Investment advisors agree that near-retirees, defined as people aged 55 to 65, s

Question

Investment advisors agree that near-retirees, defined as people aged 55 to 65, should have balanced portfolios. Most advisors suggest that the near-retirees have no more than 50% of their investments in stocks. However, during the huge decline in the stock market in 2008, 20% of near-retirees had 80% or more of their investments in stocks. Suppose you have a random sample of 10 people who would have been labeled as near-retirees in 2008.

What is the probability that during 2008 three or more had 80% or more of their investment in stocks?

Explanation / Answer

Solution:- Given that n = 10 , p = 0.20

P(X >= 3) = 1 - P(X < 3)
= 1 - [ P(X = 0) + P(X = 1) + P(X = 2)]
= 1 - ( 0.1074 + 0.2684 + 0.3020)
= 0.3222

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