6. What is the standard deviation of the number of cars sold by the
salesman during a week?
A. 0.56
B. 0.75
C. 0.80
D. 1
Distractors: Wrong answers include the variance, expected value, and unweighted mean.
57. Which of the following statements is most accurate about a binomial random variable?
A. It has a bell-shaped distribution.
B. It is a continuous random variable.
C. It counts the number of successes in a given number of trials.
D. It counts the number of successes in a specified time interval or region.
58. It is known that 10% of the calculators shipped from a particular factory are defective.
What is the probability that exactly three of five chosen calculators are defective?
A. 0.00729
B. 0.0081
C. 0.081
D. 0.03
There are n = 5 trials, and a defect is considered a success with p = 0.10 and q = 1 - p =
0.90. The probability of getting exactly x = 3 successes is
= = 0.0081. This result can also

be found using Excel's BINOM.DIST function. (See the text for details.)
What is the probability that none in a random sample of four calculators is defective?
A. 0.0010
B. 0.2916
C. 0.3439
D. 0.6561

Distractors: Wrong answers include the probability of exactly one calculator being
defective, and at least one calculator being defective.
What is the probability that at least one in a random sample of four calculators is
defective?
A. 0.0010
B. 0.2916
C. 0.3439
D. 0.6561
0.90. The probability of getting at least one success is
. This result can also be found using
Excel's BINOM.DIST function. (See the text for details.)
Distractors: Wrong answer choices include the probabilities of exactly 0 calculators and of
exactly 1 calculator being defective.
61. Thirty percent of the CFA candidates have a degree in economics. A random sample of
three CFA candidates is selected. What is the probability that none of them has a degree
in economics?
A. 0.027
B. 0.300
C. 0.343
D. 0.900
There are n = 3 trials, with p = 0.30 and q = 1 - p = 0.70. The probability of getting exactly
x = 0 successes is

Distractors: Wrong answer choices include the probability that all three have a degree in
economics.
62. Thirty percent of the CFA candidates have a degree in economics. A random sample of
three CFA candidates is selected. What is the probability that at least one of them has a
degree in economics?
A. 0.300
B. 0.343
C. 0.657
D. 0.900
There are n = 3 trials, with p = 0.30 and q = 1 - p = 0.70. The probability of getting at least
one success is

Distractors: Wrong answer choices include the probability that exactly 0 have a degree in
economics.
63. Exhibit 5-9. On a particular production line, the likelihood that a light bulb is defective is
5%. Ten light bulbs are randomly selected.
Refer to Exhibit 5-9. What is the probability that two light bulbs will be defective?
A. 0.0105
B. 0.0746
C. 0.3151
D. 0.5987
= = 0.0746. This result can

also be found using Excel's BINOM.DIST function. (See the text for details.)
Distractors: Wrong answer choices include the probabilities that exactly zero, one, and
three light bulbs are defective.
Refer to Exhibit 5-9. What is the probability that none of the light bulbs will be defective?
A. 0.0105
B. 0.0746
C. 0.3151
D. 0.5987
= = 0.5987. This result can

also be found using Excel's BINOM.DIST function. (See the text for details.)
Distractors: Wrong answer choices include the probabilities that exactly one, two, and
three light bulbs are defective.
Refer to Exhibit 5-9. What are the mean and variance of the number of defective bulbs?
A. 0.475 and 0.475

B. 0.475 and 0.6892
C. 0.50 and 0.475
D. 0.50 and 0.6892
66. Exhibit 5-10. According to a study by the Centers for Disease Control and Prevention,
about 33% of U.S. births are Caesarean deliveries ( National Vital Statistics Report, Volume
60, Number 2, November 2011). Suppose seven expectant mothers are randomly selected.
Refer to Exhibit 5-10. What is the probability that 2 of the expectant mothers will have a
Caesarean delivery?
A. 0.0147
B. 0.0606
C. 0.2090
D. 0.3088
The probability of two successes in seven Bernoulli trials is
. This result can also be found using Excel's

