STAT 420

2GR, 2UG, 3GR, 3UG

1.

Fall 2016
A. Stepanov

Practice Problems 1

In a grocery store in Pawnee, IN, the price of a pound of bacon ( U ) and the price of a
dozen of eggs ( V ) vary from day to day and jointly follow a bivariate normal with

U = $4.34,
a)

U = $0.10,

V = $2.22,

V = $0.03,

UV = 0.60.

Find the probability that on a given day, a pound of bacon costs more than $4.30. That is,
find P ( U > 4.30 ).

b)

Suppose that on a given day, a dozen of eggs costs $2.26. Find the probability that a
pound of bacon costs more than $4.30. That is, find P ( U > 4.30 | V = 2.26 ).

c)

Suppose that on a given day, a dozen of eggs costs $2.19. Find the probability that a
pound of bacon costs more than $4.30. That is, find P ( U > 4.30 | V = 2.19 ).

d)

Find the probability that on a given day, a dozen of eggs costs more than $2.25. That is,
find P ( V > 2.25 ).

e)

Suppose that on a given day, a pound of bacon costs $4.30. Find the probability that a
dozen of eggs costs more than $2.25. That is, find P ( V > 2.25 | U = 4.30 ).

f)

Find the probability that on a given day, a pound of bacon costs more than two dozen of
eggs. That is, find P ( U > 2 V ).

g)

Ron Swanson buys 5 pounds of bacon and 4 dozen of eggs. Find the probability that
he paid more than $30. That is, find P ( 5 U + 4 V > 30 ).

1.

(continued)
Suppose that the price of a pound of bacon ( U ), the price of a dozen of eggs ( V ), and
the price of a pound of ham ( W ) [ in dollars ] jointly follow N 3 ( , ) distribution with

4.34

= 2.22
3.31

and

0.0024

0.0009 .
0.0024 0.0009 0.0036

h)

What are the values of , , , and ?

i)

What are the values of UW and VW ?

j)

Find the probability that on a given day, a pound of ham costs more than $3.34. That is,
find P ( W > 3.34 ).

k)

Ron Swanson buys 5 pounds of bacon, 4 dozen of eggs, and 3 pounds of ham. Find the
probability that he paid more than $40. That is, find P ( 5 U + 4 V + 3 W > 40 ).

l)

Alex buys 0.5 pounds of bacon, 1 dozen of eggs, and 1.5 pounds of ham. Find the
probability that he paid more than $9.60. That is, find P ( 0.5 U + V + 1.5 W > 9.60 ).

m)

Sam-I-am buys 6 dozen of eggs, and 5 pounds of ham. Find the probability that he
paid more than $29.50. That is, find P ( 6 V + 5 W > 29.50 ).

2.

Suppose that company A and company B are in the same industry sector, and the
prices of their stocks, $X per share for company A and $Y per share for company B,
vary from day to day randomly according to a bivariate normal distribution with
parameters

a)

X = 45,

X = 5.6,

Y = 25,

Y = 5,

= 0.8.

What is the probability that on a given day the price of stock for company B ( Y )
exceeds $33?

b)

Suppose that on a given day the price of stock for company A ( X ) is $52. What
is the probability that the price of stock for company B ( Y ) exceeds $33?

c)

Alex bought 5 shares of company A stock and 3 shares of company B stock.

What is the probability that on a given day the value of his portfolio ( 5 X + 3 Y )
is below $250?

d)

What is the probability that 1 share of company A stock is worth more than
2 shares of company B stock?

3.

In a college health fitness program, let X denote the weight in kilograms of a male
freshman at the beginning of the program and let Y denote his weight change during
a semester. Assume that X and Y have a bivariate normal distribution with X = 75,

X = 9, Y = 2.5, Y = 1.5, = 0.6. (The lighter students tend to gain weight,

while the heavier students tend to lose weight.)
a)

What proportion of the students that weigh 85 kg end up losing weight during the
semester? That is, find P ( Y < 0 | X = 85 ).

b)

What proportion of the students that weigh over 87 kg at the end of the semester?
That is, find P ( X + Y > 87 ).

4.

Suppose X follows a 3-dimensional multivariate normal distribution with

44

mean = 40 and covariance matrix =
30

9 6 8

6 25 6 .
8 6 12

a)

Find P ( X1 > 38 ).

b)

Find P ( X2 > 38 ).

c)

Find P ( X2 + X3 > 66 ).

d)

Find P ( X2 X3 > 3 ).

e)

Find P ( X1 + 2 X2 + 3 X3 > 240 ).

