Past Exam 2

MTH2222

Throughout this paper, CDF, PMF, PDF and MGF stand for cumulative distribution
function, probability mass function, probability density function and moment generating
function, respectively. All answers must be justied.

1 A car insurance company classies its policy holders as good, bad or average risks:
30% are deemed good risks, 20% are deemed bad risks, and 50% are deemed average
risks. Historical data suggest that 10% of the good risks, 40% of the bad risks, and
20% of the average risks will be involved in an accident in the coming year.
(a) What is the probability that a randomly chosen customer will be involved in
an accident in the coming year?
(b) An accident claim has just been led with the company. What is the probability that this customer was classied as good risk?
[5 marks]

2 Let X be a discrete random variable with PMF

pX (x) =

c
,
x2x

x = 1, 2, . . .

Obtain c, E[X] and var(X).

Hint: You may use the fact that, for 0 < z < 1,
+

z k+1
= ln(1 z).
k=0 k + 1
[8 marks]

3 Let X be an exponential random variable with parameter > 2.

(a) Find the PDF of Y = eX .
(b) Obtain the mean and variance of Y .
[7 marks]

4 Suppose the PDF of X is given by

fX (x) = 2x,

0 < x < 1.

Find the MGF of X.

[4 marks]

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Past Exam 2

MTH2222

5 Let X be a random variable with MGF given by

e2t
MX (t) =
2 et

(t < ln 2).

Find the mean and variance of X. Hint: You may use the fact that MX (t) =
e2t (e2t 6et + 16)
.
(2 et )3
[5 marks]

6 The joint PMF of X and Y is given by

X
1 0
1 p q
0 q 0
1 p q

1
p
q
p

(a) Describe the possible values of p and q.

(b) Find the marginal PMFs of X and Y .
(c) Find the conditional PMF of Y given X = x for x = 1, 0, 1.
(d) Find the conditional expectation of Y given X = x for x = 1, 0, 1, and
deduce cov(X, Y ).
(e) Are X and Y independent? Explain.
[13 marks]

7 The joint PDF of X and Y is given by

fX,Y (x, y) = nxn exy , 0 < x < 1, y > 0,
where n is an integer and n > 2.
(a) Find the marginal PDF of X and its mean.
(b) Find the conditional PDF of Y given X = x.
(c) Deduce the conditional mean and the conditional variance of Y given X = x.
(d) Find the mean and variance of Y .
(e) Find the covariance of X and Y by conditioning on X.
[18 marks]

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Past Exam 2

MTH2222

8 The joint PDF of X and Y is given by

(

2
fX,Y (x, y) = c exp (x2 + xy + y 2 ) .
3
(a) Find c and the correlation coecient of X and Y .
(b) Find the best least square estimator of Y based on X.
[5 marks]

9 Let Sn denote the sum of n independent Poisson random variables with parameter
1.
(a) Show that Sn is a Poisson random variable and give its parameter.
(b) Write down an expression for P(Sn n) in terms of n.
(c) Use the Central Limit Theorem to show that
(
n

lim e

n n2
nn
1+ +
+ ... +
1!
2!
n!

1
= .
2
[8 marks]

End of examination questions

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Past Exam 2

MTH2222

Formula Sheet
Common Random Variables
The Bernoulli Random Variable with probability p of success:
pX (x) = px (1 p)1x , x = 0, 1
E[X] = p, var(X) = p(1 p) and MX (t) = (1 p) + pet .
The Binomial Random Variable with n trials and probability p of success:
n!
pX (x) =
px q nx , x = 0, 1, . . . , n
x!(n x)!
(
)n
E[X] = np, var(X) = np(1 p) and MX (t) = (1 p) + pet .
The Discrete Uniform Random Variable over [m, n]:
1
pX (x) =
, x = m, . . . , n
nm+1
m+n
(n m)(n m + 2)
e(n+1)t emt
E[X] =
, var(X) =
and MX (t) =
.
2
12
(n m + 1)(et 1)
The Geometric Random Variable with probability p of success:
pX (x) = p(1 p)x1 , x = 1, 2, . . .
1
1p
pet
E[X] = , var(X) =
and
M
(t)
=
, t < ln(1 p).
X
p
p2
1 (1 p)et
The Poisson Random Variable with parameter :
x
pX (x) = e , x = 0, 1, . . .
x!
t
E[X] = , var(X) = and MX (t) = e(e 1) .
The Continuous Uniform Random Variable over [a, b]:
1
fX (x) =
,axb
ba
a+b
(b a)2
ebt eat
E[X] =
, var(X) =
and MX (t) =
.
2
12
(b a)t
The Exponential Random Variable with parameter :
fX (x) = ex , x > 0
1
1

E[X] = , var(X) = 2 and MX (t) =

, t < .

t
The Gamma Random Variable with parameters and :
1 x
x e ,x>0
fX (x) =
()
(
)

E[X] = , var(X) = 2 and MX (t) =

, t < .

t
The Normal Random Variable with parameters and 2 :
1
2
2
fX (x) =
e(x) /(2 )
2
(
)
E[X] = , var(X) = 2 and MX (t) = exp t + 2 t2 /2 .
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Past Exam 2

MTH2222

The Bivariate Normal Distribution with parameters (, ), ( 2 , 2 ) and :

fX,Y (x, y)

1
1
(x )2 (y )2
(x )(y )

=
exp

2
2(1 2 )
2
2

2 1 2

]}

X is normal with mean and variance 2 . Y is normal with mean and variance

2 . Conditionally on Y = y, X is normal with mean + (y ) and variance

2 (1 2 ).

Common Sums and Formulae

The Arithmetic and Associated Sums:
n

k=

k=1

n
n
n(n + 1)
n(n + 1)(2n + 1)
n2 (n + 1)2
,
k2 =
,
k3 =
2
6
4
k=1
k=1

The Binomial and Associated Formulae:

n

( )

k=0

( )

n k nk
n k nk
a b
= (a + b)n ,
k
a b
= na(a + b)n1 ,
k
k
k=1
n

k=1

( )

n k nk
a b
= na(na + b)(a + b)n2
k

The Geometric and Associated Sums: For all z = 1,

n

zk =

k=0

1 z n+1
1z

and for |z| < 1,

1
2
1
k1
,
kz
=
,
k(k 1)z k2 =
z =
2
1 z k=1
(1 z) k=2
(1 z)3
k=0

The Exponential Power Series: For all z,

zk
k=0

k!

= ez

End of examination paper

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