BINOM.DIST function. (See the text for details.)
Distractors: Wrong answers include the probability of zero and one Caesarean deliveries
as well as
about 33% of U.S. births are Caesarean deliveries (National Vital Statistics Report, Volume
Refer to Exhibit 5-10. What is the probability that at least 1 of the expectant mothers will
A. 0.0606
B. 0.2090
C. 0.9394
D. 0.9742
The probability of zero successes in seven Bernoulli trials is
. The probability of at least one success is

Distractors: Wrong answers include the probability of exactly zero and one Caesarean
deliveries.
Refer to Exhibit 5-10. The expected number of mothers who will not have a Caesarean
delivery is ______.
A. 1.24
B. 2.31
C. 3.50
D. 4.69
The probability that a randomly selected mother will not have a Caesarean delivery is 0.67.
The expected number of mothers who will not have a Caesarean delivery is (0.67)(7) =
4.69.
Distractors: Wrong answers include the expected number of mothers who will have a
Caesarean delivery.
Refer to Exhibit 5-10. What is the standard deviation of the number of mothers who will
A. 1.24
B. 1.54
C. 2.31
D. 4.69
The variance of the probability distribution is (7)(0.33)(0.67) = 1.54. The standard
deviation is
Distractors: Wrong answers include the variance, the expected number of mothers who
will have a Caesarean delivery, and the expected number of mothers who will not have a
Caesarean delivery.
coupons delivered by mail are redeemed. Suppose six customers are randomly selected
and are mailed $10-off coupons.
Refer to Exhibit 5-11. What is the probability that three of the customers redeem the
coupon?
A. 0.0486
B. 0.1912
C. 0.3513
D. 0.4015
The probability of three successes in six Bernoulli trials is
This result can also be found using Excel's

BINOM.DIST function. (See the text for details.)
Distractors: Wrong answers include the probability of exactly 1 success and exactly 0
successes.
Refer to Exhibit 5-11. What is the probability that no more than one of the customers
redeems the coupon?
A. 0.2472
B. 0.3513
C. 0.4015
D. 0.7528
The probability of no more than one success in six Bernoulli trials is
. This
result can also be found using Excel's BINOM.DIST function. (See the text for details.)
Distractors: Wrong answers include the probability of exactly one success, exactly zero
successes, and more than one success.
Refer to Exhibit 5-11. What is the probability that at least two of the customers redeem
the coupon?
A. 0.2472
B. 0.3513
C. 0.4015
D. 0.7528
The probability of at least two successes in six Bernoulli trials is
. Where,
.
Therefore, . This result can also be
found using Excel's BINOM.DIST function. (See the text for details.)
Distractors: Wrong answers include the probability of exactly one success, exactly zero
successes, and no more than one success.
Refer to Exhibit 5-11. What is the expected number of coupons that will be redeemed?
A. 0.81
B. 0.96
C. 3.42
D. 5.04
The expected number of coupons is (0.16)(6) = 0.96.
Distractors: Wrong answers include the expected number of coupons that will not be
redeemed and the variance of the probability distribution.
Refer to Exhibit 5-12. What is the probability that exactly one of the residents was
unemployed?
A. 0.0419
B. 0.1678
C. 0.2936
D. 0.3355
The probability of one success in eight Bernoulli trials is
This result can also be found using

Excel's BINOM.DIST function. (See the text for details.
Distractors: Wrong answers include the probability of zero and two unemployed workers
as well as
Refer to Exhibit 5-12. What is the probability that at least two of the residents were
unemployed?
A. 0.1678
B. 0.3355
C. 0.4967
D. 0.5033
The probability of zero successes in eight Bernoulli trials and one success in eight trials
are and
The probability of at least two successes is
This result can

also be found using Excel's BINOM.DIST function. (See the text for details.
Distractors: Wrong answers include the probability of exactly zero, one, and two people
unemployed.
Refer to Exhibit 5-12. What is the probability that exactly four residents were
unemployed?
A. 0.0013
B. 0.0091
C. 0.0459
D. 0.1468
The probability of four successes in eight Bernoulli trials is

Distractors: Wrong answers include the probability of exactly three and five people
unemployed.
Refer to Exhibit 5-12. What was the expected number of unemployed residents, when
eight working-age residents were randomly selected?
A. 1.0
B. 1.6
C. 2.0
D. 6.4
The Expected value is .

