In: Statistics and Probability
Jake is hoping to be promoted to head pharmacist and make
$120,000/year starting next year. He thinks he has a 60% chance of
being promoted. His current salary is $70,000/year. If he is not
promoted, he will earn his current salary next year.
What is his mean salary for next year?
What is the variance of his salary for next year?
What is the standard deviation of his salary for next year?
Solution:
Given: Jake is hoping to be promoted to head pharmacist and make $120,000/year starting next year. He thinks he has a 60% chance of being promoted. His current salary is $70,000/year. If he is not promoted, he will earn his current salary next year.
P(promoted) = 60% = 0.60
P(Not promoted) =1 - 0.60 = 0.40
Thus we have:
Promoted | Probability | Salary |
---|---|---|
Yes | 0.60 | 120000 |
No | 0.40 | 70000 |
We have to find mean , Variance and standard deviation of his salary for next year.
Formula:
Mean:
Variance:
Standard Deviation:
Thus we need to make following table:
Promoted | Probability P(x) | Salary x | x *P(x) | x2 *P(x) |
Yes | 0.6 | 120000 | 72000 | 8640000000 |
No | 0.4 | 70000 | 28000 | 1960000000 |
Thus
Part i)
Mean:
Part ii)
Variance:
Part iii)
Standard Deviation: