Review

Chapter 1
 1-3

Scales of Measurement
• Nominal Scale - groups or classes
Gender, color, professional classification, etc.
• Ordinal Scale - order matters
Ranks (top ten videos, products, etc.)
• Interval Scale - difference or distance matters – has
arbitrary zero value.
Temperatures (0F, 0C)
• Ratio Scale - Ratio matters – has a natural zero value.
Salaries, weight, volume, area, length, etc.
 1-4

1-2 Percentiles and Quartiles

 Given any set of numerical observations, order
them according to magnitude.
 The P
th percentile in the ordered set is that value

below which lie P% (P percent) of the observations

in the set.
 The position of the P
th percentile is given by (n
+ 1)P/100, where n is the number of observations in
the set.
 1-5

Chebyshev’s Theorem
 1 
1  
 At least 
 k 2 of the elements of any



distribution lie within k standard deviations of the

mean
1 1 3
1  1    75%
2
2
4 4 2
Standard
At 1 1 8 Lie
1  2  1    89% 3 deviations
least 3 9 9 within of the mean
1 1 15 4
1 2  1   94%
4 16 16
Chapter 2
 2-7

2-3 Basic Rules for Probability

Range of Values for P(A):

0  P( A) 1
 Complements - Probability of not A

P( A )  1  P( A)
 Intersection - Probability of both A and B

P( A  B)  n( A  B)
 Mutually exclusive events (A and C) :
n( S )

P( A  C )  0
 2-8

2-4 Conditional Probability

• Conditional Probability - Probability of A given B

P( A  B)
P( A B)  , where P( B)  0
P( B)

 Independent events:

P( A B)  P( A)
P( B A)  P( B)
 2-9

2-5 Independence of Events

Conditions for the statistical independence of events A and B:
P( A B)  P( A)
P( B A)  P( B)
and
P( A  B)  P( A) P( B)
P ( Ace  Heart ) P ( Heart  Ace )
P ( Ace Heart )  P ( Heart Ace ) 
P ( Heart ) P ( Ace )
1 1
1 1
 52   P ( Ace )  52   P ( Heart )
13 13 4 4
52 52
4 13 1
P( Ace  Heart)  *   P( Ace) P( Heart)
52 52 52
Event “Ace” and Event “ Heart” are independent
 2-10

Product Rules for Independent Events

The probability of the intersection of several independent events
is the product of their separate individual probabilities:
P( A  A  A  An )  P( A ) P( A ) P( A ) P( An )
1 2 3 1 2 3
The probability of the union of several independent events
is 1 minus the product of probabilities of their complements:
P( A  A  A  An )  1 P( A ) P( A ) P( A ) P( An )
1 2 3 1 2 3
 2-12

Permutations (Order is important)

What if we chose only 3 out of the 6 letters A, B, C, D, E, and F?
There are 6 ways to choose the first letter, 5 ways to choose the
second letter, and 4 ways to choose the third letter (leaving 3
letters unchosen). That makes 6*5*4=120 possible orderings or
permutations.

Permutations are the possible ordered selections of r objects out

of a total of n objects. The number of permutations of n objects
taken r at a time is denoted by nPr, where
P  n!
n r (n  r )!
Forexam ple:
6! 6! 6 * 5 * 4 * 3 * 2 *1
6 P3     6 * 5 * 4  120
(6  3)! 3! 3 * 2 *1
 2-13

Combinations (Order is not Important)

Suppose that when we pick 3 letters out of the 6 letters A, B, C, D, E, and F
we chose BCD, or BDC, or CBD, or CDB, or DBC, or DCB. (These are the
6 (3!) permutations or orderings of the 3 letters B, C, and D.) But these are
orderings of the same combination of 3 letters. How many combinations of 6
different letters, taking 3 at a time, are there?
Combinations are the possible selections of r items from a group of n items  n
regardless of the order of selection. The number of combinations is denoted  r
and is read as n choose r. An alternative notation is nCr. We define the number
of combinations of r out of n elements as:
 n n!
  n C r 
r r! (n  r)!
Forexam ple:
 n 6! 6! 6 * 5 * 4 * 3 * 2 *1 6 * 5 * 4 120
 6 C3       20
 
r 3! ( 6  3)! 3!3! (3 * 2 * 1)(3 * 2 * 1) 3 * 2 * 1 6
 2-14

Bayes’ Theorem
• Bayes’ theorem enables you, knowing just a little more than the
probability of A given B, to find the probability of B given A.
• Based on the definition of conditional probability and the law of total
probability.

P ( A  B)
P ( B A) 
P ( A)
P ( A  B)
 Applying the law of total
P ( A  B)  P ( A  B )
probability to the denominator
P ( A B) P ( B)

P ( A B) P ( B)  P ( A B ) P ( B ) Applying the definition of
conditional probability throughout
 2-15

Example 2-10 (Tree Diagram)

Prior Conditional Joint
Probabilities Probabilities Probabilities

P( Z I )  0.92 P( Z  I )  (0.001)(0.92) .00092

P( Z I )  008
. P( Z  I )  (0.001)(0.08) .00008
P( I )  0001
.

