Chapter 5 5-

Statistics for Business Analysis

Day 4
Session
- I

PROBABILITY DISTRIBUTIONS

Learning Objectives

The properties of a probability distribution

To calculate the expected value and variance of a
probability distribution

To calculate the covariance and its use in finance

To calculate probabilities from binomial and
Poisson distributions

How to use the binomial and Poisson distributions
to solve business problems

Created by: Prabhat Mittal

E-mail Id: profmittal@yahoo.co.in
 Chapter 5 5-

Introduction to Probability
Distributions

Frequency Distribution

Listing of the observed frequencies of all the outcomes
of an experiment that actually occurred when the
experiment was done.

Probability Distribution

Listing of the probabilities of all the possible
outcomes that could result if the experiment were
done.

Defining a Random Variable

A value is random if it takes different values as a
result of the outcomes of a random experiment

Or it represents a possible numerical value from an
uncertain event.

Introduction to Probability Distributions

Number of Cars Frequency of
sold per day (X) Occurance

Table 1 illustrates the number of
cars sold per day during the last 100 1
20 days. The table gives a 101 7
Frequency Distribution. Number 103 5
of cars sold daily during 20 days. 104 3

We can use this historical record 105 4

to assign a probability to each

Value of the random Probability that the
possible number of cars and find variable (X) random variable will
a Probability distribution (Table- take on this value

2). This has been accomplished 100 1/20 =.05

by normalizing the observed 101 7/20 =.35

frequency distribution. 103 5/20 =.25

104 3/20 =.15
105 4/20= .20
Total 1.00

Created by: Prabhat Mittal

E-mail Id: profmittal@yahoo.co.in
 Chapter 5 5-

Introduction to Probability Distributions

Discrete Random Variable
If a random variable is allowed to take on only a limited
number of values, which can be listed, it is a discrete random
variable.

Continuous Random Variable
If it allowed to assume any value within a given range, it is a
continuous random variable.
Random
Variables

Discrete Continuous
Random Variable Random Variable

Discrete Random Variables

Can only assume a countable number of values
Examples:

Roll a die twice

Let X be the number of times 4 comes up
(then X could be 0, 1, or 2 times)

Toss a coin 5 times.

Let X be the number of heads
(then X = 0, 1, 2, 3, 4, or 5)

Created by: Prabhat Mittal

E-mail Id: profmittal@yahoo.co.in
 Chapter 5 5-

Discrete Probability Distribution

Experiment: Toss 2 Coins. Let X = # heads.

4 possible outcomes
Probability Distribution
T T X Value Probability
0 1/4 = 0.25
T H 1 2/4 = 0.50
2 1/4 = 0.25
H T
Probability
0.50

0.25
H H
0 1 2 X

Discrete Random Variable

Summary Measures

Expected Value (or mean) of a discrete distribution
(Weighted Average) we multiply each value that the random
variable can assume by the probability of occurrence of that
value and sum these products.
N
µ = E(X) = ∑ Xi P( Xi )
i =1

X P(X)

Example: Toss 2 coins, 0 0.25

X = # of heads, 1 0.50
2 0.25
compute expected value of X:
E(X) = (0 x 0.25) + (1 x 0.50) + (2 x 0.25)
= 1.0

Created by: Prabhat Mittal

E-mail Id: profmittal@yahoo.co.in
 Chapter 5 5-

Discrete Random Variable

Summary Measures
(continued)

Variance of a discrete random variable
N
σ = ∑ [Xi − E(X)]2 P(X i )
2

i =1

Standard Deviation of a discrete random variable

N
σ = σ2 = ∑ [X − E(X)] P(X )
i =1
i
2
i

where:
E(X) = Expected value of the discrete random variable X
Xi = the ith outcome of X
P(Xi) = Probability of the ith occurrence of X

Discrete Random Variable

Summary Measures
(continued)

Example: Toss 2 coins, X = # heads,

compute standard deviation (recall E(X) = 1)

σ= ∑ [X i
− E(X)] 2
P(X i )