Distractors: Wrong answers include the correct answer rounded up, rounded down, and q
times eight.
78. Exhibit 5-13. Chauncey Billups, a current shooting guard for the Los Angeles Clippers, has
a career free-throw percentage of 89.4%. Suppose he shoots six free throws in tonight's
game.
Refer to Exhibit 5-13. What is the probability that Billups makes all six free throws?
A. 0.1070
B. 0.3632
C. 0.5105
D. 0.6530
The probability of six successes in six Bernoulli trials is

Distractors: Wrong answers include the probability of exactly five and four successful free
throws.
game.
Refer to Exhibit 5-13. What is the probability that Billups makes five or more of his free
throws?
A. 0.3632
B. 0.5105
C. 0.8737
D. 0.8940
The probability of five or more successes in six Bernoulli trials is
. This result
can also be found using Excel's BINOM.DIST function. (See the text for details.)
Distractors: Wrong answers include the probability of exactly five successes and exactly
six successes.
game.
Refer to Exhibit 5-13. What is the expected number of free throws that Billups will make?
A. 0.636
B. 5.364
C. 5.686
D. 6.000
The expected number of coupons is (0.894)(6) = 5.364.
Distractors: Wrong answers include the expected number of free throws that will not be
made, and the variance of the probability distribution off one decimal place.
game.
Refer to Exhibit 5-13. What is the standard deviation of the number of free throws that
Billups will make?
A. 0.5364
B. 0.5686
C. 0.7540
D. 5.6860
The variance of the probability distribution is (6)(0.894)(1 - 0.894) = 0.5686. The standard
deviation is .
Distractors: Wrong answers include the variance, the expected value off a decimal place,
and the variance off a decimal place.
82. Which of the following statements is most accurate about a Poisson random variable?
A. It counts the number of successes in a given number of trials.
B. It counts the number of successes in a specified time or space interval.
C. It is a continuous random variable.
D. It has a bell-shaped distribution.
83. Exhibit 5-14. The foreclosure crisis has been particularly devastating in housing markets
in much of the south and west United States, but even when analysis is restricted to
relatively strong housing markets the numbers are staggering. For example, in 2011 an
average of three residential properties were auctioned off each weekday in the city of
Boston, up from an average of one per week in 2005.
Refer to Exhibit 5-14. What is the probability that exactly four foreclosure auctions
A. 0.1680
B. 0.1954
C. 0.2240
D. 0.8153
The probability that exactly four auctions occur is .

This result can also be found using Excel's POISSON.DIST function. (See the text for
details.)
Distractors: Wrong answers include the probability that two auctions occur, and the
probability that no more than four auctions occur.
Exhibit 5-14. The foreclosure crisis has been particularly devastating in housing markets
Refer to Exhibit 5-14. What is the probability that at least one foreclosure auction
occurred in Boston on a randomly selected weekday of 2011?
A. 0.0498
B. 0.1494
C. 0.8009
D. 0.9502
The probability that at least one success occurs is
This result can also be found using

Excel's POISSON.DIST function. (See the text for details.)
Distractors: Wrong answers include the probability that exactly zero auctions occur,
exactly one auction occurs, and more than one auction occurs.
Refer to Exhibit 5-14. What is the probability that no more than two foreclosure auctions
A. 0.1991
B. 0.2240
C. 0.4232
D. 0.5768
The probability of no more than two successes is
. Using the Poisson probability distribution
function, . This result can also be found using