5.

Suppose X has a multivariate normal distribution with mean

2
and covariance matrix =
3

9
4
0
2

a)

Find P ( X 1 > 8 ).

c)*

Find P ( X 1 > 8 | X 2 = 5, X 3 = 8, X 4 = 3 ).

b)

4 0
16 10
10 25
2

2
2
5

Find P ( 3 X 1 5 X 2 + 4 X 3 > 2 ).

Answers:

1.

In a grocery store in Pawnee, IN, the price of a pound of bacon ( U ) and the price of a
dozen of eggs ( V ) vary from day to day and jointly follow a bivariate normal with

U = $4.34,
a)

U = $0.10,

V = $0.03,

UV = 0.60.

Find the probability that on a given day, a pound of bacon costs more than $4.30. That is,
find P ( U > 4.30 ).

P ( U > 4.30 ) = P ( Z >

b)

V = $2.22,

4.30 4.34
) = P ( Z > 0.40 ) = 0.6554.
0.10

Suppose that on a given day, a dozen of eggs costs $2.26. Find the probability that a
pound of bacon costs more than $4.30. That is, find P ( U > 4.30 | V = 2.26 ).

Given V = 2.26, U has Normal distribution

with mean 4.34 + 0.6
and variance

0.10
( 2.26 2.22 ) = 4.42
0.03

( 1 0.6 2 ) 0.10 2

P ( U > 4.30 | V = 2.26 ) = P ( Z >

= 0.0064

( standard deviation 0.08 ).

4.30 4.42
) = P ( Z > 1.50 ) = 0.9332.
0.08

c)

Suppose that on a given day, a dozen of eggs costs $2.19. Find the probability that a
pound of bacon costs more than $4.30. That is, find P ( U > 4.30 | V = 2.19 ).

Given V = 2.19, U has Normal distribution

with mean 4.34 + 0.6
and variance

0.10
( 2.19 2.22 ) = 4.28
0.03

( 1 0.6 2 ) 0.10 2

P ( U > 4.30 | V = 2.19 ) = P ( Z >

d)

( standard deviation 0.08 ).

4.30 4.28
) = P ( Z > 0.25 ) = 0.4013.
0.08

Find the probability that on a given day, a dozen of eggs costs more than $2.25. That is,
find P ( V > 2.25 ).

P ( V > 2.25 ) = P ( Z >

e)

= 0.0064

2.25 2.22
) = P ( Z > 1.00 ) = 0.1587.
0.03

Suppose that on a given day, a pound of bacon costs $4.30. Find the probability that a
dozen of eggs costs more than $2.25. That is, find P ( V > 2.25 | U = 4.30 ).

Given U = 4.30, V has Normal distribution

with mean 2.22 + 0.6
and variance

0.03
( 4.30 4.34 ) = 2.2128
0.10

( 1 0.6 2 ) 0.03 2

P ( V > 2.25 | U = 4.30 ) = P ( Z >

= 0.000576

( standard deviation 0.024 ).

2.25 2.2128
) = P ( Z > 1.55 ) = 0.0606.
0.024

f)

Find the probability that on a given day, a pound of bacon costs more than two dozen of
eggs. That is, find P ( U > 2 V ).

Want P ( U > 2 V ) = P ( U 2 V > 0 ) = ?

U 2 V has Normal distribution,
E ( U 2 V ) = U 2 V = 4.34 2 2.22 = 0.10,
Var ( U 2 V ) = U2 4 UV + 4 V2 = U2 2 U V + V2
= 0.10 2 4 0.6 0.10 0.03 + 4 0.03 2 = 0.0064
P(U 2V > 0) = P(Z >

g)

( standard deviation 0.08 ).

0 + 0.10
) = P ( Z > 1.25 ) = 0.1056.
0.08

Ron Swanson buys 5 pounds of bacon and 4 dozen of eggs. Find the probability that
he paid more than $30. That is, find P ( 5 U + 4 V > 30 ).

5 U + 4 V has Normal distribution,

E ( 5 U + 4 V ) = 5 U + 4 V = 5 4.34 + 4 2.22 = 30.58,
Var ( 5 U + 3 V ) = 25 U2 + 40 UV + 16 V2 = 25 U2 + 40 U V + 16 V2
= 25 0.10 2 + 40 0.6 0.10 0.03 + 16 0.03 2 = 0.3364

( standard deviation 0.58 ).

P ( 5 U + 4 V > 30 ) = P ( Z >

30 30.58
) = P ( Z > 1.00 ) = 0.8413.
0.58

1.

(continued)
Suppose that the price of a pound of bacon ( U ), the price of a dozen of eggs ( V ), and
the price of a pound of ham ( W ) [ in dollars ] jointly follow N 3 ( , ) distribution with

4.34

= 2.22
3.31

h)

and

0.0024

0.0009 .
0.0024 0.0009 0.0036

What are the values of , , , and ?

= U2 = 0.10 2 = 0.0100.
= = UV = 0.6 0.10 0.03 = 0.0018.
= V2 = 0.03 2 = 0.0009.

i)

j)

What are the values of UW and VW ?

UW =

UW
=
U W

0.0024
= 0.40.
0.0100 0.0036

VW =

VW
=
V W

0.0009
= 0.50.
0.0009 0.0036

Find the probability that on a given day, a pound of ham costs more than $3.34. That is,
find P ( W > 3.34 ).

P ( W > 3.34 ) = P ( Z >

3.34 3.31
) = P ( Z > 0.50 ) = 0.3085.
0.0036

k)

Ron Swanson buys 5 pounds of bacon, 4 dozen of eggs, and 3 pounds of ham. Find the
probability that he paid more than $40. That is, find P ( 5 U + 4 V + 3 W > 40 ).
5 U + 4 V + 3 W has Normal distribution,
E ( 5 U + 4 V + 3 W ) = 5 U + 4 V + 3 W = 5 4.34 + 4 2.22 + 3 3.31 = 40.51,

Var ( 5 U + 4 V + 3 W ) =

5 4 3

0.0100 0.0018 0.0024 5

0.0018 0.0009 0.0009 4
0.0024 0.0009 0.0036 3

0.0644 0.0153 0.0264

5

4 = 0.4624
3

( standard deviation 0.68 ).

P ( 5 U + 4 V + 3 W > 40 ) = P ( Z >

l)

40 40.51
) = P ( Z > 0.75 ) = 0.7734.
0.68

Alex buys 0.5 pounds of bacon, 1 dozen of eggs, and 1.5 pounds of ham. Find the
probability that he paid more than $9.60. That is, find P ( 0.5 U + V + 1.5 W > 9.60 ).
0.5 U + V + 1.5 W has Normal distribution,
E ( 0.5 U + V + 1.5 W ) = 0.5 U + V + 1.5 W = 0.5 4.34 + 2.22 + 1.5 3.31 = 9.355,

Var ( 0.5 U + V + 1.5 W ) =

0.5 1 1.5

0.0100 0.0018 0.0024 0.5

0.0018 0.0009 0.0009 1
0.0024 0.0009 0.0036 1.5

0.0104 0.00315 0.0075

0.5

1 = 0.0196
1.5

( standard deviation 0.14 ).

P ( 0.5 U + V + 1.5 W > 9.60 ) = P ( Z >

9.60 9.355
) = P ( Z > 1.75 ) = 0.0401.
0.14

m)

Sam-I-am buys 6 dozen of eggs, and 5 pounds of ham. Find the probability that he
paid more than $29.50. That is, find P ( 6 V + 5 W > 29.50 ).

6 V + 5 W has Normal distribution,

E ( 6 V + 5 W ) = 6 V + 5 W = 6 2.22 + 5 3.31 = 29.87,

Var ( 6 V + 5 W ) =

0 6 5

0.0100 0.0018 0.0024 0

0.0018 0.0009 0.0009 6
0.0024 0.0009 0.0036 5

0.0228 0.0099 0.0234

0

6 = 0.1764
5

( standard deviation 0.42 ).

OR
2
Var ( 6 V + 5 W ) = 36 V2 + 60 VW + 25 W

= 36 0.0009 + 60 0.0009 + 25 0.0036 = 0.1764

( standard deviation 0.42 ).

P ( 6 V + 5 W > 29.50 ) = P ( Z >

n)

29.50 29.87
) P ( Z > 0.88 ) = 0.8106.
0.42

Find the probability that Sam-I-am paid more than $30.

P ( 6 V + 5 W > 30 ) = P ( Z >

30 29.87
) P ( Z > 0.31 ) = 0.3783.
0.42

2.