σ = (0 − 1)2 (0.25) + (1− 1)2 (0.50) + (2 − 1)2 (0.25) = 0.50 = 0.707

Possible number of heads

= 0, 1, or 2

Created by: Prabhat Mittal

E-mail Id: profmittal@yahoo.co.in
 Chapter 5 5-

The Covariance

The covariance measures the strength of the

linear relationship between two variables

The covariance:
N
σ XY = ∑ [ Xi − E( X)][( Yi − E( Y )] P( Xi Yi )
i=1

where: X = discrete variable X

Xi = the ith outcome of X
Y = discrete variable Y
Yi = the ith outcome of Y
P(XiYi) = probability of occurrence of the
ith outcome of X and the ith outcome of Y

Numerical Problems
Ref. # 5-9 Page No.230: The only information available to you regarding the
probability distribution of a set of outcomes is the following list of
frequencies:
X 0 15 30 45 60 75
Frequency 25 125 75 175 75 25
Construct a probability distribution for the set of outcomes.
a. Find the expected value of an outcome.
b. Compute the variance and standard deviation for the distribution.
Observati Probability Deviation Deviation
on (X) Frequency P(x) X.P(X) (x-m ean) Squared*P(X)
0 25 0.05 0.00 -36.75 67.53
15 125 0.25 3.75 -21.75 118.27
30 75 0.15 4.50 -6.75 6.83
45 175 0.35 15.75 8.25 23.82
60 75 0.15 9.00 23.25 81.08
75 25 0.05 3.75 38.25 73.15
500 1.00 36.75 370.69
Expected value Variance

Created by: Prabhat Mittal

E-mail Id: profmittal@yahoo.co.in
 Chapter 5 5-

Computing the Mean for

Investment Returns
Return per $1,000 for two types of investments

Investment
P(XiYi) Economic condition Passive Fund X Aggressive Fund Y
0.2 Recession - $ 25 - $200
0.5 Stable Economy + 50 + 60
0.3 Expanding Economy + 100 + 350

E(X) = µX = (-25)(0.2) +(50)(0.5) + (100)(0.3) = 50

E(Y) = µY = (-200)(0.2) +(60)(0.5) + (350)(0.3) = 95

Computing the Standard Deviation

for Investment Returns
Investment
P(XiYi) Economic condition Passive Fund X Aggressive Fund Y
0.2 Recession - $ 25 - $200
0.5 Stable Economy + 50 + 60
0.3 Expanding Economy + 100 + 350

σ X = (-25 − 50)2 (0.2) + (50 − 50)2 (0.5) + (100 − 50)2 (0.3)

= 43.30

σ Y = (-200 − 95)2 (0.2) + (60 − 95)2 (0.5) + (350 − 95)2 (0.3)

= 193.71

Created by: Prabhat Mittal

E-mail Id: profmittal@yahoo.co.in
 Chapter 5 5-

Computing the Covariance

for Investment Returns
Investment
P(XiYi) Economic condition Passive Fund X Aggressive Fund Y
0.2 Recession - $ 25 - $200
0.5 Stable Economy + 50 + 60
0.3 Expanding Economy + 100 + 350

σ XY = (-25 − 50)(-200 − 95)(0.2) + (50 − 50)(60 − 95)(0.5)

+ (100 − 50)(350 − 95)(0.3)
= 8250

Interpreting the Results for

Investment Returns

The aggressive fund has a higher expected
return, but much more risk

µY = 95 > µX = 50
but
σY = 193.71 > σX = 43.30

The Covariance of 8250 indicates that the two

investments are positively related and will vary
in the same direction

Created by: Prabhat Mittal

E-mail Id: profmittal@yahoo.co.in
 Chapter 5 5-

The Sum of
Two Random Variables

Expected Value of the sum of two random variables:

E(X + Y) = E( X) + E( Y )

Variance of the sum of two random variables:

Var(X + Y) = σ 2X + Y = σ 2X + σ 2Y + 2σ XY

Standard deviation of the sum of two random variables:

σ X + Y = σ 2X + Y

Portfolio Expected Return

and Portfolio Risk

Portfolio expected return (weighted average

return):
E(P) = w E( X) + (1 − w ) E( Y )

Portfolio risk (weighted variability)

σ P = w 2σ 2X + (1 − w )2 σ 2Y + 2w(1 - w)σ XY

Where w = portion of portfolio value in asset X

(1 - w) = portion of portfolio value in asset Y

Created by: Prabhat Mittal

E-mail Id: profmittal@yahoo.co.in
 Chapter 5 5-

Portfolio Example
Investment X: µX = 50 σX = 43.30
Investment Y: µY = 95 σY = 193.21
σXY = 8250

