Introduction to probability, Applied Statistics

Introduction to Probability

A student is considering whether she should enroll in an MBA educational program offered by a well-known college. Among other things, she would like to know how difficult the program is she obtains the following marks distribution of students who appeared for the most final examination in the previous year.

Relative Frequency Distribution

Marks %

No. of students

% of students

0   - 25

 45

 8

25 - 50

280

50

50 - 75

205

37

75 - 100

30

 5

 

560

100

Assuming the next exam is equally tough and there are same proportion of dull and bright students, she may conclude that the percentage of students in the four classes of marks will again be

Marks %

% of students

0   - 25

8

25 - 50

50

50 - 75

37

75 - 100

5

 

100

The first distribution above is related to past data and is a frequency distribution. The second distribution has the same numbers and is a copy of the first distribution. However, this distribution relates to the future. Such a distribution is called a probability distribution. Note the similarity of this distribution with that of the relative frequency distribution.

Hence by inspecting the probability distribution we can say that:

8% of the students who are appearing for the exam will score 0 - 25% marks, 50% will score 25 - 50% marks, 37% will score 50 - 75% marks and the balance 5% will score 75 - 100% marks.

If our student considers herself to be among the top 5% of the students, she can conclude that she will score 75 - 100% marks. If she considers herself to be in the top 42% of students she can conclude that she will score 50 - 100% marks and so on. However, if she has no idea of her ability in relation to the other students she can conclude that:

She has an 8% chance of scoring 0 - 25% marks, a 50% chance of scoring
25 - 50% marks, a 37% chance of scoring 50 - 75% marks and a 5% chance of scoring 75 - 100% marks. This "chance" is called probability in statistical language.

Probability theory is used to analyze data for decision making.

The insurance industry uses probability theory to calculate premium rates. A stock analyst/investor, based on the probability estimates of economic scenarios and estimates the returns of the stocks. A project manager applies probability theory in decision-making.

Posted Date: 9/14/2012 4:08:30 AM | Location : United States







Related Discussions:- Introduction to probability, Assignment Help, Ask Question on Introduction to probability, Get Answer, Expert's Help, Introduction to probability Discussions

Write discussion on Introduction to probability
Your posts are moderated
Related Questions
it is said that management is equivalent to decision making? do you agree? explain

1. For each of the following variables: major, graduate GPA, and height: a. Determine whether the variable is categorical or numerical. b. If the variable is numerical, deter

Histogram: It is generally used for charting continuous frequency   distribution. In histogram, data are plotted as a series  of rectangle one over the other. Class intervals

Correlation Analysis Correlation Analysis is performed to measure the degree of association between two variables. The measure is called coefficient of correlation. The coeffic

In the case of permanent magnet DC motor whose stator consists of a permanent magnet we can take the field current to be constant (i.e. a constant magnetic field) and it can be sho

Consider the following new business venture. An agent is considering investment in one of three real estate parcels: • Option 1: multiunit rentals • Option 2: commercial building


Accident proneness  A personal psychological issue which affects the individual's probability of suffering the accident. The concept has been studied statistically under the num

Consider three stocks A, B and C costing $100 each. The annual returns on the three stocks have mean $5 and variance $10. a. Suppose that the returns on the three stocks are i.i

Meaning and Definitions of Business Forecasting The problem of business  forecasting  refers to the  analysis  of the past and  present economic  conditions. With  the objectiv