Professional Documents
Culture Documents
Economists (Paper 6)
Oliver Linton
Lent Term 2016
Instructor: Oliver B. Linton: Room 16; email: obl20@cam.ac.uk; o ce hours:
Monday 11-12am; web page
http://www.oliverlinton.me.uk/
Supervision 1
1. Suppose that S = fa; b; c; d; eg and let B consist of two sets B1 = fa; b; cg and
B2 = fc; d; eg: Find the sigma eld A generated by B.
2. Suppose that 1 percent of the population has a particular disease. A test
has been developed with the following properties. If a person has the disease,
the test comes out positive with probability 0.9 and negative with probability
0.1. If the person does not have the disease, the test comes out positive with
probability 0.05 and negative with probability 0.95:
(a) What is the probability that a person randomly picked from the population
has the disease if he tests positive?
(b) Suppose that in response to warnings about an epidemic 30 percent of the
people who have the disease decide to have a test, and 15 percent of people who
do not have the disease decide to have the test. What is the probability that
someone who tests positive has the disease?
3. Suppose that the joint probability density function of two random variables
X; Y is
fXY (x; y) = c + (x + y)=2; 0 < x < 1; 0 < y < 1
and zero otherwise. Are X and Y independent? Find c: Find the expectation
of X: Find the conditional expectation of Y given that X = 1=2:
4. Suppose that X
N (0; 1): Derive the density function of Y = cos(X): You
may nd it useful to simulate the random variable.
m3
2)
2
1)
= E f(X
2
2g
where A > 0: Show that EX > 1 but E log(X) = 0: The game is played n
times with each game being independent, and dene the payo to be Yn =
X1 X2
Xn ; that is you bet everything you have each time. Calculate
EYn and E log(Yn ): Show that for any with 0 < < 1 :
Pr (Yn < ) !
Pr Yn >
1
2
1
! :
2
How much would you be willing to pay to play this game? Simulate the game
using some computer program such as matlab or R and show the distribution
of the payos after n periods with n = 1; 10; 100:
8. Suppose that you play dice with your 4 year old son, where the winner is
determined by the higher total score. To make it a happy ending game you
decide to let him have two dice to your one. What is the probability that he
wins? Now suppose that you throw n dice to his 2n?