Q36 Chapter 5

An alert and hardworking student has noticed that the answer in the textbook for Q36 on binomials seems to be wrong. I'd agree. I worked it out by hand and by Excel. You don't need the by hand part...I was just using this to double-check my work. Thanks to that student (no names, you know who you are!)

36.   a.     p = ¼ = .25

                

                 

                           

                            f (4) = BINOMDIST(4,20,.25,FALSE) = .1897

         b.     P(x  >  2)  =  1 – f(0) – f(1)

                 P(x  >  2)  =  1 – BINOMDIST(1,20,.25,TRUE) = .9757

         c.     f (12) = BINOMDIST(12,20,.25,FALSE) = .0008

                 And, with f (13) = .0002, f (14) = .0000, and so on, the probability of finding that 12 or more investors have exchange-traded funds in their portfolio is so small that it is highly unlikely that p = .25. In such a case, we would doubt the accuracy of the results and conclude that p must be greater than .25.

         d.     m  =  n p  =  20 (.25)  =  5