Suppose 40% of the portfolio is in Investment X and

60% is in Investment Y:
E(P) = 0.4 (50) + (0.6) (95) = 77

σ P = (0.4) 2 (43.30) 2 + (0.6) 2 (193.71) 2 + 2(0.4)(0.6 )(8250)

= 133.30

The portfolio return and portfolio variability are between the values
for investments X and Y considered individually

Statistics for Business Analysis

Day 4
Session
- II

PROBABILITY DISTRIBUTIONS

Created by: Prabhat Mittal

E-mail Id: profmittal@yahoo.co.in
 Chapter 5 5-

Probability Distributions

Probability
Distributions

Discrete Continuous
Probability Probability
Distributions Distributions

Binomial Normal

Poisson Uniform

Hypergeometric Exponential

The Binomial Distribution

Probability
Distributions

Discrete
Probability
Distributions

Binomial

Poisson

Hypergeometric

Created by: Prabhat Mittal

E-mail Id: profmittal@yahoo.co.in
 Chapter 5 5-

Binomial Probability Distribution

A fixed number of observations, n

e.g., 15 tosses of a coin; ten light bulbs taken from a warehouse

Two mutually exclusive and collectively exhaustive
categories

e.g., head or tail in each toss of a coin; defective or not defective
light bulb

Generally called “success” and “failure”

Probability of success is p, probability of failure is 1 – p

Constant probability for each observation

e.g., Probability of getting a tail is the same each time we toss
the coin

Observations are independent

The outcome of one observation does not affect the outcome of
the other

Applications of Binomial Distribution

A manufacturing plant labels items as either

defective or acceptable

A firm bidding for contracts will either get a
contract or not

A marketing research firm receives survey
responses of “yes I will buy” or “no I will not”

New job applicants either accept the offer or
reject it

Created by: Prabhat Mittal

E-mail Id: profmittal@yahoo.co.in
 Chapter 5 5-

Rule of Combinations

The number of combinations of selecting X

objects out of n objects is

n!
n Cx =
X!(n − X)!
where:
n! =(n)(n - 1)(n - 2) . . . (2)(1)
X! = (X)(X - 1)(X - 2) . . . (2)(1)
0! = 1 (by definition)

Binomial Distribution Formula

Define a random variable
X ~ BIN (n,p)

n! X −X
P(X) = p (1-p)n
X ! (n − X)!

P(X) = probability of X successes in n trials,

with probability of success p on each trial Example: Flip a coin four
times, let x = # heads:
X = number of ‘successes’ in sample,
n=4
(X = 0, 1, 2, ..., n)
p = 0.5
n = sample size (number of trials
or observations) 1 - p = (1 - 0.5) = 0.5
p = probability of “success” X = 0, 1, 2, 3, 4

Created by: Prabhat Mittal

E-mail Id: profmittal@yahoo.co.in
 Chapter 5 5-

Example:
Calculating a Binomial Probability
What is the probability of one success in five
observations if the probability of success is .1?
X = 1, n = 5, and p = 0.1

n!
P(X = 1) = p X (1− p)n− X
X!(n − X)!
5!
= (0.1)1(1− 0.1)5−1
1! (5 − 1)!
= (5)(0.1)(0.9) 4
= 0.32805

Binomial Distribution
Characteristics

Mean
µ = E(x) = np

Variance and Standard Deviation

σ 2 = np(1 - p)
σ = np(1 - p)
Where n = sample size
p = probability of success
(1 – p) = probability of failure

Created by: Prabhat Mittal

E-mail Id: profmittal@yahoo.co.in
 Chapter 5 5-

Binomial Distribution

The shape of the binomial distribution depends on the
values of p and n
Mean P(X) n = 5 p = 0.1
.6

Here, n = 5 and p = 0.1 .4
.2
0 X
0 1 2 3 4 5

P(X) n = 5 p = 0.5

Here, n = 5 and p = 0.5 .6
.4
.2
0 X
0 1 2 3 4 5

Binomial Characteristics
Examples
µ = np = (5)(0.1) = 0.5
Mean P(X) n = 5 p = 0.1
.6
.4
σ = np(1- p) = (5)(0.1)(1− 0.1) .2
= 0.6708 0 X
0 1 2 3 4 5

