SESSION – 2 (Bayes’ Theorm)

Problem Set
Dr. Preeti Khanna

Q1. A consulting firm submitted a bid for a large research project. The firm’s management
initially felt they had a 50–50 chance of getting the project. However, the agency to which
the bid was submitted subsequently requested additional information on the bid. Past
experience indicates that for 75% of the successful bids and 40% of the unsuccessful bids
the agency requested additional information.

a. What is the prior probability of the bid being successful (that is, prior to the request
for additional information)?
b. What is the conditional probability of a request for additional information given
that
the bid will ultimately be successful?
c. Compute the posterior probability that the bid will be successful given a request for
additional information

Q2. A local bank reviewed its credit card policy with the intention of recalling some of its credit
cards. In the past approximately 5% of cardholders defaulted, leaving the bank unable to
collect the outstanding balance. Hence, management established a prior probability of .05
that any particular cardholder will default. The bank also found that the probability of
missing a monthly payment is .20 for customers who do not default. Of course, the
probability of missing a monthly payment for those who default is 1.

a. Given that a customer missed one or more monthly payments, compute the
posterior probability that the customer will default.
b. The bank would like to recall its card if the probability that a customer will default is
greater than .20. Should the bank recall its card if the customer misses a monthly
payment? Why or why not?

Q3. According to the Open Doors 2011 Report, 9.5% of all full-time U.S. undergraduate
students studied abroad during the 2009–2010 academic year (Institute of International
Education, November 14, 2011). Assume that participation records show women make up
60% of the students who studied abroad during the 2009–2010 academic year, but women
make up only 49% of the students who didn’t participate.

a. Let A1 = the student studied abroad during the 2009–2010 academic year
A2 =the student did not study abroad during the 2009–2010 academic year
W = the student is a female student
Using the given information, what are the values for P(A1), P(A2), P(W |A1), and
P(W |A2)?
b. What is the probability that a female student studied abroad during the 2009–2010
academic year?
 c. What is the probability that a male student studied abroad during the 2009–2010
academic year?
d. Given the preceding results, what were the percentage of women and the
percentage of men studying full-time during the 2009–2010 academic year?

SUPPLEMENTARY PROBLEMS ON PROBABILITY

Q1 Forty-three percent of Americans use social media and other websites to voice their
opinions about television programs (The Huffington Post, November 23, 2011). Below are
the results of a survey of 1400 individuals who were asked if they use social media and
other
websites to voice their opinions about television programs.

a. What is the probability a respondent is female?

b. What is the conditional probability a respondent uses social media and other
websites to voice opinions about television programs given the respondent is
female?
c. Let F denote the event that the respondent is female and A denote the event
that the respondent uses social media and other websites to voice opinions about
television programs. Are events F and A independent?

Q2. A study of 31,000 hospital admissions in New York State found that 4% of the admissions
led to treatment-caused injuries. One-seventh of these treatment-caused injuries resulted
in death, and one-fourth were caused by negligence. Malpractice claims were filed in one
out of 7.5 cases involving negligence, and payments were made in one out of every two
claims.

a. What is the probability a person admitted to the hospital will suffer a treatment-
caused injury due to negligence?
b. What is the probability a person admitted to the hospital will die from a
treatment caused injury?
c. In the case of a negligent treatment-caused injury, what is the probability a
malpractice claim will be paid?
Q3. A telephone survey to determine viewer response to a new television show obtained the
following data.

a. What is the probability that a randomly selected viewer will rate the new show
as
average or better?
b. What is the probability that a randomly selected viewer will rate the new show
below average or worse?

Q4. The following crosstabulation shows household income by educational level of the head
of household (Statistical Abstract of the United States, 2008).

a. Develop a joint probability table.

b. What is the probability of a head of household not being a high school graduate?
c. What is the probability of a head of household having a bachelor’s degree or
more education?
d. What is the probability of a household headed by someone with a bachelor’s
degree earning $100,000 or more?
e. What is the probability of a household having income below $25,000?
f. What is the probability of a household headed by someone with a bachelor’s
degree earning less than $25,000?
g. Is household income independent of educational level?

Q5. In February 2012, the Pew Internet & American Life project conducted a survey that
included
several questions about how Internet users feel about search engines and other websites
collecting information about them and using this information either to shape search results
or target advertising to them (Pew Research Center, March 9, 2012). In one question,
participants were asked, “If a search engine kept track of what you search for, and then
used that information to personalize your future search results, how would you feel about
that?” Respondents could indicate either “Would not be okay with it because you feel it is
an invasion of your privacy” or “Would be okay with it, even if it means they are gathering
information about you.” Frequencies of responses by age group are summarized in the
following table

a. What is the probability a survey respondent will say she or he is not okay with
this
practice?
b. Given a respondent is 30–49 years old, what is the probability the respondent
will say she or he is okay with this practice?
c. Given a respondent says she or he is not okay with this practice, what is the
probability the respondent is 50 +years old?
d. Is the attitude about this practice independent of the age of the respondent?
Why or why not?
e. Do attitudes toward this practice for respondents who are 18–29 years old and
respondents who are 50+ years old differ?