Work Sheet

Bayes’ Theorem
Date: 2-4-2020

Submission: 6-4-2020

Question: 1 Incidence of a rare disease. In the book’s Introduction, we presented the following

example as a common misunderstanding of probability in everyday life. Only 1 in 1000 adults is

afflicted with a rare disease for which a diagnostic test has been developed. The test is such that

when an individual actually has the disease, a positive result will occur 99% of the time, whereas

an individual without the disease will show a positive test result only 2% of the time. If a randomly

selected individual is tested and the result is positive, what is the probability that the individual

has the disease?

Question: 2 A professional organization (for statisticians, of course) sells term life insurance

and major medical insurance. Of those who have just life insurance, 70% will renew next year,

and 80% of those with only a major medical policy will renew next year. However, 90% of

policyholders who have both types of policy will renew at least one of them next year. Of the

policy holders, 75% have term life insurance, 45% have major medical, and 20% have both. If a

randomly selected policy holder does in fact renew next year, what is the probability that he or she

has both life and major medical insurance?

Question: 3 A large operator of timeshare complexes requires anyone interested in making a

purchase to first visit the site of interest. Historical data indicates that 20% of all potential
purchasers select a day visit, 50% choose a one-night visit, and 30% opt for a two-night visit. In
addition, 10% of day visitors ultimately make a purchase, 30% of night visitors buy a unit, and
20% of those visiting for two nights decide to buy. Suppose a visitor is randomly selected and
found to have bought a timeshare. How likely is it that this person made a day visit? A one-night
visit? A two-night visit?
Question: 4 At a certain gas station, 40% of the customers use regular gas (A1), 35% use plus
gas (A2), and 25% use premium (A3). Of those customers using regular gas, only 30% fill their
tanks (event B). Of those customers using plus, 60% fill their tanks, whereas of those using
premium, 50% fill their tanks.
a. What is the probability that the next customer will request plus gas and fill the tank (A2 U B)?
b. What is the probability that the next customer fills the tank?
c. If the next customer fills the tank, what is the probability that regular gas is requested? Plus?
Premium?