Homework Assignment 3:
(1)
A company establishes a fund of 120 from which it wants to pay an amount, C, to any of its 20
employees who achieve a high performance level during the coming year.
Each employee has a 2%
chance of achieving a high performance level during the coming year, independent of any other
employee.
Determine the maximum value of C for which the probability is less than 1% that the fund
will be inadequate to cover all payments for high performance.
(Ans 60)
(2) Specifications for large batches of a certain item are that no batch shall contain more than 10%
defectives.
The inspection procedure is to draw 100 items out of the batch and reprocess the whole
batch if there are 5 or more defectives in the sample.
Find an upper bound for the probability that a
bad batch is erroneously accepted. (Ans 0.024)
(3) The number of accidents incurred by an insured driver in a given year has a Poisson distribution with
parameter 2.
If an accident occurs, the probability that the damage amount exceeds the deductible is
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 Spring '11
 CharlesDann
 Mean, Probability theory, 2 days, 1%, 2%

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