Suppose that company A and company B are in the same industry sector, and the
prices of their stocks, $X per share for company A and $Y per share for company B,
vary from day to day randomly according to a bivariate normal distribution with
parameters

a)

X = 45,

X = 5.6,

Y = 25,

Y = 5,

= 0.8.

What is the probability that on a given day the price of stock for company B ( Y )
exceeds $33?

Y has Normal distribution with mean Y = 25

and standard deviation Y = 5.
33 25

P ( Y > 33 ) = P Z >
= P ( Z > 1.60 )
5

= 1 ( 1.60 ) = 1 0.9452 = 0.0548.

b)

Suppose that on a given day the price of stock for company A ( X ) is $52. What
is the probability that the price of stock for company B ( Y ) exceeds $33?

Given X = 52, Y has Normal distribution

with mean

and variance

Y +

Y
( x X ) = 25 + 0.8 5 ( 52 45 ) = 30
X
5 .6

(1 2 ) Y2 = (1 0.8 2 ) 5 2

= 9

( standard deviation = 3 ).
33 30

P ( Y > 33 | X = 52 ) = P Z >
= P ( Z > 1.00 ) = 1 ( 1.00 )
3

= 1 ( 1.00 ) = 1 0.8413 = 0.1587.

c)

Alex bought 5 shares of company A stock and 3 shares of company B stock.

What is the probability that on a given day the value of his portfolio ( 5 X + 3 Y )
is below $250?

Portfolio = 5 X + 3 Y.
Portfolio has Normal distribution
with mean

5 X + 3 Y = 5 45 + 3 25 = 300

and variance
Var ( 5 X + 3 Y ) = Cov ( 5 X + 3 Y , 5 X + 3 Y )
= Cov ( 5 X , 5 X ) + Cov ( 5 X , 3 Y ) + Cov ( 3 Y , 5 X ) + Cov ( 3 Y , 3 Y )
2
2
2
2
= 25 X
+ 30 XY + 9 Y
= 25 X
+ 30 X Y + 9 Y

= 25 5.6 2 + 30 0.8 5.6 5 + 9 5 2 = 1681

( standard deviation = 1681 = 41 ).

250 300

P ( Portfolio < 250 ) = P Z <

= P ( Z < 1.22 ) = ( 1.22 )
41

= 0.1112.

d)

What is the probability that 1 share of company A stock is worth more than
2 shares of company B stock?

Want P ( X > 2 Y ) = P ( X 2 Y > 0 ) = ?

X 2 Y has Normal distribution,
E ( X 2 Y ) = X 2 Y = 45 2 25 = 5,
Var ( X 2 Y ) = X2 4 XY + 4 Y2 = X2 4 X Y + 4 Y2
= 5.6 2 4 0.8 5.6 5 + 4 5 2 = 41.76 ( standard deviation 6.462 ).
P(X 2 Y > 0) = P(Z >

0+5
) = P ( Z > 0.77 ) = 1 ( 0.77 )
6.462

= 1 0.7794 = 0.2206.

a)

b)

c)

d)

3.

In a college health fitness program, let X denote the weight in kilograms of a male
freshman at the beginning of the program and let Y denote his weight change during
a semester. Assume that X and Y have a bivariate normal distribution with X = 75,

X = 9, Y = 2.5, Y = 1.5, = 0.6. (The lighter students tend to gain weight,

while the heavier students tend to lose weight.)

X = 75, X = 9, Y = 2.5, Y = 1.5, = 0.6.

a)

What proportion of the students that weigh 85 kg end up losing weight during the
semester? That is, find P ( Y < 0 | X = 85 ).

Given X = 85, Y has Normal distribution

with mean
and variance

Y +

Y
( x X ) = 2.5 + ( 0.6 ) 1.5 ( 85 75 ) = 1.5
X
9

(1 2 ) Y2 = (1 ( 0.6 ) 2 ) 1.5 2

= 1.44

( standard deviation = 1.2 ).

0 1 .5

P ( Y < 0 | X = 85 ) = P Z <
= P ( Z < 1.25 ) = ( 1.25 ) = 0.1056.
1 .2

b)

What proportion of the students that weigh over 87 kg at the end of the semester?
That is, find P ( X + Y > 87 ).

X + Y has Normal distribution,

E ( X + Y ) = X + Y = 75 + 2.5 = 77.5,
Var ( X + Y ) = X2 + 2 XY + Y2 = X2 + 2 X Y + Y2
= 9 2 + 2 ( 0.6 ) 9 1.5 + 1.5 2 = 67.05.
SD ( X + Y ) 8.1884.
P ( X + Y > 87 ) = P ( Z >

87 77.5
) = P ( Z > 1.16 ) = 0.1230.
8.1884

4.

