Q1.

TU-Ride is a new bike start up by Mr Haloi and Mr Partha that provides motor bikes and bi-cycles to students and
all the employees at Tezpur University on an hourly rent basis. They maintain a total stock of 100 bikes comprising of
70 bi-cycles and 30 motor bikes. On the busiest days, they expect a total of 100 customers to rent their bikes.
Historically it is known that 30% of their customers rent a motor bike and the rest 70% rent bi-cycles.

(i) Find the probability that they will run out of motor bike rents on a specific day.

(ii) Calculate the above probability if they maintain a stock of 35 motor bikes instead of 30 out of a total of 100 bikes.
What can you infer from this probability?

Solution:

(i) Here we are given that probability of success i.e. a customer renting a motor bike is, p = 30% = 0.3
and probability of failure i.e. a customer renting a bi-cycle is, q = 70% = 0.7

Also, the total number of trials, n = 10 and ‘r’ is the number of customers renting a motor-bike.

Therefore, the probability that they will run out of motor bike rentals on a specific day can be given by
n

P(X>30) = ∑ ( nr ) pr . q n−r
r=31

100
¿ ∑ 100 0.3r . 0.7100−r
r=31 r ( )
= 0.4508 ≈ 45%
Therefore the probability that they will run out bike rentals on a specific day is 45% which is very high.

(ii) When they increase the stock of bike in their rental shop to 35 units, the new probability can be given as
follows
n

P(X>35) = ∑ (nr ) p r .q n−r

r=36

100
¿ ∑ 100 0.3 r . 0.7 100−r
r=36 r ( )
= 0.116 ≈ 12%

Therefore when they increase their inventory of motor bikes by 5 units, their probability of running out
of motor bike rentals reduces to approximately 12%.

This number is statistically significant, and indicates that we should increase our stock. Here, simply
increasing our stock of motor bikes to 35 results in a much lower chance of running out of rentals.
Q2. Tuna logistics limited is a transport and delivery service provider for various e-commerce giants in the country.
On an average the delivery agents misplaces 7 consignments per 1000 deliveries. The consignments are divided into
lots of 100. What is the probability that it misplaces 3 consignments in a lot? If it handles 1,00,000 deliveries every
day, calculate the total number of misplaced consignments.

Solution:

7
Here, we are given the probability of misplacing a consignment as p =
1000
Lot size of a delivery n = 100, x = 3
And total consignments handled in a day is N = 1,00,000
7
Therefore mean m = n.p = 100 x = 0.7
1000
Therefore, by Poisson distribution, probability of misplacing 4 deliveries in a lot of consignment is

e−m .m x
P(X=4) =
x!

e−0.7 .0.7 3
=
3!
= 0.028 ≈ 3%.

Total number of consignments misplaced on a particular day can be given as N.P(X=4)

= 1,00,000 x 0.028
= 2,800
Therefore the company misplaces approximately 2,800 consignments daily based on the given data.
Q3. LIC limited sets an average daily sales target of 8 for sale of its health insurance plans.. What is the probability
that it can sell 12 health insurances on any particular day? What happens to this probability if the target is set at 10
health insurances per day?

Solution:

Here, we are given the average daily sales target, m = 8 and

x = no. of sale of insurance plans whose probability we are to calculate.

Therefore, by Poisson distribution, probability of selling 12 insurance plans on any particular day is

e−m .m x
P(X=12) =
x!

e−8 . 812
=
12!
= 0.048 ≈ 5%.

Therefore the probability that LIC ltd will be able to sell 12 insurance plans to its customers when it sets a
target of selling 8 insurance plans daily on an average is approximately equal to 5%.

When the average daily sales target is revised to 10, the probability of selling 12 insurance plans on any
day can be given as
P(X=12)

e−m .m x
=
x!

e−10 . 812
=
12 !
= 0.094 ≈ 9%.

