1. Cindy made a few late payments, and ended up defaulting on her credit card. What would her credit rating be?
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Answer:
The probability that at least two stocks will have a return of more than 12% is 0.1810.
Step-by-step explanation:
Let <em>X</em> = rate of return on stocks.
The random variable <em>X</em> follows a Normal distribution, N (9, 3²).
Compute the probability that a stock has rate of return more than 12% as follows:
**Use the <em>z</em> table for the probability.
The probability of a stock having rate of return more than 12% is 0.1587.
Now define a random variable <em>Y</em> as the number of stocks that has rate of return more than 12%.
The sample size of stocks selected is, <em>n</em> = 5.
The random variable <em>Y </em>follows a Binomial distribution.
The probability of a Binomial distribution is:
Compute the value of P (X ≥ 2) as follows:
P (X ≥ 2) = 1 - P (X < 2)
= 1 - P (X = 0) - P (X = 1)
Thus, the probability that at least two stocks will have a return of more than 12% is 0.1810.