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2. Using Excel to compute the expected value, variance, and standard deviation of a discrete random variable
Data on the number of occupants was collected for a large sample of renter-occupied, rent-controlled housing units as part of the New York City Housing
and Vacancy Survey. The relative frequency method is used to develop the following probability distribution for the number of occupants in a renter-
occupied, rent-controlled housing unit in New York City:
Number of Occupants x Probability P(x)
1 0.611
2 0.270
3 0.073
4 0.036
5 0.007
6 0.003
To answer the questions that follow, download an Excel spreadsheet containing the previous data by clicking the following words in bold: Download Excel
File.
The upper left-hand corner of the Excel spreadsheet in the file you download should look like the following sample spreadsheet (except for the numeric
values in column C):
A B C
1 Number of Occupants Probability Sq Dev from Mean
2 1 0.611
3 2 0.270 0.187
4 3 0.073 2.053
5 4 0.036 5.919
6 5 0.007 11.785
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7 6 0.003 19.651
8
9 Expected Value =SUMPRODUCT(A2:A7,B2:B7)
10 Variance =VAR(C2:C7,B2:B7)
11 Standard Deviation =SQRT(B10)
Points: 0.5 / 1
In cell B9 of the spreadsheet, select the correct Excel formula for computing the expected value of X. Enter this formula in cell B9 of your Excel
spreadsheet. The expected value of X is .
Points: 0/1
Explanation: Close Explanation
The expected value of a discrete random variable X with probability function P(x) is the average of the x values weighted by their probabilities: E(X)
= ΣxP(x).
In this example, X is the number of persons living in one of the rent-controlled housing units. The values of X are, respectively, 1, 2, 3, 4, 5, and 6.
The probabilities of these values are, respectively, P(1) = 0.611, P(2) = 0.270, P(3) = 0.073, P(4) = 0.036, P(5) = 0.007, and P(6) = 0.003. Thus,
the expected value of X is:
E(X) E(X) = = ΣxP(x) ΣxP(x)
= = (1)P(1) + (2)P(2) + (3)P(3) + (4)P(4) + (5)P(5) + (6)P(6) (1)P(1) + (2)P(2) + (3)P(3) + (4)P(
= = (1)(0.611) + (2)(0.27) + (3)(0.073) + (4)(0.036) + (5)(0.007) + (6)(0.003) (1)(0.611) + (2)(0
You can compute E(X) in your Excel spreadsheet using the SUMPRODUCT() function, which takes ranges of the same size, multiplies their
corresponding cells, and sums the products. The values of X are stored in the range A2:A7, and the values of P(x) are stored in the range B2:B7.
Therefore, SUMPRODUCT(A2:A7,B2:B7) multiplies the X value in A2 by the P(x) value in B2, the X value in A3 by the P(x) value in B3, and so on,
and then sums the products to yield E(X).
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Select the formula SUMPRODUCT(A2:A7,B2:B7) in cell B9 of the spreadsheet. Enter this formula in cell B9 of your Excel spreadsheet to compute
E(X) = 1.5670.
In cell C2, select the correct formula for computing the squared deviation of X from its expected value μ when x = 1. Enter this formula in cell C2 of your
Excel spreadsheet. The value of (x – μ)² when x = 1 is -0.958 .
Points: 0/1
In your Excel spreadsheet, copy the formula you entered in cell C2 to cells C3 through C7 to compute the values of (x – μ)² for x = 2 through 6. The
values in your spreadsheet should match the values shown in the previous spreadsheet.
Explanation: Close Explanation
In the spreadsheet, the value of x = 1 is stored in cell A2, and the value of E(X) = μ = 1.5670 is stored in cell B9. Thus, the correct formula to
select in cell C2 of the spreadsheet is (A2 – $B$9)^2, which computes the value of (x – μ)² when x = 1. Enter this formula in cell C2 of your
spreadsheet to compute (x – μ)² = (1 – 1.5670)² = 0.321.
Copy the formula you entered in cell C2 to cells C3 through C7 to compute the values of (x – μ)² for x = 2 through 6. Set the display format of
these cells to three decimal places. The values in your spreadsheet should match the values of 0.187, 2.053, 5.919, 11.785, and 19.651 in the
spreadsheet.
In cell B10, select the correct formula for computing the variance of X. Enter this formula in your Excel spreadsheet. The variance of X is 2.4680 .
Points: 0/1
Explanation: Close Explanation
The variance of a discrete random variable X with probability distribution P(x) is Var(X) = ∑(x – μ)²P(x), that is, the average of the squared
deviation of the X values from the mean μ, weighted by the P(x) probabilities.
The expected value of X was computed previously as E(X) = μ = 1.5670. Therefore, the variance of X is:
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Var(X) Var(X) = = ∑ (x – μ) 2 P(x) ∑x – μ2P(x)
= = (0.321)P(1) + (0.187)P(2) + (2.053)P(3) + (5.919)P(4) + (11.785)P(5) + (19.651)P(6) (0
= = (0.321)(0.611) + (0.187)(0.27) + (2.053)(0.073) + (5.919)(0.036) + (11.785)(0.007) + (19.651)(0
You can compute Var(X) in your Excel spreadsheet using the SUMPRODUCT() function. The values of (x – μ)²—the squared deviations of X values
from the mean μ—are stored in the range C2:C7, and the values of P(x) are stored in the range B2:B7. Thus, SUMPRODUCT(C2:C7,B2:B7)
multiplies the (x – μ)² value in C2 by the P(x) value in B2, the (x – μ)² value in C3 by the P(x) value in B3, and so on, and then sums the products
to yield Var(X).
Select the formula SUMPRODUCT(C2:C7,B2:B7) in cell B10 of the spreadsheet. Enter this formula in cell B10 of your Excel spreadsheet to compute
Var(X) = 0.7515.
In cell B11, select the correct formula for computing the standard deviation of X. Enter this formula in your Excel spreadsheet. The standard deviation of X
is 0.8669 .
Points: 1/1
Explanation: Close Explanation
The standard deviation of a discrete random variable x is the positive square root of its variance. In our example, the variance of X is Var(X) =
0.7515. Therefore, the standard deviation of X is √Var(X) = √0.7515 = 0.8669.
You can compute the standard deviation of x in your Excel spreadsheet by applying the SQRT() function to the value of Var(X) in B10. In the
spreadsheet, select the formula SQRT(B10) in cell B11. Enter this formula in cell B11 of your Excel spreadsheet to obtain 0.8669.
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