Distractors: Wrong answers include the probability that no more than one auction occurs,
that two auctions occur, and that more than two auctions occur.
Refer to Exhibit 5-14. What is the probability that exactly 10 foreclosure auctions occurred
during a randomly selected five-day week in 2011 in Boston?
A. 0.0008
B. 0.0486
C. 0.1185
D. 0.9514
The mean over a four-day period is . The probability that exactly 10
successes occur over a four-day period is This result can

also be found using Excel's POISSON.DIST function. (See the text for details.)
Distractors: Wrong answers include the probability that at most 10 successes occur, and
the probability that 10 successes occur with mean 3.
87. Exhibit 5-15. A bank manager estimates that an average of two customers enter the
tellers' queue every five minutes. Assume that the number of customers that enter the
tellers' queue is Poisson-distributed.
Refer to Exhibit 5-15. What is the probability that exactly three customers enter the queue
in a randomly selected five-minute period?
A. 0.0902
B. 0.1804
C. 0.2240
D. 0.2707
The probability that exactly three customers enter the queue is
. This result can also be found using Excel's POISSON.DIST

function. (See the text for details.)
Distractors: Wrong answers include the probability that exactly two customers enter the
queue and exactly four customers enter the queue.
Refer to Exhibit 5-15. What is the probability that less than two customers enter the
queue in a randomly selected five-minute period?
A. 0.1353
B. 0.2707
C. 0.4060
D. 0.6767
The probability that less than two customers enter the queue is
This result can also be

found using Excel's POISSON.DIST function. (See the text for details.)
Distractors: Wrong answers include the probability that exactly zero customers enter the
queue, exactly one customer enters the queue, and no more than two customers enter the
queue.
Refer to Exhibit 5-15. What is the probability that at least two customers enter the queue
in a randomly selected five-minute period?
A. 0.1353
B. 0.2707
C. 0.4060
D. 0.5940
The probability that at least two customers enter the queue is
. This result can

also be found using Excel's POISSON.DIST function. (See the text for details.)
Distractors: Wrong answers include the probability that exactly zero customers enter the
queue, exactly one customer enters the queue, and no more than one customer enters the
queue.
Refer to Exhibit 5-15. What is the probability that exactly seven customers enter the
queue in a randomly selected 15-minute period?
A. 0.0034
B. 0.1033
C. 0.1377
D. 0.1606
Over a 15-minute period, . The probability that exactly seven customers enter
the queue is . This result can also be found using Excel's

POISSON.DIST function. (See the text for details.)
Distractors: Wrong answers include the probability that exactly six customers enter the
queue, the probability that exactly eight customers enter the queue, and the probability of
seven customers enter the queue with an unadjusted mean of two.
91. Cars arrive randomly at a tollbooth at a rate of 20 cars per 10 minutes during rush hour.
What is the probability that exactly five cars will arrive over a five-minute interval during
rush hour?
A. 0.0378
B. 0.0500
C. 0.1251
D. 0.5000
Over a five-minute period, . The probability that exactly five cars arrive
over a five-minute interval is . This result can also be found

using Excel's POISSON.DIST function. (See the text for details.)
92. A roll of steel is manufactured on a processing line. The anticipated number of defects in a
10-foot segment of this roll is two. What is the probability of no defects in 10 feet of
steel?
A. 0.0002
B. 0.1353
C. 0.1804
D. 0.8647
The probability of no defects in 10 feet of steel is . This result

can also be found using Excel's POISSON.DIST function. (See the text for details.)
Distractors: Wrong answers include the probability that one defect and at least one defect
is found in 10 feet of steel.
Refer to Exhibit 5-16. What is the probability that no earthquakes with a magnitude of 6.5
or greater strike the San Francisco Bay Area in the next 40 years?
A. 0.0067
B. 0.0337
C. 0.1353
D. 0.2707
The mean number of successes in 40 years is equal to . Using the Poisson
probability distribution function, . This result can also be

found using Excel's POISSON.DIST function. (See the text for details.)
Distractors: Wrong answers include the probability of one earthquake and the probability
of no earthquakes given the mean number of earthquakes was equal to five.
Refer to Exhibit 5-16. What is the probability that more than two earthquakes with a
magnitude of 6.5 or greater will strike the San Francisco Bay Area in the next 40 years?
A. 0.1353
B. 0.2706
C. 0.3233
D. 0.8754
The probability of more than two earthquakes occurring is
. Using the Poisson probability
distribution function, . This result can

also be found using Excel's POISSON.DIST function. (See text for details.)
Distractors: Wrong answers include the probability that 2 earthquakes occur, the
probability that more than two earthquakes occur given the mean number of successes
was five, and the probability of no earthquakes.
Refer to Exhibit 5-16. What is the probability that one or more earthquakes with a
magnitude of 6.5 or greater will strike the San Francisco Bay Area in the next year?
A. 0.0488
B. 0.1353
C. 0.4878
D. 0.9512
The mean number of earthquakes in one year is equal to . Using the

