Summer of Quant

Probability Primer Assignment

Deadline for submission : 13th July 2024

Submission link: https://forms.gle/ZknHRy1mcFLAs4Yf8

General Submission Instructions- Read Carefully

1. You can refer to any online resources and modeling tools but do
attempt the problems honestly first before taking a peek-a-boo.
2. Submit the assignment in a form which is linked at the top of this assignment. If
you’ve made progress in certain problems but haven’t arrived at the answer
then create a document linking all steps you performed and submit that
document as well.
3. Questions are divided in three parts: Pretty easy, Easy and Kinda hard bro.
4. Not all problems will be directly related to Probability ;)
5. While the questions may seem too many, you are not required to
solve all the questions to get your SoQ thingy. Solve as many as
you can in the given time period. We value your ability to learn
and assimilate new information, be analytical and precise with
your problem-solving, and be astute and ingenuine with your
approach. Even if you cannot complete a question, document all
the logical steps you considered. Genuine attempts will be
rewarded with partial marks.

For any queries, you may reach out to us anytime-

Aryan Gupta (9038434974 & [email protected])
Umang Agarwal (9796508110 & [email protected])
Sathwik Shetty (9834260902 & [email protected])
Aakash Gore (8779340447 & [email protected])
Introduction.
Hello, we’re extremely delighted that you chose to sign up for Summer of Quant.
The assignment checks how you progressed with the summers and how much you
learnt. This tests a breadth of concepts and some questions are easier than they
appear. While the assignment may seem rigorous (well, if it doesn’t, that’s cool!),
fun lies in figuring out the unfigured.

Pretty Easy:

Question 1. If a fair unbiased coin is flipped 5 times, what is the probability that
it will land heads up on the first 3 flips and not on the last 2 flips?

A. 3/5
B. 1/2
C. 1/5
D. 1/8
E. 1/32

Question 2. Shantanu prepared 4 different letters to be sent to 4 different

addresses. For each letter, she prepared an envelope with its correct address. If
the 4 letters are to be put into the 4 envelopes at random, what is the
probability that only 1 letter will be put into the envelope with its correct
address?
A. 1/24
B. 1/8
C. 1/4
D. 1/3
E. 3/8
Question 3. Let A and B be independent events with P(A) = 0.2 and P(B) = 0.3.
Find:
(a) P(A ∩ B) and P(A ∪ B)
(b) P(A ∪ B’) and P(A ∩ B’ )
(c) P(A | B) and P(B | A)
(d) P(A | B’) and P(B’ | A)

(Note: ‘ denotes complement.)

Question 4.

Show that T is also a countably infinite probability space.

Hint: Here’s an example problem with solution. Maybe this strikes inspiration?
Question 5. Let X be a continuous random variable with the following
distribution:

(a) Evaluate k.
(b) Find P(1≤X≤2).

Question 6. Let h be the joint distribution of random variables X and Y.

Question 7. Let X be a random variable with mean μ and standard deviation σ.

Use Chebyshev's inequality to estimate P(μ - 3σ ≤ X ≤ μ + 3σ).
a. 0.89
b. 0.11
c. 0.54
d. 0.46

Question 8. You have 25 horses, each with a unique constant speed. With a
track that accommodates only 5 horses per race, what is the minimum number
of races required to determine the 3 fastest horses?

Question 9. You have an endless supply of water, a 3L jug and a 5L jug. Can you
measure out a 4L jug? If yes, how do you do it. If no, why not?
Question 10. How large of a group is required such that there is a greater than
50% chance that one of the people in the group has a birthday matching any
other person?

Question 11. Let X be a random variable with the following geometric

distribution:

What is E(X)?
a. 1/p
b. 1/q
c. p/q
d. 1/pq

Question 12: A die is rolled 3 times. Find the probability that the sum of the
outcomes is greater than 6.
a. 0.88
b. 0.95
c. 0.98
d. 0.92

Question 13: There was a hit and run incident involving a taxi in a city in which
85% of the taxis are green and the remaining 15% are blue. There was a witness
to the crime who says that the hit and run taxi was blue. Unfortunately, this
witness is only correct 80% of the time. What is the probability that it was
indeed a blue car that hit our victim in percentage (nearest integer)?

Before Question 14. Here’s some Markov Chain theory:

Question 14. Consider the following stochastic matrix P [which is regular since
P⁵ has only positive entries]:
Find its unique fixed probability vector t for P. If 5t of the form [a b c]. Enter
a+b+c.

Easy:

Question 1. If a chessboard has 64 squares and you roll a die across white, what
is the probability of the die landing on a white square?

Question 2. Gretchen and Henry were sent to their rooms for fighting in the
house. Each separately protested to their father, insisting that the fight was
merely healthy sibling competition and expressing their desire to go see a movie
that afternoon. Although their stories moved him, he did not simply let them go.
Instead, he devised a system: he visited each child's room with a penny and told
them they had 10 minutes to decide whether to bring the penny to the den or
leave it in their rooms. He would then flip the one or two pennies brought to the
den. If the flipped pennies landed on heads, they could go to the movies. If
neither brought a penny, or if he flipped at least one tail, they would remain in
their rooms until supper.

