Probability Distribution:

The list of all possible outcomes of a random variable along with their
probabilities of occurrence is called probability distribution.
Outcome(Marks) Probability
0 P(0)
1 P(1)
2 P(2)
3 P(3)
4 P(4)
5 P(5)

Outcome Probability
H 0.5
T 0.5

Types of Random Variable:

Discrete Random Variable: variable only assumes integer values.
Ex: 1. No. of Copies of Book in a book shop (0, 1,2……)
2. A consumer can buy 0,1,2 Shirts

Continuous Random Variable: variable assume both integer and non

integer values over a range of values (interval).
Ex:
1. Product Cost and Prices
2. Floor Area of office and shop
3. Amount of Rainfall
Expected Value (Mean) and Variance of Random Variable:
Discrete Random Variable:
E(x) = ∑ xjP(xj )
Variance
σ2 = ∑ (xj- E(x) )2 P(xj )

Continuous Random Variable:


E(x) =  xP(x) dx


Example

Ex 2 Adoctor recommends a patient to take a particular diet for two weeks and there
is equal chance for the patient to lose weight between 2 kgs and 4 kgs. What is the
average amount the patient is expected to lose on this diet?

Soln : P(x) = {1/2 when 2<x<4

0 otherwise

4
E(x) = 
2
x *1 / 2dx =[ x2 /2 *1/2]
Probability Distribution Function
Discrete Probability Distribution: A probability distribution in which
the random variable is permitted to take on integer values.

Notes:
1. The probability of any specific outcome for discrete variable must
fall 0 to 1. 0 ≤ P(x= r) ≤ 1
2. ∑ P(x= r ) = 1

Continuous Probability Distribution: A probability distribution in

which the random variable is permitted to take any values over a range of
values (interval).
Notes:
1. The probability of any specific outcome for discrete variable must
fall 0 to 1. 0 ≤ P(x= r) ≤ 1

2.  P(x) dx = 1( Area under the continuous curve must be 1)


Binomial Probability Distribution: It is widely used Probability

distribution for discrete random variable. It is based on Bernoulli Process.
In Bernoulli Process each trial of experiment there are only two possible
mutually exclusive outcomes success and failure. The binomial test
requires that each trial is independent from any other trial. In other words,
the probability of the second trial is not affected by the first trail.

Assumptions of the Binomial Distribution:

• The experiment involves n identical trials
 • Each trial has only two possible outcomes denoted as success or as
failure
• Each trial is independent of the previous trials
• The terms p and q remain constant throughout the experiment,
where the term p is the probability of getting a success on any one
trial and the term q = (1 − p) is the probability of getting a failure on
any one trial

The probability of ‘r’ successes P(r) is given by the binomial formula:

P (r) = nCr pr qn – r

n! r n - r
P(r)  pq
r!n  r!
Excel Formula:
=BINOM.DIST(number_s, trials, probability_s, cumulative)

Mean = np
SD = npq
The binomial distribution is fully defined if we know both ‘n’ & ‘p’.
 Q.1 A coin is tossed four times. Calculate the probability of obtaining
more heads than tails.
Sol : Trials n = 4
Success = obtaining more heads than tails.
Failure = Not obtaining more heads than tails.
P(x = 3H or 4H) = P(x=3) + P(x =4)

n! r n - r
P(r)  pq
r!nr!
P(x =3)= 4 !/ 3! 1! (1/2)3(1/2) = 0.25
P(x =4)= 4 !/ 4! 0! (1/2)4(1/2)0 = 0.0625
P(x=3 or 4) =0.3125

Binomial Distribution in Excel

=BINOM.DIST(number_s,trials,probability_s,cumulative)
 Q.2 An agent sells life insurance policies to five equally aged, healthy
people. According to recent data, the probability of a person living in
these conditions for 30 years or more is 2/3.
Calculate the probability that after 30 years:
1. All five people are still living. P(x=5)
2. At least three people are still living. P(x=3 0r 4 0r 5)
3. Exactly two people are still living. P(x=2)

Success = people are living more than 30 years

n= 5
p = 2/3
q = 1/3
1.
P(x=5) = 5C5(2/3)5(1/3)0
=1*(2/3)5*1=0.131

2. P(x=3 0r 4 0r 5) = P(x=3)+P(x=4)+P(x=5)
= 0.329+ 0.329+ 0.131= 0.789

3. P(x=2) = 0.164

Q.3 If from six to seven in the evening one telephone line in every five is
engaged in a conversation: what is the probability that when 10 telephone
numbers are chosen at random, only two are in use?
n= 10
p = 1/5
q = 4/5
1.
P(x= 2) = 10C2(1/5)2(4/5)8
= 0.301
Important Points:
N ! = N * (N-1)*(N-2)* --------3*2*1
0! = 1
N ! = N* (N-1)!

