Problem 16E Some parts of California are particularly earthquake-prone. Suppose that in one metropolitan area, 25% of all homeowners are insured against earthquake damage. Four homeowners are to be selected at random; let X denote the number among the four who have earthquake insurance. a. Find the probability distribution of X. [Hint: Let S denote a homeowner who has insurance and F one who does not. Then one possible outcome is SFSS, with probability (.25)(.75)(.25)(.25) and associated X value 3. There are15 other outcomes.] b. Draw the corresponding probability histogram. c. What is the most likely value for X? d. What is the probability that at least two of the four selected have earthquake insurance?
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Textbook Solutions for Probability and Statistics for Engineering and the Sciences
Question
Problem 21E
Suppose that you read through this year’s issues of the New York Times and record each number that appears in a news article—the income of a CEO, the number of cases of wine produced by a winery, the total charitable contribution of a politician during the previous tax year, the age of a celebrity, and so on. Now focus on the leading digit of each number, which could be 1, 2, . . . , 8, or 9. Your first thought might be that the leading digit X of a randomly selected number would be equally likely to be one of the nine possibilities (a discrete uniform distribution). However, much empirical evidence as well as some theoretical arguments suggest an alternative probability distribution called Benford’s law:
a. Without computing individual probabilities from this formula, show that it specifies a legitimate pmf.
b. Now compute the individual probabilities and compare to the corresponding discrete uniform distribution.
c. Obtain the cdf of X.
d. Using the cdf, what is the probability that the leading digit is at most 3? At least 5?
[Note: Benford’s law is the basis for some auditing procedures used to detect fraud in financial reporting—for example, by the Internal Revenue Service.]
Solution
Problem 21E
Answer:
Step1:
We have Suppose that you read through this year’s issues of the New York Times and record each number that appears in a news article—the income of a CEO, the number of cases of wine produced by a winery, the total charitable contribution of a politician during the previous tax year, the age of a celebrity, and so on. Now focus on the leading digit of each number, which could be 1, 2, . . . , 8, or 9. Your first thought might be that the leading digit X of a randomly selected number would be equally likely to be one of the nine possibilities (a discrete uniform distribution). However, much empirical evidence as well as some theoretical arguments suggest an alternative probability distribution called Benford’s law:
P(x) = P(1st digit is x) = , x = 1,2,3,...,9.
We need to find,
a. Without computing individual probabilities from this formula, show that it specifies a legitimate pmf.
b. Now compute the individual probabilities and compare to the corresponding discrete uniform distribution.
c. Obtain the cdf of X.
d. Using the cdf, what is the probability that the leading digit is at most 3? At least 5?
Step2:
a).
We have Benford’s law:
P(x) = P(1st digit is x) = , x = 1,2,3,...,9.
If the sum of the all probabilities is unity then we say that the above function is legitimate.
Consider,
P(x) = , x = 1,2,3,...,9
Apply summation on both sides to above equation
full solution