µ = np = (5)(0.5) = 2.5 P(X) n = 5 p = 0.5

.6
.4
σ = np(1- p) = (5)(0.5)(1− 0.5) .2
= 1.118 0 X
0 1 2 3 4 5

Created by: Prabhat Mittal

E-mail Id: profmittal@yahoo.co.in
 Chapter 5 5-

Using Binomial Tables

n = 10
x … p=.20 p=.25 p=.30 p=.35 p=.40 p=.45 p=.50
0 … 0.1074 0.0563 0.0282 0.0135 0.0060 0.0025 0.0010 10
1 … 0.2684 0.1877 0.1211 0.0725 0.0403 0.0207 0.0098 9
2 … 0.3020 0.2816 0.2335 0.1757 0.1209 0.0763 0.0439 8
3 … 0.2013 0.2503 0.2668 0.2522 0.2150 0.1665 0.1172 7
4 … 0.0881 0.1460 0.2001 0.2377 0.2508 0.2384 0.2051 6
5 … 0.0264 0.0584 0.1029 0.1536 0.2007 0.2340 0.2461 5
6 … 0.0055 0.0162 0.0368 0.0689 0.1115 0.1596 0.2051 4
7 … 0.0008 0.0031 0.0090 0.0212 0.0425 0.0746 0.1172 3
8 … 0.0001 0.0004 0.0014 0.0043 0.0106 0.0229 0.0439 2
9 … 0.0000 0.0000 0.0001 0.0005 0.0016 0.0042 0.0098 1
10 … 0.0000 0.0000 0.0000 0.0000 0.0001 0.0003 0.0010 0
… p=.80 p=.75 p=.70 p=.65 p=.60 p=.55 p=.50 x

Examples:
n = 10, p = 0.35, x = 3: P(x = 3|n =10, p = 0.35) = 0.2522
n = 10, p = 0.75, x = 2: P(x = 2|n =10, p = 0.75) = 0.0004

Some more facts about Binomial

When n is constant, notice the changes due to changes in p,
probability of success.
1. when p is small (0.1), the binomial distribution is skewed to the
right.
2. As p increases (to 0.3), the skewness is less noticeable.
3. When p = 0.5, the binomial dist. Is symmetrical.
4. When p is larger than 0.5, the distribution is skewed to the left.
5. When p =0.7, the probabilities are the same as for p=0.3 except
that the values are reversed.

Let us examine when p stays constant but n is increased.

1. As n increases, the vertical lines not only become more numerous
but also tend to bunch up together to form a bell shape.
Note:
Look at the Excel worksheet

Created by: Prabhat Mittal

E-mail Id: profmittal@yahoo.co.in
 Chapter 5 5-

Numerical Problems
Ref. # 5-18 Page No.247: For a Binomial distribution with
n = 7 and p = 0.2, find
a. P(X=5)
b. P(X>2)
c. P(X<8)
d. P(X≥4)
Ans.
• .0043
• .1480
• 1
• .0333

Numerical Problems
Ref. # 5-22 Page No.248: Harley Davidson, director of quality control
for the Kyoto Motor company is conducting his monthly spot check of
automatic transmissions. In that procedure, 10 transmissions are
removed from the pool of components and are checked for
manufacturing defects. Historically, only 2% of the transmissions have
such flaws. (Assume that flaws occur independently in different
transmissions)
a. What is the probability that Harley’s sample contains more than two
transmissions with manufacturing flaws?
b. What is the probability that none of the selected transmissions has
manufacturing flaws.
Ans.
a. .0009
b. .8171

Created by: Prabhat Mittal

E-mail Id: profmittal@yahoo.co.in
 Chapter 5 5-

Numerical Problems
Ref. # 5-25 Page No.248: A recent study of how Indians spend their
leisure time surveyed workers employed more than 5 years. They
determined the probability an employee has 2 weeks of vacation
time to be 0.45, 1 week of vacation time to be 0.10, and 3 or more
weeks to be 0.20. Suppose 20 workers are selected at random.
what is the probability that;
a. 8 have 2 weeks of vacation time?
b. Only one worker has 1 week of vacation time?
c. At most 2 of the workers have 3 or more weeks of vacation time?
d. At least 2 workers have 1 week of vacation time?
Ans.
a. 0.1623
b. 0.2702
c. 0.2061
d. 0.6083

