Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Provide an appropriate response.
Which of the following describes the possible values of a Poisson random variable, X?
All counting numbers (1, 2, 3, 4, …)
All counting numbers up to twice the mean of X (1, 2, 3, 4, …, 2)
SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.
Identify each of the variables in the Binomial Probability Formula.
P(x) =n!
(n – x)!x! ·px·(1–p)n–x
Also, explain what the fraction n!
(n – x)!x! computes.
A person is trying to decide which of two possible mutual funds to invest his money in. Let
the random variable X represent the annual return for mutual fund A and let the random
variable Y represent the annual return for fund B. It is known that the mean, µ, of X is
10.3% and the standard deviation, , of X is 4.2%. It is also known that the mean, µ, of Y is
11.3% and the standard deviation, , of Y is 7.2%. Which fund do you think the person
would prefer if he is a short–term investor? Which fund do you think he would prefer if he
is a long–term investor? Explain your thinking.
Suppose that the random variable X has a binomial distribution and that the success
probability, p, is greater than 0.5. Is the probability distribution of X right skewed, left
skewed, or symmetric? Explain your thinking.