The dilemma for Gretchen and Henry was that neither knew what the other
would choose. It would be easy if they could coordinate—one bringing a penny
and the other not, giving them a 50% chance of going free—but they did not
have this option.
Assuming they both acted optimally, what is the probability that they will be
free in time to see the movie?

a. ⅖
b. ⅓
c. ⅔
d. ⅗
e. ¼

Question 3. Alice has a thirty-sided die, and Bob has a twenty-sided die. They
both roll their dice, and the player with the higher roll wins. If they roll the same
number, Bob wins. What is the probability that Bob wins?

Question 4. You have three cards, each labeled n, n + 1, n + 2, and you don't
know the value of n. All cards start face down. You flip one card and observe its
value. If you say "stay", your payout is equal to that card's value. If you don't
"stay", then you flip another card. Again, choose to "stay" (and receive a payout
equal to the second card's value) or flip the final card and receive a payout equal
to the final card's value. Assuming optimal play & strategy, what is the expected
payout of this strategy, expressed as n + c for some constant c?

Question 5. Suppose that X and Y are independent standard normal random

variables. What is the probability P[Y > 4X]?

a. ⅕
b. ⅘
c. ½
d. ¼
e. ¾.
Hint 1: Recall that if X and Y are independent standard normal random variables, any
linear
combination of these variables will also follow a normal distribution.
Hint 2: Remember that the standard normal distribution is symmetric around its
mean.

Question 6. Suppose we have a random variable X which follows a Poisson

distribution with parameter λ, denoted as X ~ Pois (λ). Additionally, λ itself is a
random variable that follows an exponential distribution with parameter 1,
denoted as λ ~ Exp(1). Compute the expected value of X, that is, E[X].
a. 1
b. 2
c. 3
d. ½
e. 0

Question 7: In a game of cards, 8 cards are dealt out from a standard deck.
What is the variance of the number of hearts among these 8 cards?
a. 22/17
b. 23/16
c. 12/5
d. 3/2
e. 5/3

Question 8. Let V1 and V2 be two vectors of length 10. The 10 elements of V1

are IID Bernoulli(½) random variables. The 10 elements of V2 are IID
Bernoulli(¾) random variables. Determine the probability that the dot product
V1⋅V2 is odd. Express the probability in the form ½ - 1/an, where a is a prime
number. What is a+n?
a. 23
b. 43
 c. 12
d. 11

Question 9: Tesla employees are driving their individual self-driving cars on

their way to the Gigafactory in Berlin. All cars are reasonably spaced apart, and
each car travels at a distinct, randomly assigned speed. When a faster car
catches up to a slower one, it automatically adjusts to match the slower car's
speed. After a long period of time, the cars form into clusters traveling at
different speeds. If there are N = 10 cars, what is the expected number of
clusters (K) formed?
a. 3
b. 4
c. 5
d. 6
e. 10

Question 10: Estimation is back in town baby!

a. How many lakes are there in the world?
b. Estimate how many 3-pointers are made in the NBA per year?
c. How many ping pong balls can fit inside a Boeing 747?

Question 11: You are playing Russian roulette with 2 bullets randomly put into
a gun that holds 6 bullets. Your opponent played first and lived after 1 trigger
pull. You are given the option whether to spin the barrel. Given the best
strategy (spin or no spin), what is your chance of survival?
a. ⅔
b. ⅖
c. ⅗
d. ⅓.
Question 12: Would you prefer to play Lebron James one on one 1 time or 7
times?
(“Because I don't want anybody to know my identity. I'm like a superhero. Call me
Basketball Man.” ~ Lebron)
a. One time
b. Seven times

Question 13: In a magical world of mathematics, a mystical mathematician

presents you with a game involving a standard 6-sided die. You have the
opportunity to bet on whether the outcome will be even or odd. Here's the
twist:
- If you bet $4 on the outcome being even and win, you'll receive $6.
- If you bet $6 on the outcome being odd and win, you'll get $9.
Given these conditions, how should you optimally place your bets?

Question 14: Imagine you have a drawer filled with socks of different colors.
One morning, you reach in without looking to grab some socks. How many
socks do you need to pull out to ensure you have at least one matching pair?
Start with a scenario where there are only black and white socks, and then
generalize to a drawer with socks of N different colors.

Hint : Think about the worst-case scenario. If you're trying to get any pair of socks, not
necessarily of a specific color, what's the maximum number of socks you could pull out
without getting two of the same color?

