1. Wages for workers in a particular industry average $11.

90 per hour with a standard

deviation of 40 cents. The wages are considered to be normally distributed.
1. Suppose you are employed in this industry. What would your wage have to be if
75% of all workers earn more than you? Ans: 11.63
2. What proportion of workers receive wages less than $11 per hour? Ans: 0.0122
3. What proportion of workers make between $12 and $13 per hour? Ans: 0.3983

2. If scores are normally distributed with a mean of 30 and a standard deviation of 5, what
percent of the scores is: (a) greater than 30? (b) greater than 37? (c) between 28 and 34?
Ans: (a) 0.5 (b) 0.0808 (c) 0.4435

3. Daily fluctuations of French CAC-40 stock index from March to June in 1997 seem to
follow a normal distribution with mean of 2600 and a standard deviation of 50. Find the
probability that the CAC-40 will be (i) between 2520 and 2670 (ii) below 2730 and not
less than 2450?
Ans: (i) 0.8644 (ii) 0.9940

4. The mean cost for employee alcohol rehabilitation programs involving hospitalization is
$10,000 ((USA Today, September 12, 1991). Assume that rehabilitation program cost
has a normal distribution with a standard deviation of $2,200
a. What is the probability that a rehabilitation program will cost at least $12,000?
Ans: 0.1814
b. What is the cost range for the 10% most expensive rehabilitation programs?
Ans: ≥ 12816

5. The grade point averages of a large population of cadets in MA206 are approximately
normally distributed with a mean of 2.4 and a standard deviation of 0.8.
a) What fraction of the students will possess a grade point average in excess of 3.0?
Ans: 0.2266
b) If cadets possessing a grade point average equal to or less than 1.9 are dropped
from USMA, what percentage of the cadets will be dropped? Ans: 0.2643
c) What grade point average would you need to be in the 90th percentile? The 45th
percentile?
Ans: 3.424 and 2.296 respectively.

6. The time, in hours, that a copying machine may work without breaking down
is a normally distributed random variable with mean 549 and standard deviation
68. Find the probability that the machine will work for at least 500 hours without
breaking down. Ans: 0.7642

12 Scores on a management aptitude examination are believed to be normally

distributed with mean 650 (out of a total of 800 possible points) and standard
deviation 50. What is the probability that a randomly chosen manager will achieve
a score above 700? What is the probability that the score will be below 750?
Ans: 0.1587 and 0.9772

13.You are considering the risk return profiles of two mutual funds for investments. Fund
A promises an expected return of 8% with standard deviation of 14%. Fund B promises
an expected return and standard deviation of 4% and 5% respectively. Assume that the
returns are approximately normally distributed.
a) Which mutual fund will you pick if your objective is to minimize probability of
earning a negative return? Ans: Fund B
b) Which mutual fund will you pick if your objective is to maximize probability of
earning a return above 8%? Ans: Fund A
Support your answers with probabilities.
18. President Bush proposed the elimination of taxes on dividends paid to
shareholders on the grounds that they result in double taxation. The earnings
used to pay dividends are already taxed to the corporation. A survey on this
issue revealed that 47% of Americans favor the proposal. By political party,
64% of Republications and 29% of Democrats favor the proposal (Investor’s
Business Daily, January 13, 2003). Suppose a group of 250 Americans gather
to hear a speech about the proposal.
a. What is the probability at least half of the group is in favor of the proposal?
b. You later find out 150 Republicans and 100 Democrats are present. Now
what is your estimate of the expected number in favor of the proposal?
c. Will a speaker in favor of the proposal be better received by this group than
one against the proposal?

a. In answering this part, we assume it is not known how many Democrats and
Republicans are in the group.

 = np = 250(.47) = 117.5

2 = np(1-p) = 250(.47)(.53) = 62.275

  62.275  7.89

Half the group is 125 people. We want to find P(x  124.5).

124.5  117.5
z  .89
At x = 124.5, 7.89

P(z  .89) = .5000 - .3133 = .1867

So, P(x  124.5) = .1867

We estimate a probability of .1867 that at least half the group is in favor of the
proposal.

b. For Republicans: np = 150(.64) = 96

For Democrats: np = 100(.29) = 29

Expected number in favor = 96 + 29 = 125

c. It's a toss up. We expect just as many in favor of the proposal as opposed.
 19. In December 1997, the U.S. Department of Justice issued an injunction
against Microsoft Corporation for building its Internet Explorer Web browser
with its Windows 95 operating system (Fortune, February 2, 1998). Public
opinion was divided on whether Microsoft was a monopoly. In a Fortune
poll, 41% of respondents agreed with the statement, “Microsoft is a
monopoly.”
a. For a sample of 800 people, how many would you expect to agree that
Microsoft is a monopoly?
b. For a sample of 800 people, what is the probability that 300 or fewer agree
that Microsoft is a monopoly?
c. Again for a sample of 800 people, what is the probability that more than
450 do not agree that Microsoft is a monopoly?

a. np = (800)(0.41) = 328

  np (1  p)  (800)(0.41)(0.59)  13.9111

I would expect 328 to agree that Microsoft is a monopoly.

b. Find P(x  300.5)

At x = 300.5
300.5  328
z  1.98
13.9111

P(x  300.5) = 0.5000 - 0.4761 = 0.0239

The probability that 300 or fewer agree that Microsoft is a monopoly is 0.0239.

c. Use n(1 - p) = 800(0.59) = 472

 = 13.9111 as in part a.

Find P(x > 450.5)

At x = 450.5

450.5  472
z  1.55
13.9111

P(x > 450.5) = 0.5000 + 0.4394 = 0.9394

The probability that there are over 450 that do not agree Microsoft is a
monopoly.

20. Motorola used the normal distribution to determine the probability of defects
and the number of defects expected in a production process (APICS – The
performance Advantage, July 1991). Assume a production process produces
items with a mean weight of 10 ounces. Calculate the probability of a defect
 and the expected number of defects for a 1000- unit production run in the
following situations.
a. The process standard deviation is .15, and the process control is set at
plus or minus one standard deviation. Units with weights less than
9.85 or greater than 10.15 ounces will be classified as defects.
b. Through process design improvements, the process standard
deviation can be reduced to .05. Assume the process control remains
the same, with weights less than 9.85 or greater than 10.15 ounces
being classified as defects.
c. What is the advantage of reducing process variation thereby setting
process control limits at a greater number of standard deviations
from the mean?

a. P(defect) = 1 - P(9.85  x  10.15)

= 1 - P(-1  z  1) = 1 - .6826 = .3174

Expected number of defects = 1000(.3174) = 317.4

b. P(defect) = 1 - P(9.85  x  10.15)

= 1 - P(-3  z  3) = 1 - .9974 = .0026

Expected number of defects = 1000(.0026) = 2.6

c. Reducing the process standard deviation causes a substantial reduction in the

number of defects.