P( I )  0999
. P( Z I )  004
. P( Z  I )  (0.999)(0.04) .03996

P( Z I )  096
.

P( Z  I )  (0.999)(0.96) .95904
Chapter 3
 3-17

Variance and Standard Deviation of a Random

Variable
The variance of a random variable is the expected
squared deviation from the mean:
 2
 V ( X )  E [( X   ) 2 ]  
a ll x
(x   ) 2 P(x)
2
   
 E ( X 2 )  [ E ( X )] 2    x 2 P ( x )     xP ( x ) 
 a ll x   a ll x 

The standard deviation of a random variable is the

square root of its variance:   SD( X )  V ( X )
 3-18

Variance and Standard Deviation of a Random

Variable –   V ( X )  E [( X   ) ]   ( x   ) P ( x )
2 2 2

a ll x
Table 3-8    
2

 E ( X 2 )  [ E ( X )] 2    x 2 P ( x )     xP ( x ) 
 a ll x   a ll x 

Recall:  = 2.3.
 3-19

Variance of a Linear Function of a Random

Variable
The variance of a linear function of a random variable is:
V(aX b)  a2V( X)  a22
Example 3-3:
2 V(X)
Number  E ( X 2 )  [ E ( X )]2
of items, x P(x) xP(x) x2 P(x) 2
   
5000 0.2 1000 5000000    x P( x )     xP( x ) 
2

6000 0.3 1800 10800000 all x  all x 

7000 0.2 1400 9800000  46500000  ( 67002 )  1610000
8000 0.2 1600 12800000
9000 0.1 900 8100000   SD( X )  1610000  1268.86
1.0 6700 46500000 V (2 X  8000)  (2 2 )V ( X )
 ( 4)(1610000)  6440000

 ( 2 x  8000)  SD(2 x  8000)

 2 x  (2)(1268.86)  2537.72
 3-20

3-3 Sum and Linear Composites of Random

Variables (Continued)
NOTE: E( X  X ... X )  E( X )  E( X ) ... E( X )
1 2 k 1 2 k

E(a X  a X ... a X )  a E( X )  a E( X ) ... a E( X )

1 1 2 2 k k 1 1 2 2 k k

The variance of the sum of k mutually independent random

variables is the sum of their variances:
V ( X  X ... X ) V ( X ) V ( X ) ...V ( X )
1 2 k 1 2 k
and

V (a X  a X ... a X )  a2V ( X )  a2V ( X ) ... a2V ( X )

1 1 2 2 k k 1 1 2 2 k k
 3-21

Binomial Probabilities (Introduction)

Suppose we toss a single fair and balanced coin five times in succession,
and let X represent the number of heads.

How many are there possible outcomes ?

How many are there exactly 2 heads (X=2)?

HHTTT HTHTT HTTHT HTTTH THHTT THTHT THTTH TTHHT TTHTH

TTTHH

The probability of each of these 10 outcomes is p3q2 = (1/2)3(1/2)2=(1/32), so the probability of 2

heads in 5 tosses of a fair and balanced coin is:

P(X = 2) = 10 * (1/32) = (10/32) = 0.3125

10 (1/32)
Number of outcomes Probability of each
with 2 heads outcome with 2 heads
 3-22

Binomial Probabilities (continued)

10 (1/32)
Number of outcomes Probability of each
with 2 heads outcome with 2 heads

In general:

1. The probability of a given 2. The number of different sequences of n

sequence of x successes out trials that result in exactly x successes is
of n trials with probability of equal to the number of choices of x
success p and probability of elements out of a total of n elements. This
failure q is equal to: number is denoted:

 n n!
pxq(n-x) nCx    
 x x!( n  x)!
 Difference between

Binomial : fixed 8 trials, since replacement , fixed probability (success) = 6/10

Hypergeometric : fixed 8 trials, but without replacement  the second trial , may 5/9 ( if 1st
trial “success” or 6/10 if 1st trial “fail”)
Negative binomial : Stop when “k” success , ex: k=2 . Stop if first two trials are “success” . Stop
at 3 trials if 1st “success” 2nd “fail” and 3rd “success”
Binomial Probabilities (continued)

N u m b er o f
su ccesses, x P ro b ab ility P (x )
The binomial probability distribution: n!
0 p 0 q (n 0)
0 !( n  0 ) !
 n x ( n  x ) n! n!
P( x)    p q  p x q ( n x) 1 p 1 q ( n  1)
 x x!( n  x)! 1 !( n  1 ) !
n!
where : 2 p 2 q (n 2)
2 !( n  2 ) !
p is the probability of success in a single trial, n!
q = 1-p, 3 p 3 q (n 3)
3 !( n  3 ) !
n is the number of trials, and  
n!
x is the number of successes. n p n q (n n)
n !( n  n ) !
1 .0 0
Negative Binomial Distribution
Hypergeometric Distribution
Chapter 4
 4-28

