18.05. Test 2.

(1) Let X be the players fortune after one play. Then

P (X = 2c) =

1
c
1

and P (X = ) =
2
2
2

and the expected value is

EX = 2c

1 c 1
5
+ = c.
2 2 2
4

Repeating this n times we get the expected values after n plays (5/4)n c.
(2) Let Xi , i = 1, . . . , n = 1000 be the indicators of getting heads. Then
Sn = X1 + . . . + Xn is the total number of heads. We want to nd k such
that P (440 Sn k) 0.5. Since = EXi = 0.5 and 2 = Var(Xi ) = 0.25
by central limit theorem,
Z=

Sn n
Sn 500

=
n
250

is approximately standard normal, i.e.

k 500
440 500

= 3.79 Z
)
250
250
k 500
(
) (3.79) = 0.5.
250

P (440 Sn k) = P (

From the table we nd that (3.79) = 0.0001 and therefore

k 500
(
) = 0.4999.
250
Using the table once again we get
(3) The likelihood function is

and the log-likelihood is

k
500
250

0 and k 500.

n en
() =
( Xi )+1

log () = n log + n ( + 1) log

Xi .

We want to nd the maximum of log-likelihood so taking the derivative we

get

n
+ n log
Xi = 0

and solving for , the MLE is

=

log

(4) The prior distribution is

f () =

n
.
Xi n

1
e
()

and the joint p.d.f. of X1 , . . . , Xn is

n en
f (X1 , . . . , Xn |) =
.
( Xi )+1

Therefore, the posterior is proportional to (as usual, we keep track only of

the terms that depend on )
1 +n1 e+n
n en

=
f (|X1 , . . . , Xn ) 1 e
( Xi )+1
Xi
( Xi )
Q
Q
+n1 e+n log Xi = (+n)1 e(n+log Xi ) .
This shows that the posterior is again a gamma distribution with parameters

( + n, n + log
Xi ).
Bayes estimate is the expectation of the posterior which in this case is
=

+n
.
n + log Xi

(5) The condence interval for is given by

1
1
2) X
+c
2)
c
(X 2 X
X
(X 2 X
n1
n1
where c that corresponds to 90% condence is found from the condition
t101 (c) t101 (c) = 0.9

or t9 (c) = 0.95 and c = 1.833.

The condence interval for 2 is
2)
2)
n(X 2 X
n(X 2 X
2

c2
c2
where c1 , c2 satisfy
2101 (c1 ) = 0.05 and 2101 (c2 ) = 0.95,
and c1 = 3.325, c2 = 16.92.