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If X is a random variable and a, b are real numbers, then which of the following statements are correct?

(A) E[aX+b]=aE(X)+bE[aX+b] = a E(X) + b

(B) Var(aX+b)=a2Var(X)+bVar (aX + b) = a^2 Var (X) + b

(C) Var(aX+b)=aVar(X)Var (aX + b) = a Var (X)

(D) Var(X)=E(X2)[E(X)]2Var (X) = E(X^2) - [E(X)]^2

Choose the correct answer from the options given below:

Solution

Correct Option: 2

For statement (A): E[aX+b]=aE(X)+bE[aX+b] = a E(X) + b

The linearity of expectation gives us that multiplying a random variable by constant aa multiplies the expectation by aa, and adding constant bb adds to the expectation.

Statement (A) is correct.


For statement (B): Var(aX+b)=a2Var(X)+bVar(aX + b) = a^2 Var(X) + b

The correct formula is Var(aX+b)=a2Var(X)Var(aX + b) = a^2 Var(X).

Adding a constant bb does not change variance since variance measures spread. Shifting all values by constant bb does not change the spread.

Statement (B) is incorrect.


For statement (C): Var(aX+b)=aVar(X)Var(aX + b) = a Var(X)

The correct formula is Var(aX+b)=a2Var(X)Var(aX + b) = a^2 Var(X).

Multiplying by constant aa multiplies variance by a2a^2, not aa.

Statement (C) is incorrect.


For statement (D): Var(X)=E(X2)[E(X)]2Var(X) = E(X^2) - [E(X)]^2

This is the standard variance formula where:

E(X2)E(X^2) is the average of squares

[E(X)]2[E(X)]^2 is the square of average

Variance equals the average of squares minus the square of average.

Statement (D) is correct.


Only statements (A) and (D) are correct.

The correct answer is Option 2: (A) and (D) only.

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