Answer:
b) 0.0007
c) 0.4163
d) 0.2375
Step-by-step explanation:
We are given the following:
We treat securities lose value as a success.
P(Security lose value) = 70% = 0.7
Then the securities lose value follows a binomial distribution, where
where n is the total number of observations, x is the number of success, p is the probability of success.
Now, we are given n = 20.
a) Assumptions
- There are 20 independent trials.
- Each trial have two possible outcome: security loose value or security does not lose value.
- The probability for success of each trial is same, p = 0.7
b) P(all 20 securities lose value)
We have to evaluate:
0.0007 is the probability that all 20 securities lose value.
c) P(at least 15 of them lose value.)
d) P(less than 5 of them gain value.)
P(gain value) = 1 - 0.7 = 0.3