4-2 Properties of the Normal Distribution

•The normal is a family of
Bell-shaped and symmetric distributions.
Because the distribution is symmetric, one-half (.50 or 50%) lies on
either side of the mean.
Each is characterized by a different pair of mean, , and variance,
. That is: [X~N()].
Each is asymptotic to the horizontal axis.
The area under any normal probability density function within k of
 is the same for any normal distribution, regardless of the mean
and variance.
 4-29

4-2 Properties of the Normal Distribution

(continued)
• If X1, X2, …, Xn are independent normal random variable, then the
random variable Q defined as Q = a1X1 + a2X2 + … + anXn + b will also
be normally distributed with
• E(Q) = a1E(X1) + a2E(X2) + … + anE(Xn) + b
• V(Q) = a12 V(X1) + a22 V(X2) + … + an2 V(Xn)
• Note: It is the variances that can be added above and not the
standard deviations.
Appendix C
 4-32

99% Interval around the Mean

P(-2.57583  Z  2.57583) = 0.99

95% Interval around the Mean

P(-1.96  Z  1.96) = 0.95

90% Interval around the Mean

P(-1.65  Z  1.65) = 0.90
 4-33

The Transformation of Normal Random

Variables
The transformation of X to Z: The inverse transformation of Z to X:
X  x
Z  X    Z
x x x

The transformation of X to Z, where a and b are numbers::

 a  
< 
P ( X a ) P Z < 
  
 b  
> 
P ( X b) P Z > 
  
a b  
< <
P (a X b ) P  < Z < 
   
 4-34

4-5 The Inverse Transformation

The area within k of the mean is the same for all normal random variables. To find a
probability associated with any interval of values for any normal random variable, all that
is needed is to express the interval in terms of numbers of standard deviations from the
mean. That is the purpose of the standard normal transformation. If X~N(50,102),
 x   70     70  50 
P( X > 70)  P >   P Z >   P( Z > 2)
     10 

That is, P(X >70) can be found easily because 70 is 2 standard deviations above the mean
of X: 70 =  + 2. P(X > 70) is equivalent to P(Z > 2), an area under the standard normal
distribution.

Example 4-12 X~N(124,122) Normal Distribution:  = 124,  = 12

P(X > x) = 0.10 and P(Z > 1.28) 0.10 0.04
x =  + z = 124 + (1.28)(12) = 139.36
0.03
z .07 .08 .09
. . . . .

f(x)
. . . . . 0.02
. . . . .
1.1 ... 0.3790 0.3810 0.3830 0.01
1.2 ... 0.3980 0.3997 0.4015 0.01
1.3 ... 0.4147 0.4162 0.4177
. . . . .
. . . . . 0.00
. . . . . 80 130 180
139.36
X
 4-35

Approximating a Binomial Probability Using

the Normal Distribution
 a  np b  np 
P( a  X  b) & P Z 
 np(1  p) np(1 p) 


for n large (n  50) and p not too close to 0 or 1.00

or:
 a  0.5  np b  0.5  np 
P(a  X  b) & P Z 
 np(1  p) 
np(1 p) 

for n moderately large (20  n < 50).

NOTE: If p is either small (close to 0) or large (close to 1), use the

Poisson approximation.
Chapter 5
 5-40

Student’s t Distribution
If the population standard deviation, , is unknown, replace with
the sample standard deviation, s. If the population is normal, the
resulting statistic: t  X  
s/ n
has a t distribution with (n - 1) degrees of freedom.
• The t is a family of bell-shaped and symmetric distributions, one
for each number of degree of freedom.
• The expected value of t is 0. Standard normal
• The variance of t is greater than 1, but approaches 1 as the t, df=20
number of degrees of freedom increases. The t is flatter and has
fatter tails than does the standard normal. t, df=10
• The t distribution approaches a standard normal as the number of
degrees of freedom increases.



 5-45

Sample Proportion (Example 5-3)

In recent years, convertible sports coupes have become very popular in Japan. Toyota is
currently shipping Celicas to Los Angeles, where a customizer does a roof lift and ships
them back to Japan. Suppose that 25% of all Japanese in a given income and lifestyle
category are interested in buying Celica convertibles. A random sample of 100
Japanese consumers in the category of interest is to be selected. What is the probability
that at least 20% of those in the sample will express an interest in a Celica convertible?
n  100
 
p  0.25
 p$  p .20  p 
P ( p$ > 0.20 )  P
 p (1  p )
>
p (1  p ) 

np  (100 )( 0.25)  25  E ( p$ )
 n n

 
p (1  p )

(.25)(.75)
 0.001875  V ( p$ )  .20  .25   >  .05 
 P z >  
 .0433
n 100 P z
 (.25)(.75)

p (1  p )  100

 0.001875  0.04330127  SD ( p$ )  P ( z > 1.15)  0.8749
n