Therefore the probability that LIC ltd will be able to sell 12 insurance plans to its customers when it revises
its average daily sales target to 10 is approximately equal to 9%.

Q4. KIDZEN Company produces electric toys. The company has a huge market share in comparison to other toy
manufacturing companies. On a certain date, it was found that there arise certain problems in the manufacturing
department. As a result, few electric toys which were supplied to retailers were found to be defective. This resulted
in dissatisfaction among consumers and thus led to decrease in market share. The company then decided to call back
the toys from retailer. The probability that an electric toy is defective is 0.01. What is the probability that a shipment
of 400 toys in a certain retailer shop will contain exactly 5 defectives?

Solution:

Here, Poisson distribution is applicable

The random variable is the number of defective toys with mean

m = np

m = 400 × 0.01 = 4

The required probability is given by

-4
P (r = 400) = e .45/5!
= 0.0183 × 1024 /120

= 0.1562

Therefore, the probability that a shipment of 400 toys in a certain retailer shop will contain exactly 5 defectives
is 0.1562.

Q5. In a certain region, AU life insurance is one of the most trusted brand when it comes to life insurance. During an
audit, the Chairperson of AU Life assigned a task to the Manager regarding the number of male insurance owners.
The manager of the insurance company goes through the data of insurance policies sold by insurance salesmen
working under him. He found out that 80% of the people who purchase motor insurance are men. He wanted to find
out that if 10 motor insurance owners are randomly selected, what would be the probability that exactly 6 of them
are men.

Solution:

No of success in trials (x) = 6

No of independent trials (n) = 10

Probability of success (p) = 0.8

Now,
10
P(x=5) = C6 (0.8)6
(1-0.8)10-6

= 210 × 0.2621 × (0.2)4

= 210 × 0.2621 × 0.0016

= 0.088

Therefore, the probability that exactly 6 of 10 random selected motor insurance owners are men is 0.088.

Q6. Autumn Valley is a new start-up producing a certain bakery product. After a few months, the start-up did not run
well. This was mainly due to inefficiency of machines and workers as well. The manager after analysis for a certain
period found out that 30% of the items produced have no defect, 40% have one defect and 30% have two defects. A
random sample of 10 items is taken from a day’s output. Find the probability that it will contain 2 items with no
defect, 3 items with one defect, and 3 items with two defects.

Solution:

No of independent trials (n) = 8,

p1 = 0.30, p2 = 0.40, p3 = 0.30;

x1= 2; x2= 3; x3=3

Since it has more than two outcomes, it is a multinomial distribution.

Now,

10 !
P (x1=2; x2=3; x3=3) = (0.40)3 (0.30)3(0.30)3
2! .3 ! .3 !

= 50400 × 0.09 × 0.064 × 0.027

= 7.84

Therefore, the probability that it will contain 2 items with no defect, 3 items with one defect and 3 items with
two defects is 7.84.

Q7. State Bank of India has been operating in India for over 10 years. However, with the coming in of other
banks SBI started losing customers. They decided to give out loans to attract its customers. Assuming that
the chance of the customers taking up loan is 1/2 and 10 loans will be offered to the customers every
month. Find the probability that exactly 3 customers will take the loan.
Solution:
The probability that exactly 3 will take the loan

P(X=x) = ( nC x ⋅ px ⋅q n−x )
Given P(x=3)
n = 10
p=½
q=1–p=1–½=½
Therefore:

1 3 10−3
1
 10 c 3 ⋅
2()()
⋅
2
1 3 7
1
 10 c 3 ⋅
2()()
⋅
2
 0.1171875
 0.12
 12%
The probability that exactly 3 customers will take the loan is 12%.

Q8. Mr Swapnil opened a grocery store in his neighbourhood. In the first month customers never showed
up and he did not make any sales. In the next month when customers started coming in, it was seen that
the average number of customers that came into the grocery store in a day per hour per hour was 2. Find
the probability that during every hour:
(i) Exactly 3 customers will arrive
(ii) Not more than 2 customers will arrive.