Poisson probability distribution function,
. This result can also be found

using Excel's POISSON.DIST function. (See text for details.)
Distractors: Wrong answers include the probability of no earthquakes in the next year.
Refer to Exhibit 5-16. What is the standard deviation of the number of earthquakes with a
magnitude of 6.5 or greater striking the San Francisco Bay Area in the next 40 years?
A. 1.414
B. 2.000
C. 2.236
D. 5.000
The mean number of earthquakes in 40 years is equal to . The standard
deviation is equal to the square root of the mean number of successes: .

Distractors: Wrong answers include the variance, the variance if the mean number of
successes is equal to five, and the standard deviation if the mean number of successes is
equal to five.
Essay Questions
104. A six-sided, unfair (weighted) die has the following probability distribution.
Find the probability of rolling a 3 or less.
0.6667
Feedback: The probability of rolling a 3 or less is the sum of the probabilities of rolling a 1,
2, and 3. Therefore, the answer is P(X = 1) + P(X = 2) + P(X = 3) = 1/4 + 1/12 + 1/3 =
8/12 = 0.6667.
105. Does the following table describe a discrete probability distribution?
No, the sum of probabilities is 0.9 rather than 1.
Feedback: The two properties that must be met are:
• The probability of each outcome is a number between 0 and 1, or equivalently,
.
• The sum of the probabilities over all mutually exclusive and exhaustive values of X
equals 1. In other words, where the represent an exhaustive list

of all distinct outcomes of X.
106. An analyst estimates that a stock has the following probabilities of year-end prices.
a. Calculate the expected price at year-end.

b. Calculate the variance and the standard deviation.
E(X) = 88, Var(X) = 21, and SD(X) = 4.58
Feedback:
= -80(0.1) + 85(0.4) + 1(0.3) + 2(0.2) = 88
= (80 - 88)2(0.1) + (80 - 88)2(0.4) + (80 -

88)2(0.3) + (80 - 88)2(0.2) = 21.
107. You have inherited a lottery ticket that may be a $5,000 winner. You have a 35% chance of
winning the $5,000 and a 65% chance of winning $0. You have an opportunity to sell the
lottery for $1500. What should you do if are risk neutral?
E(X) = $1750. Therefore, keep the ticket, since the expected value is greater than the sale
price ($1500).
Feedback: A risk neutral consumer completely ignores risk and always accepts a prospect
that offers a positive expected gain. Using the expected value formula, we find
= 5000(0.35) + 0(0.65) = $1750.
The expected value ($1750) is greater than the sale price of the lottery ($1500); therefore,
you expect to gain more by keeping the lottery ticket.
108. You have inherited a lottery ticket worth $10,000. You have a 0.25 chance of winning the
$10,000 and a 0.75 chance of winning $0. You have an opportunity to sell the lottery ticket
for $2,500. What should you do if you are risk averse?
Sell the lottery ticket.
Feedback: A risk averse consumer may decline a risky prospect even if it offers a positive
expected gain; he/she will definitely decline a risky prospect if there is no positive
expected gain. Using the expected value formula, we find =

10,000(0.25) + 0(0.75) = $2500. Here, the expected value of $2500 is the same as the sale
price of $2,500 of the lottery. Since the risky prospect does not offer a positive expected
gain, a risk averse person would sell the ticket rather than hold out to have a chance of
winning $10,000.
111. Suppose your firm is buying five new computers. The manufacturer offers a warranty to
replace any computer that breaks down within three years. Suppose there is a 25% chance
that any given computer breaks down within three years.
a. What is the probability that exactly one of the computers breaks down within five years?
b. What is the probability that at least one of the computers breaks down within five
years?
c. Suppose the warranty for five computers costs $700, while a new computer costs $600.
Is the warranty less expensive than the expected cost of replacing the broken
computers?
a. ; b. ; c. Yes.
Feedback: a. The probability of one success in five trials
is .
b.
c. The expected number of computers that will break down is np = (5)(0.25) =

