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THE UNIVERSITY OF HONG KONG DEPARTMENT OF STATISTICS AND ACTUARIAL SCIENCE

STAT1801 Probability and Statistics: Foundations of Actuarial Science Assignment 4 Due Date: November 22, 2011 (Hand in your solutions for Questions 1, 4, 12, 18, 32, 39, 45, 49) 1. Consider two components and three types of shocks. A type 1 shock causes component 1 to fail, a type 2 shock causes component 2 to fail, and a type 3 shock causes both components 1 and 2 to fail. The times until shocks 1, 2, and 3 occur are independent exponential random variables with respective rates 1 , 2 , and 3 . Let X i denote the time at which component i fails, i = 1,2 . The random variables X 1 and X 2 are said to have a joint bivariate exponential distribution.

(a) Find P( X 1 > s, X 2 > t ) for s > 0, t > 0 . (b) Use the result in part (a), or otherwise, to find the joint pdf of X 1 and X 2 . (c) Find the correlation coefficient between X 1 and X 2 . 2. Suppose the number of bad records in a used computer tape follows a Poisson process with average of 4.5 bad records in 120 feet. Let W be the number of feet checked before the fourth bad record is found. (a) (b) (c) (d) Determine the mean number of bad record per foot. How is W distributed? Find the mean and variance of W. Find P(W > 350 ) .

3. An insurance company supposes that each person has an accident parameter and that the yearly number of accidents of someone whose accident parameter is is Poisson distributed with mean . They also suppose that the parameter value of a newly insured person can be assumed to be the value of a gamma random variable with parameter and . If a newly insured person has n accidents in her first year, find the conditional pdf of her accident parameter. Also, determine the expected number of accidents that she will have in the following year. 4. For a certain type of insurance policy, it is believed that the claim size made by each particular policy holder is exponentially distributed. Due to uncertainty in the risk factors associated to different policy holders, one cannot be certain of their expected size of claims. Suppose that the uncertainty in expected claim size is modelled by assuming that the exponential parameter has a ( , ) distribution. Denote X as the claim size. Show that unconditionally, X follows a Pareto distribution with the probability density function given by for x > 0; f ( x ) = ( x + ) +1 0 otherwise.

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5. Let W be a gamma random variable with parameters (t , ) , and suppose that conditional on W = w , X 1 , X 2 ,..., X n are independent exponential random variables with rate w. Show that the conditional distribution of W given that X 1 = x1 , X 2 = x 2 , , X n = x n is gamma with
n parameters t + n, + xi . i =1

6. If Z is distributed as N (0,1) , find (a) P (0.53 < Z < 2.06 ) , (d) P (Z > 1.77 ) , (g) P ( Z < 1) , (b) P ( 0.79 Z < 1.52 ) , (e) P (Z > 2.89 ) , (c) P ( 2.63 < Z 0.51) , (f) P ( Z < 1.96 ) , (i) P ( Z < 3) .

(h) P ( Z < 2 ),

7. If X is a normal random variable with parameters = 10 and 2 = 36 , compute (a) P ( X > 5) (b) P (4 < X < 16 ) (c) P ( X < 8) (d) P ( X < 20) (e) P ( X > 16 ) 8. The length of a certain kind of item is distributed normally with mean 4.9cm and standard deviation 0.065cm. Any item whose length exceeds 5.0cm must be scrapped. Find the proportion of scraps in a large batch of such items. 9. The lengths of the sardines received by a cannery have a normal distribution with mean 11.00cm and standard deviation 0.40cm. What percentage of all these sardines are (i) shorter than 10.30cm, (ii) from 10.80cm to 11.90cm long? 10. Batteries are manufactured and supposed to be 6V in voltage but they are still acceptable if they are within the range of 5.7V to 6.3V. Suppose the voltages of batteries manufactured are normally distributed and it is observed that 1.5% of them are below 5.7V while 2.5% are above 6.3V. Find the mean and standard deviation of the voltages of the batteries. 11. Assume that Y is normally distributed with mean and standard deviation . After observing a value of Y, a mathematician constructs a rectangle with length L = Y and width
W = 6 Y . Let A denote the area of the resulting rectangle. What is E ( A) ?

12. The inside diameter of a cylindrical tube is a random variable with a mean of 25 mm and a standard deviation of 0.1 mm, the thickness of the tube is a random variable with a mean of 4 mm and a standard deviation of 0.05 mm, and the two random variables are independent. (a) Find the mean and the standard deviation of the outside diameter (X) of the tube. (b) Using the Chebyshevs inequality, find the lower bound for the probability that X is within 0.25 mm from the mean. (c) Evaluate the probability in part (b) by assuming that the inside diameter and the thickness of the tube are independently distributed as normal. 13. If Z is a standard normal random variable, show that, for every a > 0 ,
a lim P Z > x + | Z > x = e a . x x
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14. Let Z be a standard normal random variable, and for a fixed x, set Z X = 0 Show that E ( X ) = 1 2 e x
2

if Z > x otherwise

15. Suppose Z is a standard normal variable and Y = a + bZ + cZ 2 , show that

Corr (Y , Z ) = b b + 2c 2
2

16. Let P and Q be two points randomly picked from the x-y plane with coordinates ( X 1 ,Y1 ) and ( X 2 ,Y2 ) respectively, where X 1 , X 2 , Y1 , Y2 are independent standard normal random variables. (a) Let W = . What is the distribution of W? 2 (b) Let R be the distance between P and Q. Express R in terms of W. (c) Show that the pdf of R is r2 r f (r ) = exp , r > 0 . 4 2

( X 1 X 2 )2 + (Y1 Y2 )2

(d) Calculate E (R ) and Var (R ) . (e) Find the hazard rate function of R.

