KABARAK UNIVERSITY

UNIVERSITY EXAMINATIONS
MAIN CAMPUS
SECOND SEMESTER 2023, ACADEMIC YEAR
EXAMINATION FOR THE DEGREE OF BACHELOR OF SCIENCE IN
ACTURIAL SCIENCE, ECONOMICS AND STATISTICS, ECONIMICS
AND MATHEMATICS, AND BACHELOR OF SCIENCE

ACT 323/MATH 417/STAT 417: PROBABILITY AND STOCHASTIC

PROCESS

STREAM: Y3/S2 & Y4/S1 - REGULAR TIME: 9:00-11:00AM

EXAMINATION SESSION: MAY - AUGUST DATE: 00 / 08/2023

INSTRUCTIONS TO CANDIDATES
1. Answer Question 1 and any other two questions in the answer booklet provided.
2. Do not write on your question papers. All rough work should be done in your
answer booklet.
3. Clearly indicate which question you are answering.
4. Write neatly and legibly.
5. Edit your work for language and grammar errors.
6. Follow all the instructions in the answer booklet
QUESTION ONE (30 MARKS)
(a) Considering a birth – death processes, explain two methods of getting the mean and the
variance of the process. [4 marks]
(b) Consider a Fibonacci process given by 𝑏𝑛 = 𝑏𝑛−1 + 𝑏𝑛−2 where 𝑏0 = 𝑏1 = 1. Obtain the
generating function for the process. [4 marks]
(c) Consider a branching process where the probability distribution of the first generation 𝑍𝑛
1 3 3 1
is given by 𝑝0 = , 𝑝1 = , 𝑝2 = , 𝑝3 = , and 𝑝𝑛 = 0 for 𝑛 > 3. Let 𝑍𝑛 be the size of
8 8 8 8
𝑡ℎ
the 𝑛 generation. Assuming that the process starts with a single individual, find mean
and variance of the first generation [5 marks]

(d) Consider the Markov chain shown in Figure below. Identify the transient and recurrent
states, and the irreducible closed classes [4 marks]

(e) Consider the three states Markov chain having a transition probability matrix
2 1
[3 3]
1 1
2 2
Obtain the stationary distribution [3 marks]

(f) Let 𝑋 be a discrete variable with probability generating function

1 8𝑠 8𝑠 2 32𝑠 3 16𝑠 4
𝐺𝑋 (𝑠) = + + + +
81 81 27 81 81
Find the distribution of 𝑋. [3 marks]

(g) The number of customers arriving at Kabarak University cafeteria can be modelled by a
Poisson process with intensity 𝜆 = 11 customers per hour.
(i) Find the probability that there are three customers between 1005hrs and 1035hrs.
[3 marks]

(ii) Find the probability that there are seven customers between 1005hrs and 1035hrs
am and nine customers between 1030hrs and 1145hrs. [4 marks]
QUESTION TWO (20 MARKS)
a.) Consider the two states Markov chain having a transition probability matrix
3 1
[4 4]
1 4
5 5
(i) Check if it is a regular transition matrix [2 marks]
(ii) Obtain the stationary distribution [3 marks]
(iii) Find 𝜋 (4) given 𝜋 (0) = (0 1) [3 marks]

b.) Consider a Markov Chain with three possible states 𝑆 = [1, 2, 3], and the following
transition probabilities.

1 1 1
4 2 4
3 1
𝑃𝑖𝑗 = 0
4 4
1 1
[2 0
2]
(i) Draw a state transition diagram [2 marks]
(ii) Find:
I) 𝑃(𝑌4 = 3|𝑌3 = 2) [1 mark]
1
II) 𝑃(𝑌0 = 1, 𝑌1 = 2) if 𝑃 (𝑌0 = 1) = 3 [2 marks]
(2)
III) 𝑃13 [3 marks]
1
IV) 𝑃(𝑌1 = 3, 𝑌2 = 3, 𝑌3 = 1 ) if 𝑃 (𝑌1 = 1) = 𝑃 (𝑌1 = 2) = 3 [4 marks]

QUESTION THREE (20 MARKS)

(a) Explain the following terms as used in Stochastic processes.
(i) Random processes [2 marks]
(ii) Probability generating function [2 marks]
(iii) Poisson process [2 marks]

(b) Let 𝑋 be a discrete variable with probability generating function

𝑠2
𝐴𝑋 (𝑠) = (2 + 3𝑠 3 )
5
Find the distribution of 𝑋. [4 marks]

(c) Let 𝑋 have a Binomial distribution of the form

𝒏
𝑷𝒓𝒐𝒃 (𝑿 = 𝒙) = 𝒑𝒙 = ( ) 𝒑𝒙 𝒒𝒏−𝒙 , 𝒙 = 𝟎, 𝟏, 𝟐, … 𝒏
𝒙
 Obtain the probability generating function and hence find its mean and variance.
[10 marks]

QUESTION FOUR (20 MARKS)

1
(a) The 𝑝𝑔𝑓 of a positive integral valued variable is 𝑋 is given by, G(s) = 4−3s

If pn = Pr(X = n), find (i) p0 (ii) p1 and (iii) pn in general. [7 marks]

(b) The transition probabilities of a Markov chain are given by the following matrix;

E1 E2 E3 E4

E1 0.4 0 0 0.6

E2 0 0.25 0.75 0

E3 2 0 1 0
3 3
E4 0 0.5 0 0.5

(i) Show that the Markov chain is Ergodic. [6 marks]

(ii) Find the invariant distribution and give its interpretation. [7 marks]

QUESTION FIVE (20 MARKS)

a) Classify the states of the following Markov chain [6 marks]
0 1
[ ]
1 0
b) Briefly describe four ways how random process can be classified [8 marks]
c) Consider the process 𝑌(𝑡) = 𝐴 𝑐𝑜𝑠 (𝑤𝑡) + 𝐵 sin(𝑤𝑡) where 𝐴 and 𝐵 are
independent random variables and 𝑊 is a constant. Given 𝐸(𝐴) = 𝐸(𝐵) = 0
that 𝑉𝑎𝑟(𝐴) = 𝑉𝑎𝑟(𝐵) = 𝜎 2 . Show that the process is covariance stationary [NB:
𝐶𝑜v (𝐴, 𝐵) = 0] [6 marks]