1.25. Since to replace a broken computer, the firm must pay $600, the expected cost of
replacing the broken computers is (1.25)($600) = $750. The warranty, which costs $700, is
less expensive.
These results can also be found using Excel's BINOM.DIST function. (See the text for
details.)
112 Lisa is in a free-throw shooting contest where each contestant attempts 10 free throws. On
. average, Lisa makes 77% of the free throws she attempts.
a. What is the probability that she makes exactly eight free throws?
b. What is the probability she makes at least nine free throws?
c. What is the probability she makes less than nine free throws?
d. Lisa is competing against Bill to see who can make the most free throws in 10 attempts.
Suppose Bill goes first and makes seven. Should we expect Lisa to make at least as many as
Bill? Explain.
a. ; b. ; c. ;
d. Yes, on average we expect Lisa to make as many free throws as Bill since 7.7 > 7.
Feedback: a. ;
b. ,
where and
Therefore,
c. The probability of less than nine successes is From part b, we

know that Therefore,
Results a-c can also be found using Excel's BINOM.DIST function. (See the text for details.)
d. The expected value of a binomial probability distribution is The expected

number of free throws that Lisa can expect to make is (0.77)(10) = 7.7. Since this is greater
than seven, Lisa will, on average, make seven or more free throws.
11 George buys six lottery tickets for $2 each. In addition to the grand prize, there is a 20%
3. chance that each lottery ticket gives a prize of $4. Assume that these tickets are not grand
prize winners.
a. What is the probability that the tickets pay out more than George spent on them?
b. What is the probability that none of the tickets are winners?
c. What is the probability that at least one of the tickets is a winner?
a. ; b. ; c. .
Feedback: a. The tickets cost $12 total. In order for George to make more than $12, more
than three of them need to be winners. ,

where
and
Therefore, .
b. The probability that none of the tickets are winners
is
c. The probability that at least one of the tickets is a winner
is
These results can also be found using Excel's BINOM.DIST function. (See the text for details.)
114. A car salesman has a 5% chance of landing a sale with a random customer on his lot.
Suppose 10 people come on the lot today.
a. What is the probability that he sells exactly three cars today?

b. What is the probability he sells less than two cars today?
c. What is the expected number of cars he is going to sell today?
a. 0.0105; b. 0.9139; c. 0.5
Feedback: a. The probability that he sells exactly three cars today
is ; .
b. The probability he sells less than two cars is equal
to
Results a and b can also be found using Excel's BINOM.DIST function. (See the text for
details.)
c. The expected number of cars he is going to sell is np = (10)(0.05) = 0.5.
115. A company is going to release four quarterly reports this year. Suppose the company has a
32% chance of beating analyst expectations each quarter.
a. What is the probability that the company beats analyst expectations every quarter of
this year?
b. What is the probability the company beats analyst expectations more than half the time
this year?
c. What is the probability of the expected number of times the company will beat analyst
expectations this year?
a. ; b. ; c. 1.28
Feedback: a. The probability of beating analyst expectations every quarter
is .
b. The probability of beating analyst expectations more than half the time is equal
to .
Results a and b can also be found using Excel's BINOM.DIST function. (See the text for
details.)
c. The expected number of times the company will beat analyst expectations is equal to
np = (4)(0.32) = 1.28.
116. Assume that the mean success rate of a Poisson process is six successes per hour.
a. Find the expected number of successes in a 40-minute period.

b. Find the expected number of successes in a three-hour period.
c. Find the probability of at least two successes in a 30-minute period.
a. 4; b. 18; c. 0.8008
Feedback: a. Since there are six successes expected in an hour, and 40 minutes is two-
thirds of an hour, there will be 6 × (2/3) = 4 expected successes in 40 minutes.
b. Since there are six successes expected in an hour, the expected number of successes
in three hours is 3 × 6 = 18.
c. Since we are looking at a half-hour period, the mean number of successes is 3 per this
period. P(X ≥ 2) = 1 -[P(X = 0) + P(X = 1)] = = 1 - 0.0498 - 0.1494