Solution:

−μ x
(i) P (X = x) = e .µ
x!
Given: x = 3
µ=2
3
 P(x = 3) = e .2
−2

3!
= 0.1353 * 8
6
= 0.1804

= 18%
Therefore the probability that exactly 3 customers will arrive is 18%.

−μ x
(ii) P (X = x) = e .µ
x!

Given: x ≤ 2
µ=2
 P(x ≤ 2 ) = P(x = 0) + P(x = 1) + P(x = 2)

ⅇ−2 ⋅20 ⅇ−2 ⋅21 ⅇ−2 ⋅22

= ( 0! )(
+
1!
+ )(
2! )
= ⅇ−2 [ 1+2+2 ]
= 0.6768

≈ 68%
Therefore the probability that not more than 2 customers will show up is 68%.

Q9. Mr Sushanta wanted to start an investment firm for investing in equity shares. He was not certain if he
would make profit. If the probability of him picking a profitable equity stock is 80%. Find the probability
that exactly 7 out of his 10 stocks that he invests will earn a profit for him.
Solution:

P (X = x) = nCx ⋅ p x ⋅ q n−x

Given: n = 10
x=7
p = 80% = 0.80
q = 1- p = 1 – 0.80 = 0.20
7 10−7
= 10 C7 ⋅ 0.80 ⋅0.20

= 10 C7 ⋅ 0.807 ⋅ 0.203
= 0.2013
= 0.20
= 20%

Therefore the probability that 7 out of his 10 stock picks earning him a profit is approximately equal to 20%.

Q10. Rajesh Traders, a manufacturer of wooden beds finds that on an average, 2% of their beds are rejected because
of their low wood quality and durability. What is the probability that an order of 10 beds will contain.

(a) At least 2 rejects

Solution:

Let X be the number of rejected beds

Given, n=10

p=0.02

q=0.98

For X=0
n x n− x
P(X) = C x p q

= C 10 0
0 . 0.02 . 0.98
10

= 0.81

For X=1

P(X) = c 10 1 9
1 . 0. 0 2 . 0.9 8

=0.16

Probability of at least 2 rejects

=1-p (X≤1)

=1-{p ( x 0) +p ( x 1)}
=1-(0.81+0.16)

=.03

Therefore the probability that at least 2 beds in and order of 10 beds being rejected is 0.03, i.e. approximately equal
to 3%.

Q11. Hyundai Motor Company makes electric cars. The probability of an electric car being defective is 0.02. What
probability that a consignment of 200 electric cars will contain exactly 8 defective cars.

Solution:

The average number of cars defective in 200 cars is µ = 0.02x200 = 4

Given, n=200

x=8

p=0.02

q=0.98

m= n.p

=200(2/100)

=4

P(X) = e−m . m x

x!
= e−4 . 4 8

8!
= 0.03

Therefore, in consignment of 200 electric vehicles produced by Hyundai Motor Company, the probability that 8 will
be defective is 0.03, i.e. approximately equal to 3%

Q12. Greenwood Ply examined their plywood for surface flaws. The frequency of the number of plywood with a
given number of surface flaws per plywood was as follows:

Number of flaws Frequency

0 2
 1 1

2 3
3 2

4 2

What is the probability of finding plywood chosen at random which contains 2 or more surface flaws?

Solution:

Total number of plywood = 2+1+3+2+2 = 10

Total number of flaws is given by:

= (0x2) + (1x1) + (2x3) + (3x2) + (4x2)

= 21

So, the average number of flaws for the 10 plywood is given by µ = 21/10

= 2.1

The required probability is

Probability = p (x≥3)

= 1 – { p ( x 0) + p ( x 1) + p (x2) }

e−2.1 X 2.11 e−2.1 X 2.12

=1– ¿ + + ¿
1! 2!
= 1 – {0.12+0.25+0.27}

= 0.36

Therefore the probability that a random plywood chosen at random to contain 2 or more surface flaws is 0.36, i.e.
approximately equal to 36%.