17. The population skewness of a random variable X is defined by

E ( X )3

).
(c) X ~ N , 2 .

Find the skewness of X if (b) X ~ ( , ) , (a) X ~ Exp( ) ,

18. Identify the distributions of the random variables with the following moment-generating functions. Please also write down the values of the parameters involved. (a) M X (t ) = (1 5t ) ,
6
8 e t 8

t <1 5

(b) M X (t ) = e (c) M X (t ) = e

, ,
t 12

<t <

3t + 4 t 2

(d) M X (t ) = (0.3 + 0.7e

<t < , <t < 4 t < log 3

(e) M X (t ) = (4e t 3) ,
3

19. Find the lower quartile, median, and upper quartile of the following distributions. N , 2 ; (c) Exp( ) . (a) U (a, b ) ; (b)

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20. Suppose X | p ~ b(n, p ) , p ~ Beta ( , ) . (a) Find the marginal pmf of X. (X is said to have a beta-binomial distribution.) (b) Find the condition distribution of p , given that X = x . 21. Let X be a random variable with pdf given by

f (x ) = Let Y = log X . Find the pdf of Y.

(1 + x )4

0< x < .

22. Let U be a random variable uniformly distributed in (0,1) . The random variable U X = a + b log 1U is said to follow the logistic distribution, where < a < and b > 0 . Find the pdf of X. 23. Let X ~ Exp(1) , and define Y to be the integer part of X + 1 . (a) Find the pmf of Y. What well-known distribution does Y have? (b) Find the conditional distribution of X 4 given Y 5 .
24. Suppose Z ~ N (0,1) . (a) Find the pdf of X = Z 2 . (b) Find the pdf of Y = Z . (c) find the pdf of W = e Z . (d) Find the mean and median of the random variable W defined in part (c). 25. Suppose X ~ 12 . Find the pdf of Y =
X.

26. A standard Cauchy random variable X has density function

f (x ) =

1 , 1+ x2

< x < .

(a) Determine E ( X ) . 1 is also a standard Cauchy random variable. (b) Show that Y = X

27. Let X be a random variable distributed as exponential with parameter . Define a new random variable Y according to the following procedure: A fair coin is tossed once. Put Y = X if a head turns up and Y = X if otherwise. Find the probability density function of Y.

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28. The random variables Y1 and Y2 are independently distributed, both with density
1 y2 f (y) = 0 Let U 1 =
Y1 and U 2 = Y1 + Y2 . Y1 + Y2

if 1 < y < . otherwise

(a) Find the joint density of U 1 and U 2 . (b) Sketch the region where f U1 ,U 2 (u1 , u 2 ) > 0 . (c) Find the marginal density of U 1 . (d) Are U 1 and U 2 independent? Why or why not? 29. Let X and Y be random variables with joint pdf 2 xe y f ( x, y ) = y 2 0

if 0 < x < y < otherwise

Let W = Y X , Z = Y + X . Find the joint pdf of W and Z. 30. Suppose X and Y have joint density function 1 f ( x, y ) = x 2 y 2 0 if x > 1, y > 1 otherwise

(a) Find the joint density function of U = XY , V = X Y . (b) Find the marginal pdfs of U and V. 31. Let X and Y be two continuous random variables having the joint pdf 24 xy f ( x, y ) = 0 if 0 < x < 1, 0 < y < 1, x + y < 1 . otherwise

Find the joint pdf of Z = X + Y and W = X . 32. Suppose X, Y, and Z are independently and identically distributed as Exp (1) . Derive the joint distribution of U = X + Y , V = X + Z , W = Y + Z . 33. Suppose X , Y ~ U (0,1) . Find the cumulative distribution function of Z = X + Y .
iid

34. If X is uniformly distributed over (0, 1) and Y is exponentially distributed with parameter = 1 , find the distribution of (a) Z = X + Y and (b) Z = X Y . Assume independence.