Suppose X follows a 3-dimensional multivariate normal distribution with

44

mean = 40 and covariance matrix =
30

a)

9 6 8

6 25 6 .
8 6 12

Find P ( X1 > 38 ).

X1 ~ N ( 44, 9 )
38 44

P ( X1 > 38 ) = P Z >
= P ( Z > 2.00 ) = 0.9772.
3

b)

Find P ( X2 > 38 ).

X2 ~ N ( 40, 25 )
38 40

P ( X2 > 38 ) = P Z >
= P ( Z > 0.40 ) = 0.6554.
5

c)

Find P ( X2 + X3 > 66 ).

E ( X2 + X3 ) = 40 + 30 = 70.
Var ( X2 + X3 ) = Var ( X2 ) + 2 Cov ( X2 , X3 ) + Var ( X3 ) = 25 12 + 12 = 25.
OR

9 6 8 0
0

Var ( X2 + X3 ) = (0 1 1) 6 25 6 1 = (2 19 6 ) 1 = 25.
8 6 12 1
1

66 70

P ( X2 + X3 > 66 ) = P Z >
= P ( Z > 0.80 ) = 0.7881.
5

d)

Find P ( X2 X3 > 3 ).

E ( X2 X3 ) = 40 30 = 10.
Var ( X2 X3 ) = Var ( X2 ) 2 Cov ( X2 , X3 ) + Var ( X3 ) = 25 + 12 + 12 = 49.
OR

9 6 8 0
0

Var ( X2 X3 ) = (0 1 1) 6 25 6 1 = ( 14 31 18) 1 = 49.
8 6 12 1
1

3 10

P ( X2 X3 > 3 ) = P Z >
= P ( Z > 1.00 ) = 0.8413.
7

e)

Find P ( X1 + 2 X2 + 3 X3 > 240 ).

E ( X1 + 2 X2 + 3 X3 ) = 44 + 2 40 + 3 30 = 214.

9 6 8 1
1

Var ( X1 + 2 X2 + 3 X3 ) = (1 2 3) 6 25 6 2 = (21 26 32 ) 2 = 169.
8 6 12 3
3

240 214

P ( X1 + 2 X2 + 3 X3 > 240 ) = P Z >

= P ( Z > 2.00 ) = 0.0228.
13

5.

Suppose X has a multivariate normal distribution with mean

a)

2
and covariance matrix =
3

4 16 10 2
.
0 10 25 5

2 2 5 4
9

Find P ( X 1 > 8 ).

X1 ~ N ( 5, 9 )
85

P ( X1 > 8 ) = P Z >
= P ( Z > 1.00 ) = 0.1587.
3

b)

Find P ( 3 X 1 5 X 2 + 4 X 3 > 2 ).

3 1 5 2 + 4 3 = 3 5 5 2 + 4 3 = 17.

( 3 5 4 0 )

2

4 16 10 2

0 10 25 5

2 2 5 4
9

5
= ( 7 28 50 36 )

5
= 361.
4

3 X 1 5 X 2 + 4 X 3 ~ N ( 17, 361 )

2 17
P ( 3 X 1 5 X 2 + 4 X 3 > 2 ) = P Z >
= P ( Z > 1.00 ) = 0.8413.
361

c)*

Find P ( X 1 > 8 | X 2 = 5, X 3 = 8, X 4 = 3 ).

16 10 2

22 = 10 25 5
2 5 4

1
12 22

1
22

75 50 100
1
=
100
50 60
500
100 100 300

0.15 0.1 0.2

= ( 4 0 2 ) 0.1 0.12 0.2

0 .2 0 .2
0 .6

1 + 12 221 (X 2 2 ) = 5 +

11 12 221 21 = 9

0.15 0.1 0.2

= 0.1 0.12 0.2

0 .2 0 .2
0.6

= ( 1 0 .8 2 )

52

( 1 0 .8 2 ) 8 3 = 6 .
3 4

( 1 0 .8 2 ) 0 = 1 .
2

X 1 | X 2 = 5, X 3 = 8, X 4 = 3 ~ N ( 6, 1 )
86

P ( X 1 > 8 | X 2 = 5, X 3 = 8, X 4 = 3 ) = P Z >
= P ( Z > 2.00 ) = 0.0228.
1