= 0.8008. This result can also be found using Excel's POISSON.DIST function. (See the
text for details.)
117. Sam is a trucker and believes that for every 60 miles he drives on the freeway in Indiana,
there is an average of 2 state troopers checking his speed with a radar gun.
a. What is the probability that at least one trooper is checking his speed on a randomly
selected 60-mile stretch?
b. What is the probability that exactly three troopers are checking his speed on a randomly
selected 60-mile stretch?
c. Sam drives 240 miles a day. What is the average number of state troopers that check his
speed on a given day?
d. Sam drives 240 miles a day. What is the probability that exactly five troopers check
Sam's speed on a randomly selected day?
a. ; b. ; c. Eight troopers;
d.
Feedback: a. The probability that at least one trooper is checking his speed
is .
b. The probability that exactly three troopers are checking his speed
is .
c. Since two troopers, on average, check his speed every 60 miles, eight troopers, on
average, will check his speed every 240 miles; d. The probability that exactly five troopers
check his speed over 240 miles is

These results can also be found using Excel's POISSON.DIST function. (See the text for
details.)
118. Due to turnover and promotion, a bank manager knows that, on average, she hires four
new tellers per year. Suppose the number of tellers she hires is Poisson-distributed.
a. What is the probability that in a given year, the manager hires exactly five new tellers?
b. What is the average number of tellers the manager hires in a six-month period?
c. What is the probability that the manager hires at least one new teller in a given six-
month period?
a. ; b. Two tellers; c.
Feedback: a. The probability that the manager must hire five tellers
is .
b. In a given six-month period, the manager hires an average of 2 (4/2) new tellers.
c. The probability that the manager hires at least one teller
is
details.)
1 A telemarketer knows that, on average, he is able to make three sales in a 30-minute period.
1 Suppose the number of sales he can make in a given time period is Poisson-distributed.
9.
a. What is the probability that he makes exactly four sales in a 30-minute period?
b. What is the probability that he makes at least two sales in a 30-minute period?
c. What is the probability that he makes five sales in an hour-long period?
a. ; b. ; c.
Feedback: a. The probability that the telemarketer makes exactly four sales
is .
b. The probability that he makes at least two sales
is where and
Therefore, ; c. The
probability that he makes five sales in one hour is

details.)
120. A construction company found that on average its workers get into four car accidents per
week.
a. What is the probability of exactly six car accidents in a random week?

b. What is the probability that there are less than two car accidents in a random week?
c. What is the probability that there are exactly eight car accidents over the course of
three weeks?
a. 0.1042; b. 0.0916; c. 0.0655
Feedback: a. The probability of exactly six car accidents in a week is equal
to .
b. The probability of less than two accidents in a week is equal
to .
c. The mean number of accidents over the course of three weeks is equal to 4 × 3 = 12.
The probability of exactly eight accidents over the course of three weeks is equal
to .
details.)
121. During an hour of class, a professor anticipates six questions on average.
a. What is the probability that in a given hour of class, exactly six questions are asked?
b. What is the expected number of questions asked in a 20-minute period?
c. What is the probability that no questions are asked over a 20-minute period?
a. 0.1606; b. 2; c. 0.1353
Feedback: a. The probability that in a given hour of class, exactly six questions are asked
is equal to .
b. In a 20-minute period, the expected number of questions asked is equal to the number
of questions per hour divided by 3: 6/3 = 2.
c. The probability that no questions are asked over a 20-minute period is equal
to .
details.)
122. A plane taking off from an airport in New York can expect to run into a flock of birds once
out of every 1,250 take-offs.
a. What is the expected number of bird strikes for 10,000 take-offs?

b. What is the standard deviation of the number of bird strikes for 10,000 take-offs?
c. What is the probability of running into seven flocks of birds in 10,000 take-offs?
a. 8; b. 2.8284; c. 0.1396
Feedback: a. The expected number of bird strikes for 10,000 take-offs is equal to the
expected number of bird strikes per take-off times 10,000 .