Q13. A fruit vendor assures that 96% of the oranges in his stock are fresh. If he sells those oranges in boxes
of 15 each to a caterer and guarantees that not more than two oranges will be rotten, what are the
chances that a box will fail to meet the quality assured?
Solution :

Given,

n = 15
Probability that the oranges are rotten, p = 100 - 96 = 4% = 0.04
( very small )
Mean, m = np
= 15 × 0.04
= 0.6
Using Poisson's Distribution,
the probability that not more that two oranges are rotten in a box is

2 −m x
e .m
= ∑ x!
x=0

2
e−0.6 X 0. 6 x
= ∑ x!
x=0

= 0.976 ≈ 98%

Therefore, the probability that the box will fail to meet the quality assured is

2
e−m . mx
=1-∑
x=0 x!

≈2%

Therefore there is a 2% chance that a box of oranges delivered will not meet the quality assured.

Q14. In a factory producing nuts and bolts, the mean number of defective pieces produced by a machine in
a sample of 20 is 2. Out of 1000 such samples, how many would be expected to contain atleast three
defective parts.
Solution:

Given,

Mean no. of defectives, m = n.p = 2

n = 20

2
p= = 0.1
20

q = 1 - p = 1 - 0.1 = 0.9

Probability of at least three defective parts is

P ( X ≥3 ) = P ( X = 3 ) + P ( X = 4 ) + .................... + P ( X = 20 )

= 1-[P(X=0)+P(X=1)+P(X=2)]

= 1 - [(20C0 . 0.10. 0.9 20) + (20C1. 0.11. 0.9 19) + (20C0 . 0.10. 0.9 20 )

= 0.323

Hence the no of samples having at least three defectives out of 1000 samples

= 1000 × 0.323

= 323

Therefore in a batch size of 1000, 323 of them will have at least 3 defectives.

Q15. Miss Ruth owns a book store at Tezpur town that sells science fiction novels by authors from all
around the world. From a survey it is found that 65% of the book readers at Tezpur enjoy reading science
fiction. From a sample of 15 such books, what are the chances that
 (i) exactly 11 such books will be sold.
(ii) at least 5 science fiction novels are sold.

Solution :

Given,

n = 15,
p = 0.65,
q = ( 1 - p ) = ( 1 - 0.65 ) = 0.35

(i) for P ( X = 11 ) = nCx . p x . q n-x

15
= C11 . 0.65 11 . 0.35 4

= 0.1792 = 17. 92 %

Therefore, the probability of exactly 11 science fiction novels being sold is 17.92 %.

(ii) for P( X ≥ 5 )
= P(X=5) + P(X=6) + P(X=7) + P(X=8) + P(X=9) + P(X=10) + (X=11) + P(X=12) + P(X=13) + P(X=14) +
P(X=15)
=1-[P(X=0)+P(X=1)+P(X=2)+P(X=3) +P(X=4)]

= 0.9972 = 99.72 %

Therefore the probability that at least 5 science fiction novels being sold is 99.72 %.

QUANTITATIVE TECHNIQUES ASSIGNMENT

SUBMITTED TO

Dr. ARUP ROY

 ASSOCIATE PROFESSOR

DEPARTMENT OF BUSINESS ADMINISTRATION

TEZPUR UNIVERSITY

NAPAAM, SONITPUR, ASSAM-784028

TOPIC: PROBABILITY DISTRIBUTION AND ITS APPLICATION IN BUSINESS

SUBMITTED BY

TANIA CHOUDHURY (BAM19006)

SUSHANTA KRISHNA BHUYAN (BAM19017)

SWAPNIL DAS (BAM19029)

NABAJIT MALAKAR (BAM19038)

RUTH THAUZENI (BAM19054)