Exercises This symbol denotes data on the CD.

1 If an event has a probability equal to 0.2, what does this mean?

2 What term is used to describe two events that cannot occur simultaneously in
a single trial of a random experiment?
3 What is meant when two terms are said to be ‘statistically independent’?
4 If P(A) = 0.26, P(B) = 0.35 and P(A and B) = 0.14, what is the value of P(A or B)?
5 If P(X) = 0.54, P(Y) = 0.36 and P(X and Y) = 0.27, what is the value of P(X/Y)? Is
it the same as P(Y/X)?
6 X4.6 – economic sectors
In a survey of companies, it was found that 45 were in the mining sector, 72 were in
the financial sector, 32 were in the IT sector and 101 were in the production
sector. (a) Show the data as a percentage frequency table.
(b) What is the probability that a randomly selected company is in the financial
sector?
(c) If a company is selected at random, what is the probability that this company is
not in the production sector?
(d) What is the likelihood that a randomly selected company is either a mining
company or an IT company?
(e) Name the probability types or rules used in questions (b), (c) and (d).
7 X4.7 – apple grades
An apple cooperative in Elgin, Western Cape receives and groups apples into A, B,
C and D grades for packaging and export. In a batch of 1 500 apples, 795 were
found
to be grade A, 410 were grade B, 106 were grade C and the rest grade D.
(a) Construct a percentage frequency distribution of apple grades.
(b) What is the probability that a randomly selected apple from the batch will
belong to grade A?
(c) If an apple is selected at random from the batch, what is the likelihood that it is
either of grade B or D?
(d) Grade C and D apples are not exported. What is the probability that a randomly
selected apple is export quality?
(e) Name the probability types or rules used in questions (b), (c) and (d).
8 X4.8 – employment sectors
Statistics South Africa reported the number of people employed by sector in a
given year as follows (in thousands): 6 678 in the formal business sector
(excluding agriculture); 1 492 in the commercial agricultural sector; 653 in
subsistence agriculture; 2 865 in the informal business sector; and 914 in
the domestic service sector.
(a) Construct a percentage frequency distribution of employment by sector.
(b) What is the probability that a randomly selected employed person works in
the domestic service sector?
(c) If an employed person is selected at random from the workforce, what is
the likelihood that the person earns a living through agriculture?
(d) If a person is known to work in the business sector (both formal and informal),
what is the likelihood that the person is an informal trader?
(e) Name the probability types or rules used in questions (b), (c) and (d).
Applied Business Statistics

9 X4.9 – qualification levels

The human resources department of an insurance company analysed
the qualifications profile of their 129 managers in terms of their highest
qualification achieved. The findings are shown in the cross-tabulation (two-way
pivot) table.
Qualification Managerial level

Section Dept Division

head head head

?
Matric 28 14

6
Diploma 24

14
Degree 10
Total 53 ? 28

(a) Define the two random variables, their measurement scale and data type.
(b) Complete the above cross-tabulation table (joint frequency table).
(c) What is the probability that a manager selected at random:
(i) has only a matric?
(ii) is a section head and has a degree?
(iii) is a department head given that the manager has a diploma?
(iv) is a division head?
(v) is either a division head or a section head?
has either a matric, or a diploma, or a degree?
(vi)
(vii) has a degree given that the person is a department head?
(viii) is either a division head or has a diploma or both?
(d) For each probability calculated in (c) state:
(i) the type of probability (i.e. marginal, joint or conditional)
(ii) which probability rule, if any, was applied (i.e. addition rule or
multiplication rule).
(e) Are the events in (c)(v) and (vi) mutually
20 ? exclusive?
10 X4.10 – bonus options
A company offered each of its employees a choice of three performance bonus
options: a cash bonus option, a profit-sharing option and a shares option. The
number of employees who selected each bonus option together with their work
function (administration or production) is shown in the following cross-tabulation
(two-way pivot) table.

Cash bonus Profit sharing Shares option

Admin 28 44 68
Production 56 75 29

(a) What is the probability that an employee selected the cash bonus option?

120
 Chapter 4 – Basic Probability Concepts

(b) If income tax must only be paid on the cash bonus or the profit-sharing option,
what is the probability that an employee selected a tax-free bonus
(c) option? What is the likelihood that an employee works in production and
chose the option?
cash bonus
(d) If an employee is in administration, what is the likelihood that the employee
chose the shares option?
(e) If a cash bonus option was chosen, what is the probability that it was chosen by
a production worker?
(f) If event A = shares option and event B = an administration employee, test
whether the choice of performance bonus option is statistically independent of
the work function of the employee.
(g) State the probability type (marginal, joint or conditional) or probability rule
that applied in each of (a) to (e).
11 X4.11 – age profile
The following table shows the 300 employees of a glass manufacturing company,
cross-classified on the basis of age and department:

Age Department Total

Production Sales Administration

<30 60 25 18 103

30–50 70 25 124
>50 30 35 73
Total 160 62 78 300

(a) An employee is selected at random from this company. Calculate the probability
that the employee is:
(i) under 30 years of age
a production worker 29
8
(ii) a sales person and between 30 and 50 years of age
(iii) over 50, given that he or she is in administration
(iv) a production worker or under 30 years, or both.
(b) Are the two events ‘age’ and ‘department’ mutually exclusive? Justify your
(v)
answer.
(c) Are age and department statistically independent? Justify your answer.
(d) State the probability type and probability rule, if appropriate, used in each of
(a)(i)–(v).
12 X4.12 – digital cameras
Consider the following cross-tabulation table of brand preference for digital cameras
and their primary usage (professional or personal):

121
Applied Business Statistics

Usage Digital camera brand preference Total

Canon Nikon Pentax
Professional 48 15 27 90
Personal 30 95 65 190
Total 78 110 92 280

(a) What is the probability of randomly selecting a professional user?

(b) What is the probability of selecting a user who prefers the Nikon
(c) brand? Find the probability that a user prefers the Pentax brand given
that their usage is primarily personal.
(d) Is brand preference statistically independent of primary usage? Justify
your answer with a statistical illustration and explain the meaning of your
(e) finding. What is the likelihood that a randomly selected user prefers the
Canon brand and is a professional user?
(f) Find the probability of randomly selecting either a professional user or a user
who prefers the Nikon brand of digital camera or both.
(g) Are the two events primary usage and brand preference mutually exclusive?
Justify your answer statistically.
13 An electronic device consists of two components, A and B. The probability that
component A will fail within the guarantee period is 0.20. There is also a
15% chance that component B will fail within the guarantee period. Assume
the components operate entirely independently of each other.
(a) Draw a probability tree to show all the outcomes and their probabilities for the
components (events) A and B.
(b) What is the probability that both components will fail within the guarantee
period?
(c) If either or both components fail within the guarantee period, the company will
replace the electronic device free of charge. What is the probability that the
electronic device will not need to be replaced during the guarantee
14 period? Personal Financial Advisors (PFA) are required by law to write a
professional exam. PFAs can choose to attend a workshop to prepare for the exam.
30% attended a preparatory workshop and, of these advisors, 80% of them
passed the professional exam. Of those that did not attend a preparatory
workshop, only 60% passed the professional exam.
(a) Draw a probability tree to show all the outcomes and their probabilities for the
two events, workshop (attend/not attend) and exam result (pass/fail)). Let the
first branch be the event {workshop} and the second branch be the event
{exam result}.
(b) Use the probability tree to find the following probabilities:
(i) What is the probability of a PFA passing the exam and having attended a
workshop?
(ii) What is the probability of a PFA passing the exam (regardless of whether
they attended a workshop or not)?

122
 Chapter 4 – Basic Probability Concepts

15 Find the value of:

(i) 6! (ii) 3! 5! (iii) 4! 2! 3!
(iv) 7C4 (v) 9C6 (vi) 8P3
(vii) 5P2 (viii) C
7 7
(ix) 7P4
Explain the meaning of each of these calculations in terms of a practical
16 scenario. A company has 12 products in its product range. It wishes to advertise
in the local newspaper but, due to space constraints, it is allowed to display only
seven of its products at one time. How many different ways can this company
compose a display of seven products out of its range of 12 products to insert into
17 the local newspaper? There are five levels of shelving in a supermarket. If three
brands of soup must each be placed on a separate shelf, how many different ways
can a packer arrange the soup brands?
18 For a balanced investment portfolio consisting of four equities, an investor must
select only one equity from each of nine economic sectors (labelled 1 to
9). (a) How many different portfolios consisting of four equities can be
selected?
(b) What is the probability that the portfolio will consist of one equity each from
19 economic sectors 3, 5, 7 and 8?
What is the probability that each of five identical screws that are removed from the
back cover of a stove will be replaced in exactly the same holes from which they were
20 removed?
A selection of 10 tourist attractions is available in Cape Town.
(a) How many separate selections are there of three attractions, not considering
the order in which the three attractions are visited?
(b) What is the probability of selecting a particular day tour package of three
21 attractions, regardless of the order in which they are visited?
A planning committee for a major development project, such as a shopping mall,
must consist of two architects and four engineers. There are four architects and
seven engineers available from which to choose.
(a) How many different combinations of committee members can be formed?
(b) If the committee must also include an environmental lawyer, of which there
are two available, how many different committee compositions are now
possible?

123