Solved: Suppose a particular state allows individuals

Chapter 4, Problem 114E

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Problem 114E

Suppose a particular state allows individuals filing tax returns to itemize deductions only if the total of all itemized deductions is at least $5000. Let X (in 1000s of dollars) be the total of itemized deductions on a randomly chosen form. Assume that X has the pdf

a. Find the value of k. What restriction on α is necessary?

b. What is the cdf of X?

c. What is the expected total deduction on a randomly chosen form? What restriction on α is necessary for E(X) to be finite?

d. Show that ln(X/5) has an exponential distribution with parameter α–1

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