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Colt1911 [192]
3 years ago
13

Four percent of the customers of a mortgage company default on their payments. a sample of five customers is selected. what is t

he probability that exactly two customers in the sample will default on their payments?
Business
1 answer:
Maurinko [17]3 years ago
8 0
We can use the formula for binomial distribution in calculating for the probability that exactly two customers out five will default on their payments.

The formula is:   P(r) = nCr*q^(n-r)*p^r   
Where:
n = sample size, 5
r = successes, 2
q = failure rate, 96% = 0.96
r = success rate, 4% = 0.04  

Substituting on the formula:
P = 5C2*0.96^3*0.04^2 
<span>P = 0.0142 or 1.42%</span>
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