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35. Suppose X 1 and X 2 are independent exponential random variables with respective parameters 1 and 2 . (a) Find the distribution of Z = X 1 X 2 . (b) Compute P ( X 1 < X 2 ) . 36. When a current I (measured in amperes) flows through a resistance R (measured in ohms), the power generated is given by W = I 2 R (measured in watts). Determine the pdf of W. Suppose that I and R are independent random variables with densities 6 x (1 x ) f I (x ) = 0 if 0 < x < 1 otherwise , 2y fR (y) = 0 if 0 < y < 1 . otherwise

37. A joint life insurance policy provides insurance on a group of lives in such a way that the benefit is paid when the first death in the group occurs. Hence, if X 1 , X 2 ,..., X n are the future lifetimes of the group members, then T = min ( X 1 ,..., X n ) is the time from now when the benefit is paid. Suppose that the future lifetimes of the group members are exponentially distributed with respective parameters 1 , 2 ,K, n and suppose that future lifetimes are independent. Determine the distribution of T = min ( X 1 ,..., X n ) . 38. Show that the median of a sample of size 2n + 1 from a uniform distribution on (0,1) has a beta distribution with parameters (n + 1, n + 1) . 39. Let X ~ U (0,1) and Y be a continuous random variables distributed in (0,1) with pdf f Y ( y ) and cdf FY ( y ) . Suppose X and Y are independent. Denote I A as an indicator variable such that I A = 1 if A occurs and I A = 0 otherwise. (a) Show that, for 0 < t < 1 , t t P X | Y = y = I y t + I y <t . Y y (b) Using the result in part (a), show that the cdf of W = XY is given by 0 1t FW (t ) = FY (t ) + f Y ( y )dy t y 1 t0 0 < t < 1. t 1

(c) Using variable substitution and integral by parts for the integral in the expression of FW (t ) in part (b), show that FW (t ) can be also expressed as 0 1 t FW (t ) = t + FY dx t x 1
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(d) Derive the result in part (c) by first showing that t t P Y | X = x = FY I x t + I x<t X x (e) Find the cdf of W = XY if the cdf of Y is given by for 0 < t < 1 .

0 FY ( y ) = y 2 1 Determine the density function of W.

y0 0 < y < 1. y 1

40. Let X and Y be independent continuous random variables with respective hazard rate functions X (t ) and Y (t ) , and set W = min( X , Y ) . (a) Determine the distribution function of W in terms of those of X and Y. (b) Show that W (t ) , the hazard rate function of W , is given by

W (t ) = X (t ) + Y (t ) .
41. Suppose that A, B, C, are independent random variables, each being uniformly distributed over (0,1). (a) What is the joint cumulative distribution function of A, B, C? (b) What is the probability that all of the roots of the equation Ax 2 + Bx + C = 0 are real? 42. Let X 1 and X 2 be independent random variables with normal distributions N (16,62 ) and N (13,82 ) respectively. Compute P ( X 1 < X 2 ) . (HINT: Find the distribution of Y = X 1 X 2 and then compute P (Y < 0) = P ( X 1 < X 2 ) .) 43. Let X denote the wing length in millimetres of a male gallinule and Y the wing length in millimetres of a female gallinule. Assume that X is distributed as N (173.69,49.52 ) and Y is distributed as N (164.38,54.67 ) , and that X and Y are independent. If a male and a female gallinule are captured, what is the probability that X is greater than Y? 44. Jills howling scores are approximately normally distributed with mean 185 and standard deviation 18, while Jacks scores are approximately normally distributed with mean 178 and standard deviation 25. Suppose each of them bowls one game independently. Determine the probability that (a) Jacks score is higher; (b) The total of their scores is above 400.

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45. Let X be the maximal oxygen intake of a human on a treadmill, where the measurements are in millilitres of oxygen per minute per kilogram of weight. Assume that for a particular population X is distributed as normal with mean = 57.23 and standard deviation = 6.9 . Let X be the sample mean of a random sample of size n = 55 . Find the probability that this average maximal intake is between 57.463 and 57.761. 46. If X follows a Chi-square distribution with degrees of freedom 15, find the following. (a) P (7.26 < X < 27.49 ) . (b) Constants a and b such that P (a < X < b ) = 0.95 and P ( X < a ) = 0.025 . (c) The mean and variance of X . 47. Let X 1 , X 2 ,..., X n be random variables identically and independently distributed as r2 . What is the distribution of the sample mean X ? 48. Suppose X 11 , X 12 ,..., X 1n1 , X 21 , X 22 ,..., X 2 n2 are independent random variables, with the first
n1 constituting a random sample from a population with mean 1 and variance 12 , and the 2 other n 2 constituting a random sample from a population with mean 2 and variance 2 . Show that

(a) E ( X 1 X 2 ) = 1 2 ; (b) Var ( X 1 X 2 ) =

12
n1

2 2

n2

49. Let X and Y be two random variables distributed as bivariate normal with joint probability density function

f ( x, y ) =

x 2 2 xy + y 2 , exp 2 1 2 2 1 2 1

< x < , < y <

where 1 < < 1 . (a) Let U = X Y , V = X + Y . Find the joint probability density function of U and V. Are they independent? (b) Show that the moment generating function of W = X 2 Y 2 is
M W (t ) =

1 4 1 2 t2

1 2 1 2

<t <

1 2 1 2

(c) Find the mean and variance of W defined in part (b). (d) Suppose X and Y represent respectively the personal savings (in thousands of dollars) of Peter and Mary in a month, with = 0.5 . Negative saving means taking on debt. What is the probability that in total, they can save more than $10,000 in one year, assuming independence among their savings in different months?

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