Numerical Problems
Ref. # 5-26 Page No.248: Harry Ohme is in charge of the electronics
section of a large department store. He has noticed that the
probability that a customer who is just browsing will buy something is
0.3. Suppose that 15 customers browse in the electronics section
each hour. What is the probability that;
a. At least one browsing customer will buy something during a specified
hour?
b. At least four browsing customers will buy something during a
specified hour?
c. No browsing customers will buy anything during a specified hour?
d. No more than four browsing customers will buy something during a
specified hour?
Ans.
a. 0.9953
b. 0.7031
c. 0.0047
d. 0.5155

Created by: Prabhat Mittal

E-mail Id: profmittal@yahoo.co.in
 Chapter 5 5-

The Poisson Distribution

Probability
Distributions

Discrete
Probability
Distributions

Binomial

Poisson

Hypergeometric

The Poisson Distribution

Apply the Poisson Distribution when:

You wish to count the number of times an event occurs in a given
area of opportunity

Distribution of telephone calls going through a switchboard system.

The demand (needs) of patients for service at a health institution.

The arrivals of trucks and cars at a tollbooth.
The above examples all have common element that they can be
described by a discrete random variable that takes on integer
values 0,1,2,3,4…

The number of events that occur in one area of opportunity is
independent of the number of events that occur in the other areas
of opportunity

The average number of events per unit is λ (lambda)

Created by: Prabhat Mittal

E-mail Id: profmittal@yahoo.co.in
 Chapter 5 5-

Poisson Distribution Formula

e − λ λx
P( X) =
X!
where:
X = number of events in an area of opportunity
λ = expected number of events
e = base of the natural logarithm system (2.71828...)

Poisson Distribution
Characteristics

Mean
µ=λ

Variance and Standard Deviation

σ2 = λ
σ= λ
where λ = expected number of events

Created by: Prabhat Mittal

E-mail Id: profmittal@yahoo.co.in
 Chapter 5 5-

Using Poisson Tables

λ

X 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90

0 0.9048 0.8187 0.7408 0.6703 0.6065 0.5488 0.4966 0.4493 0.4066

1 0.0905 0.1637 0.2222 0.2681 0.3033 0.3293 0.3476 0.3595 0.3659
2 0.0045 0.0164 0.0333 0.0536 0.0758 0.0988 0.1217 0.1438 0.1647
3 0.0002 0.0011 0.0033 0.0072 0.0126 0.0198 0.0284 0.0383 0.0494
4 0.0000 0.0001 0.0003 0.0007 0.0016 0.0030 0.0050 0.0077 0.0111
5 0.0000 0.0000 0.0000 0.0001 0.0002 0.0004 0.0007 0.0012 0.0020
6 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0001 0.0002 0.0003
7 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

Example: Find P(X = 2) if λ = 0.50

e − λ λ X e −0.50 (0.50)2
P(X = 2) = = = 0.0758
X! 2!

Graph of Poisson Probabilities

0.70

Graphically: 0.60

λ = 0.50 0.50

λ= 0.40
P(x)

X 0.50
0.30
0 0.6065
0.20
1 0.3033
2 0.0758 0.10

3 0.0126 0.00
0 1 2 3 4 5 6 7
4 0.0016
5 0.0002 x
6 0.0000
P(X = 2) = 0.0758
7 0.0000

Created by: Prabhat Mittal

E-mail Id: profmittal@yahoo.co.in
 Chapter 5 5-

Poisson Distribution Shape

The shape of the Poisson Distribution

depends on the parameter λ :

0.70
λ = 0.50 0.25
λ = 3.00
0.60
0.20
0.50

0.15
0.40

P(x)
P(x)

0.30 0.10

0.20
0.05
0.10

0.00 0.00
0 1 2 3 4 5 6 7 1 2 3 4 5 6 7 8 9 10 11 12

x x

Numerical Problems
Ref. # 5-28 Page No.255: If the prices of new cars
increase an average of four times every 3 years, find the
probability of
a. No price hikes in a randomly selected period of 3 years.
P(X=0)
b. Two price hikes P(X=2)
c. Four price hikes P(X=4)
d. Five or more P(X≥5)
Ans.
• .0183
• .1465
• .1954
• .3711

