The manager for State Bank and Trust has recently examined the credit card accou
ID: 3368196 • Letter: T
Question
The manager for State Bank and Trust has recently examined the credit card account balances for the customers of her bank and found that 20% have an outstanding balance at the credit card limit. Suppose the manager randomly selects 15 customers and finds 4 that have balances at the limit. Assume that the properties of the binomial distribution apply.
What is the probability of finding 4 customers in a sample of 15 who have “maxed out” their credit cards?
What is the probability that 4 or fewer customers in the sample will have balances at the limit of the card?
Explanation / Answer
Solution : Given that n = 15 , p = 0.20 , q = 1-p = 0.80
=> P(x = 4) = 0.1876
=> P(x <= 4) = 0.8358
Formula : For binomial distribution nCr*p^r*q^(n-r)
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