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A plan for an executive travellers’ club has been developed by an airline on the premise that \({\rm{10\% }}\) of its current customers would qualify for membership.

a. Assuming the validity of this premise, among \({\rm{25}}\) randomly selected current customers, what is the probability that between \({\rm{2}}\) and \({\rm{6}}\) (inclusive) qualify for membership?

b. Again assuming the validity of the premise, what are the expected number of customers who qualify and the standard deviation of the number who qualify in a random sample of \({\rm{100}}\) current customers?

c. Let \({\rm{X}}\) denote the number in a random sample of \({\rm{25}}\) current customers who qualify for membership. Consider rejecting the company’s premise in favour of the claim that \({\rm{p > 10}}\) if \({\rm{x}} \ge {\rm{7}}\). What is the probability that the company’s premise is rejected when it is actually valid?

d. Refer to the decision rule introduced in part (c). What is the probability that the company’s premise is not rejected even though \({\rm{p = }}{\rm{.20}}\) (i.e., \({\rm{20\% }}\) qualify)?

Short Answer

Expert verified

(a) The probability that between\({\rm{2}}\)and\(6\)(inclusive) customers who will qualify for membership is\({\rm{0}}{\rm{.720}}\).

(b) The expected number of customers who qualify and the standard deviation of the number who qualify in a random sample of\(100\)current customers is\({\rm{10}}\).

(c) The probability that the company’s premise is rejected when it is actually valid is\({\rm{0}}{\rm{.009}}\).

(d) The probability that the company’s premise is not rejected even though \({\rm{p = }}{\rm{.20}}\) qualify is \({\rm{0}}{\rm{.78}}\).

Step by step solution

01

Concept Introduction

Probability refers to the likelihood of a random event's outcome. This word refers to determining the likelihood of a given occurrence occurring.

The Binomial Random Variable\({\rm{X}}\)is defined as

\({\rm{X = }}\)the number of customers who qualify for membership out of\({\rm{n}}\)

Where conditions one to four on page\({\rm{117}}\)are satisfied (binomial experiment).

The described random variable has Binomial Distribution with parameters

\({\rm{n}}\)and\({\rm{p}}\)where\({\rm{p = 0}}{\rm{.1}}\).

02

Probability between \({\rm{2}}\) and \({\rm{6}}\)

(a)

There are\({\rm{25}}\)randomly selected current customers, which means that –

\({\rm{X}} \sim {\rm{Bin(25,0}}{\rm{.1)}}\)

Cumulative Density Function cdf of binomial random variable\({\rm{X}}\)with parameters\({\rm{n}}\)and\({\rm{p}}\)is –

\({\rm{B(x;n,p) = P(X}} \le {\rm{x) = }}\sum\limits_{{\rm{y = 0}}}^{\rm{x}} {\rm{b}} {\rm{(y;n,p),}}\;\;\;{\rm{x = 0,1, \ldots ,n}}\)

The theorem is –

\({\rm{b(x;n,p) = }}\left\{ {\begin{array}{*{20}{l}}{\left( {\begin{array}{*{20}{l}}{\rm{n}}\\{\rm{x}}\end{array}} \right){{\rm{p}}^{\rm{x}}}{{{\rm{(1 - p)}}}^{{\rm{n - x}}}}}&{{\rm{,x = 0,1,2, \ldots ,n}}}\\{\rm{0}}&{{\rm{, otherwise }}}\end{array}} \right.\)

The following is true –

\(\begin{aligned}{\rm{P(2}} \le {\rm{X}} \le 6) &= B(6;25,0) {\rm{.1 - B(1;25,0)}}{\rm{.1}}\\ &= 0 {\rm{.991 - 0}}{\rm{.271}}\\ &= 0 {\rm{.720}}\end{aligned}\)

Therefore, the value is obtained as \({\rm{0}}{\rm{.720}}\).

03

Number of customers to qualify

(b)

Proposition: For a binomial random variable \({\rm{X}}\) with parameters \(n,p,\) and \({\rm{q = 1 - p}}\), the following is true –

\(\begin{aligned}E(X) &= np; \\ V(X) &= np(1 - p) = npq;\\{{\rm{\sigma }}_{\rm{X}}} &= \sqrt {{\rm{npq}}} \end{aligned}\)

Since in this it is given –

\({\rm{X\sim Bin(100,0}}{\rm{.1)}}\)

The following holds –

\(\begin{aligned} E(X) = np &= 100 \cdot {\rm{0}}{\rm{.1 = 10}}\\ V(X) &= npq = 100 \cdot {\rm{0}}{\rm{.1}} \cdot {\rm{0}}{\rm{.9 = 9}}\\{{\rm{\sigma }}_{\rm{X}}} &= \sqrt {{\rm{V(X)}}} {\rm{ = }}\sqrt {\rm{9}} {\rm{ = 3}}\end{aligned}\)

Therefore, the value is obtained as \({\rm{E(X) = 10}}\).

04

Probability of company’s premise being rejected

(c)

Find the following probability –

\(\begin{gathered}P(X \geqslant 7{\text{ }}when{\text{ }}p = 0.1) &= 1 - B(6;25,0.1) \\ &= 1 - 0.991 = 0.009 \\ \end{gathered} \)

Therefore, the value is obtained as \({\rm{0}}{\rm{.009}}\).

05

Probability of company’s premise being rejected

(d)

Do not reject the premise when –

\({\rm{x}} \le {\rm{6}}\)

Which is complement of –

\({\rm{x}} \ge {\rm{7}}\)

Thus, find the probability of event –

\({\rm{\{ X}} \le {\rm{6 when p = 0}}{\rm{.2\} }}\)

Which is –

\({\rm{P(X}} \le {\rm{6 when p = 0}}{\rm{.2) = B(6;25,0}}{\rm{.2) = 0}}{\rm{.78}}\)

Therefore, the value is obtained as \({\rm{0}}{\rm{.78}}\).

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