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Midterm Exam 2 Practice Problems  Econometrics 120A
1. Consider the following joint probability distribution of years of experience in a job and annual salary:
Experience / Salary
$30
,
000
$60
,
000
$90
,
000
0 years
1/3
1/6
0
10 years
0
1/6
1/3
(a) What is the probability of having 0 years of experience? What is the probability of having 10
years of experience?
(b) What is the probability of earning $30
,
000 conditional on having 0 years of experience? What
is the probability of earning $30
,
000 conditional on having 10 years of experience?
(c) What is the covariance between years of experience and salary earned?
(d) Are years of experience and salaries independent? Justify your answer.
(e) The current exchange rate between US dollar and Euro is 1 Dollar = 0.65 Euro. What is the
covariance between years of experience and salaries in Euros. That is, what would the covariance
b if in the above table you multiplied salaries by 0.65?
2. A fair die has probability 1/6 of any particular number coming up.
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 Spring '10
 Elliot

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