b. The standard deviation of the number of bird strikes for 10,000 take-offs is equal to the
square root of the expected value .

c. The probability of striking seven flocks of birds in 10,000 take-offs is equal to


Discrete Distributions-Practice Questions

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Discrete Probability Distributions

True / False Questions

2. A discrete random variable X may assume an (infinitely) uncountable number of distinct

3. A continuous random variable X assumes an (infinitely) uncountable number of distinct

Multiple Choice Questions

17. Which of the following can be represented by a discrete random variable?

19. Which of the following can be represented by a continuous random variable?

20. What is a characteristic of the mass function of a discrete random variable X?

Refer to Exhibit 5-1. What is the probability that X is 0?

Refer to Exhibit 5-1. What is the probability that X is greater than 0?

24. Exhibit 5-1. Consider the following discrete probability distribution.

Refer to Exhibit 5-1. What is the probability that X is negative?

25. Exhibit 5-1. Consider the following discrete probability distribution.

Refer to Exhibit 5-1. What is the probability that X is less than 5?

Refer to Exhibit 5-2. What is the probability that X equals 2?

Refer to Exhibit 5-2. What is the probability that X is greater than 2?

31. Exhibit 5-3. Consider the following probability distribution.

Refer to Exhibit 5-3. The expected value is ___.

Refer to Exhibit 5-3. The variance is ____.

33. Exhibit 5-3. Consider the following probability distribution.

Refer to Exhibit 5-3. The standard deviation is _________.

34. Exhibit 5-4. Consider the following probability distribution.

Refer to Exhibit 5-4. The expected value is _____.

Refer to Exhibit 5-4. The variance is _____.

Refer to Exhibit 5-4. The standard deviation is ____.

The expected value and the variance of this distribution are:

The stock's expected price at the end of the year is _______.

48. A consumer who is risk averse is best characterized as _______________.

49. A consumer who is risk neutral is best characterized as ______________.

50. How would you characterize a consumer who is risk loving?

Find the probability of rolling a 3 or less.

105.Does the following table describe a discrete probability distribution?

a. Calculate the expected price at year-end.

a. What is the probability of exactly six car accidents in a random week?

121.During an hour of class, a professor anticipates six questions on average.

a. What is the expected number of bird strikes for 10,000 take-offs?

True / False Questions

1. A random variable is a function that assigns numerical values to the outcomes of a

2. A discrete random variable X may assume an (infinitely) uncountable number of distinct

3. A continuous random variable X assumes an (infinitely) uncountable number of distinct

4. A probability distribution of a continuous random variable X gives the probability that X

12. A Bernoulli process consists of a series of n independent and identical trials of an

17. Which of the following can be represented by a discrete random variable?

18. Which of the following can be represented by a continuous random variable?

A. The time of a flight between Chicago and New York

A. The average temperature in Tampa, Florida, during a month of July

20. What is a characteristic of the mass function of a discrete random variable X?

A. The sum of probabilities P(X=x) over all possible values x is 1.

The two key properties are and .

Refer to Exhibit 5-1. What is the probability that X is 0?

23. Exhibit 5-1. Consider the following discrete probability distribution.

Refer to Exhibit 5-1. What is the probability that X is greater than 0?

Refer to Exhibit 5-1. What is the probability that X is negative?

Distractors: Wrong answers include the probability that X is 0 and X is 10.

25. Exhibit 5-1. Consider the following discrete probability distribution.

Refer to Exhibit 5-1. What is the probability that X is less than 5?

Distractors: Wrong answers include the probability that X is -10, 0, or 10.

Distractors: Wrong answers include , , and .

Refer to Exhibit 5-2. What is the probability that X equals 2?

Distractors: Wrong answers include , , and .

Refer to Exhibit 5-2. What is the probability that X is greater than 2?

Distractors: Wrong answers include , , and .

31. Exhibit 5-3. Consider the following probability distribution.

Refer to Exhibit 5-3. The expected value is ___.