Question

Suppose the probability of an irs audit is 2.8 percent for U.S. taxpayers who file form 1040 and who earn 100,000 or more. What are the odds that taxpayer would be audited?

Answer 1

Answer:

So, the odds that a taxpayer would be audited 28 to 972 or 2.88%

Step-by-step explanation:

Given

Let P(A) = Probability of irs auditing

P(A) = 2.8%

Let n = number of those who earn above 100,000

To get the odds that taxpayer would be audited, we need to first calculated the proportion of those that will be audited and those that won't.

If the probability is 2.8% then 2.8 out of 100 will be audited. That doesn't make a lot of sense since you can't have 2.8 people; we multiply the by 10/10

i.e.

Proportion, P = 2.8/100 * 10/10

P = 28/1000

The proportion of those that would not be audited is calculated as follows;

Q = 1000 - P

By substituton

Q = 1000 - 28

Q = 972

So, the odds that a taxpayer would be audited 28 to 972 or P/Q

P/Q = 28/972

= 0.0288065844

= 2.88% --- Approximately