Question 15: One evening, as the sun set behind the hills, Lydia sat by her
window, gazing at the chessboard on her table. She pondered a peculiar
question: "If you could randomly select a rectangle on this chessboard, what are
the odds that the chosen rectangle would actually be a square?"(upto 2 decimal)
Kinda hard bro:

Question 1: From a standard 52-card deck, what is the probability of drawing a

5-card hand that contains 4 cards of the same rank? (to the 3rd decimal)
a. 0.024%
b. 0.018%
c. 0.001%
d. 0.035%
e. 0.069%

Question 2: Five children went trick-or-treating together and decided to

randomly split their candy haul at the end of the night. As it turned out, they got
a total of 25 pieces of candy, 5 copies each of 5 different types (they live in a
small town). They distribute the candies by choosing an ordering of the 25
uniformly at random from all shufflings, and then giving the first 5 to the first
child, the second 5 to the second, and so on. What is the probability that each
child has one type of candy that they have strictly more of than every other
trick-or-treater? (Give an approximate answer)
a. 2.5%
b. 4%
c. 6%
d. 10%
Question 3:

Call a “ring” of circles a collection of six circles of equal radius, say r, whose
centers lie on the six vertices of a regular hexagon with side length 2r. This
makes each circle tangent to its two neighbors, and we can call the center of the
regular hexagon the “center” of the ring of circles. If we are given a circle C,
what is the maximum proportion of the area of that circle we can cover with
rings of circles entirely contained within C that all are mutually disjoint and
share the same center?

a. 0.78
b. 0.97
c. 0.55
d. 0.45
e. 0.11

Question 4: Finance Time!

Alice and Bob have contrasting beliefs about the future of gold prices, driven by
potential geopolitical events. Alice believes that the uncertainty in global
markets will drive the price of gold upwards, but she is also wary of a potential
sudden price drop. To capitalize on her belief but also to protect herself, she
decides to buy a gold futures contract and simultaneously purchase a put
option on gold with a strike price of $1,800 per ounce. She pays a premium of
$50 for this option. Bob believes the opposite. He thinks the geopolitical events
will be resolved without major disruptions and thus, the price of gold will stay
fairly stable but with a potential for a minor uptick. He decides to sell/write a
gold futures contract and simultaneously sell a call option with a strike price of
$1,850 per ounce, receiving a premium of $40.
Fast forward six months, the geopolitical events escalate, causing gold prices to
spike to $1,900 per ounce, but then they resolve rapidly, leading gold to settle
at $1,820 per ounce.
Who made a profit?

Hint: Here’s some theory for more context:

1. Futures Contracts:
A futures contract is a standardized agreement to buy or sell a specified amount of a
commodity or financial instrument at a predetermined price at a specified time in the
future. In this case, both Alice and Bob are engaging in futures contracts related to
the price of gold.
- Long Position: Alice takes a long position by buying a gold futures contract. This
means she expects the price of gold to rise, and she will profit if the price increases
above the futures price at which she entered the contract.
- Short Position: Bob takes a short position by selling (writing) a gold futures contract.
He profits if the price of gold decreases below the futures price at which he sold the
contract.
2. Options Contracts:
Options are financial derivatives that give the buyer the right, but not the obligation,
to buy (call option) or sell (put option) an underlying asset at a specified price (strike
price) on or before a specified date (expiration date).
- Put Option: Alice buys a put option, giving her the right to sell gold at a strike price of
$1,800 per ounce. This protects her from potential downside risk if the price of gold
drops below $1,800. She pays a premium of $50 for this option upfront.
 - Call Option: Bob sells (writes) a call option, giving the buyer the right to buy gold at a
strike price of $1,850 per ounce. By selling this call option, Bob receives a premium of
$40 upfront. He will profit if the price of gold remains below $1,850 by the expiration
date.

3. Premiums:
The premium is the price paid upfront by the option buyer to the option seller. It
represents the cost (for the buyer) or income (for the seller) associated with the
rights conveyed by the option.
- Alice pays a premium of $50 for her put option, which is a cost she incurs regardless
of whether she exercises the option.
- Bob receives a premium of $40 for selling his call option, which is income he earns
immediately.

Question 5: A rope that is one meter long is divided into three segments by
two random points. What is the expected length of the longest segment?

Hint 1: Consider the positions of the cuts as two random variables, X and Y, both lying
within the range [0, 1] and X < Y. The problem involves calculating the expected value
of X given that X is the longest segment.
Hint 2: Use geometric probability to analyze the problem. Visualize the constraints
and the regions they form on a graph. The constraints X > Y - X and X > 1 - Y help in
defining the areas where X is the longest segment.
Question 6: Sarah received 78 figurines as gifts this holiday season: 12
drummers drumming, 11 pipers piping, 10 lords a-leaping, etc., down to 1
partridge in a pear tree. They are all mixed together in a big bag. She agrees with
her friend Michael that this seems like too many figurines for one person to
have, so she decides to give some of her figurines to Michael. Sarah will
uniformly randomly pull figurines out of the bag one at a time until she pulls out
the partridge in a pear tree, and will give Michael all of the figurines she pulled
out of the bag (except the partridge, that’s Sarah's favorite). If n is the maximum
number of any one type of ornament that Michael gets, what is the approximate
expected value of n?
a. 4
b. 7
c. 10
d. 13

Question 7: What is the minimum size of a randomly selected group of people

such that there is a greater than 50% chance they can celebrate the birthday of
at least one person in the group on every day of the year? Assume that all years
have 365 days, and that birthdays are evenly spread throughout the year.

All the best!~