Created by: Prabhat Mittal

E-mail Id: profmittal@yahoo.co.in
 Chapter 5 5-

Numerical Problems
Ref. # 5-32 Page No.256: Guy Ford, production supervisor for
the Winstead company’s Charlottesville plant, is worried about
an elderly employee’s ability to keep up the minimum work
pace. In addition to the normal daily breaks, this employee
stops for short rest periods an average of 4.1 times per hour.
The rest period is a fairly consistent 3 minutes each time. Ford
has decided that if the probability of the employee resting for 12
minutes (not including normal breaks) or more per hour is
greater than 0.5, he will move the employee to a different job.
Should he do so?
Ans.
• Yes, the probability of resting at least 12 minutes is 0.5859

Numerical Problems
Ref. # 5-34 Page No.256: Southwestern Electronics has developed a
new calculator that performs a series of functions not yet performed
by any other calculator. The marketing department is planning to
demonstrate this calculator to a group of potential customers, but it is
worried about some initial problems, which have resulted in 4 percent
of new calculators developing mathematical inconsistencies. The
marketing VP is planning on randomly selecting a group of
calculators for this demonstration and is worried about the chances of
selecting a calculator that could start malfunctioning. He believes that
whether or not a calculator malfunctions is Bernoulli process, and he
is convinced that the probability of a malfunctions really about 0.04.
a. Assuming that the VP selects exactly 50 calculators to use in the
demonstration, and using the Poisson distribution as an
approximation of the binomial, what is the chance of getting at least
three calculators that malfunction?
b. No calculators malfunctioning?
Ans.
a. 0.3233
b. 0.1353

Created by: Prabhat Mittal

E-mail Id: profmittal@yahoo.co.in
 Chapter 5 5-

Numerical Problems
Ref. # 5-36 Page No.256: The U.S. Bureau of printing and engraving
is responsible for printing this country’s paper money. The BPE has
an impressively small frequency of printing errors; only 0.5 percent of
all bills are too flawed for circulation. What is the probability that out
of a batch of 1000 bills;
a. None are too flawed for circulation?
b. Ten are too flawed for circulation?
c. Fifteen are too flawed for circulation?

Ans.
a. 0.00674
b. 0.01813
c. 0.00016

Poisson Distribution as an Approximation of

the Binomial Distribution

e − np ( np) x
P( X ) =
X!
Poisson Distribution can be a reasonable approximation of the
Binomial, but only under certain conditions. These conditions
occur when n is large and p is small, that is when
The number of trials is large (n ≥ 20)and
The binomial probability of success is small (p < 0.05).

with above conditions the mean of Poisson can be substituted by

mean of binomial i.e. np

Created by: Prabhat Mittal

E-mail Id: profmittal@yahoo.co.in
 Chapter 5 5-

The Hypergeometric Distribution

Probability
Distributions

Discrete
Probability
Distributions

Binomial

Poisson

Hypergeometric

The Hypergeometric Distribution

“n” trials in a sample taken from a finite

population of size N

Sample taken without replacement

Outcomes of trials are dependent

Concerned with finding the probability of “X”
successes in the sample where there are “A”
successes in the population

Created by: Prabhat Mittal

E-mail Id: profmittal@yahoo.co.in
 Chapter 5 5-

Hypergeometric Distribution
Formula

 A  N − A 
  
[ A C X ][N− A Cn− X ]  X  n − X 
P(X) = =
N Cn  N
 
n 
 
Where
N = population size
A = number of successes in the population
N – A = number of failures in the population
n = sample size
X = number of successes in the sample
n – X = number of failures in the sample

Properties of the
Hypergeometric Distribution

The mean of the hypergeometric distribution is
nA
µ = E(x) =
N

The standard deviation is
nA(N - A) N - n
σ= ⋅
N2 N -1

N-n
Where is called the “Finite Population Correction Factor”
N -1
from sampling without replacement from a
finite population

Created by: Prabhat Mittal

E-mail Id: profmittal@yahoo.co.in
 Chapter 5 5-

Using the
Hypergeometric Distribution
■ Example: 3 different computers are checked from 10 in
the department. 4 of the 10 computers have illegal
software loaded. What is the probability that 2 of the 3
selected computers have illegal software loaded?
N = 10 n=3
A=4 X=2

 A  N − A   4  6 
     
 X  n − X   2 1  (6)(6)
P(X = 2) =    =    = = 0.3
 N 10  120
   
n  3 
   
The probability that 2 of the 3 selected computers have illegal
software loaded is 0.30, or 30%.

Created by: Prabhat Mittal

E-mail Id: profmittal@yahoo.co.in