Poisson distribution
It is not always appropriate to classify the outcome of a test simply as
pass or fail. Sometimes, we have to count the number of defects where
there may be several defects in a single item.
The Poisson distribution is a discrete probability distribution that
specifies the probability of a certain number of occurrences over a
specified interval.
The Poisson distribution describes the occurrence of rare events
A Poisson distribution is a discrete probability distribution. It gives
the probability of an event happening a certain number of times (k)
within a given interval of time or space. The Poisson distribution has
only one parameter, λ (lambda), which is the mean number of events.
In Poisson distribution probability of occurrence of an outcome
within a very small time period is very small, and probability that two
or more such outcomes will occur within the same small time interval
is negligible.
Assumptions of the Poisson distribution:
• It is a discrete distribution
• It describes rare events
• Each occurrence is independent of the other occurrences
• It describes discrete occurrences over a continuum or interval
• The occurrences in each interval can range from zero to infinity
• The expected number of occurrences must hold constant throughout
the experiment
• The number of trials “n” tends to infinity
• Probability of success “p” tends to zero
• Mean (np) is finite
• The Poisson distribution is a limiting case of the binomial
distribution when the number of trials increases without limit while
the product of the number of trials and the probability of success
remains constant

If the probability p of occurrence of an outcome of interest (Success)

in each trial is very small but number of independent trials n is
sufficiently large then average number of times that an event occurs
in certain period of time λ = np is also small. Thus the Poisson
distribution which approximates the binomial distribution is given
by:
r e  
P( X  r )  r= 0, 1, 2,----
r!

The Poisson distribution is fully defined if we know the value of λ.

e is exponential, i.e. e = 2.7183
Excel Formula:
=POISSON.DIST(x, mean, cumulative)
 Q.1 The number of industrial injuries per working week in a particular factory
is known to follow a Poisson distribution with mean 0.5. Find the probability
that in a particular week, there will be ((e-0.5 = 0.607)
i) less than 2 accidents
ii) more than 2 accidents
iii) In a three week period there will be no accidents.
Soln:
r e  
P( X  r ) 
r!

Success= No. of Accidents

i) P(X= 0 or 1) = P(X=0)+ P(X=1)
= (0.5)0*0.607/0! + (0.5)1*0.607/1!
= 0.607 + 0.3035 = 0.9105
ii) P(X=2) = (0.5)2*0.607/2! = 0.076
P(X= 0 or 1 0r 2) = 0.9105 + 0.076 = 0.9865
P(X> 2) = 1- P(X= 0 or 1 0r 2) = 1- 0.9865= 0.0135
iii) P(X=0)3 = (0.607)3 = 0.223
P(X >=4) =1-P(x= 0 or1 or2 or 3)

Q.2 The number of misprints on a page of the Daily News Paper has
Poisson distribution with mean 1.2. Find the probability that the no.
of errors (a) on page four is 2; (b) on page three is less than 3
(e-1.2 = 0.3012)

1. 0.2168
2. 0. 8794
 Normal Distribution: Normal distribution, also known as the
Gaussian distribution, is a probability distribution that is symmetric
about the mean, showing that data near the mean are more frequent in
occurrence than data far from the mean. In graph form, normal
distribution will appear as a bell curve.

Characteristics of the Normal Distribution

• It is a continuous distribution
• It is a symmetrical distribution about its mean
• It is asymptotic to the horizontal axis
• It is unimodal
• Area under the curve is 1

The random variables following the normal distribution are those

whose values can find any unknown value in a given range. For
example, finding the height of the students in the school. These
random variables are called Continuous Variables, and the Normal
Distribution then provides here probability of the value lying in a
particular range for a given experiment.
Applications
The normal distributions are closely associated with many things such
as:

 Marks scored on the test

 Heights of different persons
 Size of objects produced by the machine
 Blood pressure and so on.

For a normal distribution, 68% of the observations are within +/- one
standard deviation of the mean (µ-σ to µ+σ), 95% are within +/- two
standard deviations (µ-2σ to µ+2σ), and 99.7% are within +- three
standard deviations (µ-3σ to µ+3σ).

The general form of its probability density function is

 1 ( x   )
1 ( )2
f ( x)  e 2 
 2
Where П= constant 3.1416
e = constant 2.7183
µ= mean of normal distribution
σ = standard deviation of normal distribution
• The normal distribution is described by its mean and standard
deviation
• All normal distributions can be converted to a single distribution,
the z distribution, using the formula:

Z= x- µ/ σ

• A z score is the number of standard deviations that a value, x, is

above or below the mean
The z distribution is a normal distribution with a mean of 0 and a
standard deviation of 1

Excel Formula:
= NORM.DIST(x, mean, standard deviation, cumulative)
Q.1 The lifetimes of certain kinds of electronic devices have a mean of
300 hours and standard deviation of 25 hours. Assuming that the
distribution of these lifetimes, which are measured to the nearest hour,
can be approximated closely with a normal curve
(a) Find the probability that any one of these electronic devices will have
a lifetime of more than 350 hours.
(b) What percentage will have lifetimes of 300 hours or less?
(c) What percentage will have lifetimes from 220 to 260 hours?
Q.2 Most graduate schools of business require applicants for admission
to take the Graduate Management Admission Council’s GMAT
examination. Scores on the GMAT are roughly normally distributed with
a mean of 527 and a standard deviation of 112. What is the probability
of an individual scoring above 500 on the GMAT?
Q.3 The weekly wages of 1000 workmen are normally distributed
around a mean of Rs. 70 with a standard deviation of Rs. 5.
Estimate the number of workers whose weekly wages are
1) Between Rs. 69 to Rs. 72
2) Less than Rs. 69
3) More than Rs. 72