- CFA Exams
- CFA Level I Exam
- Study Session 3. Quantitative Methods (2)
- Reading 9. Common Probability Distributions
- Subject 5. The Binomial Distribution

###
**CFA Practice Question**

MRC produces chips with a defective rate of 15%. For an random sample of 20 chips from MRC, let X count the number of defective chips in the sample (and assume x is a binomial random variable), P(X < 2) = ______ (to nearest 0.001).

A. 3.9%

B. 17.6%

C. 30%

**Explanation:**Binomial random variable X has N = 20 and p = 0.15. Using the calculator, we find P(X < 2) = p(0) + p(1) = 0.0387 + 0.1368 = 0.1755 = 17.6% (to the nearest 0.1%).

###
**User Contributed Comments**
8

User |
Comment |
---|---|

Pooh |
use the binomial random variable probability formula |

andy4cfa |
p(0)= power(.85,20) = 0.0387 p(1)= power(.85,19)*.0.15*20 = 0.1368 |

schandri |
what calculator are we talking about?? what's power function? |

thanks |
Binomial Probability = rCn * p^r * (1-p)^(n-r) p(0) = 1 * 0.15^0 * 0.85^20 = 1 * 1 * 0.0387 p(1) = 20 * 0.15^1 * 0.85^19 = 0.1368 p(X<2) = p(0) + p(1) = 0.0387 + 0.1368 = 0.1756% |

chamad |
Am I missing any way to do it through BAII? |

Gooner7 |
damn that wasnt that hard! |

thekobe |
remember the binomial function formula n!/(n-r!)r!* (p^r*(1-p)^n-r) in this case you have to evaluate the cases that are less than 2, that is 0 and 1. for 0 you have n= 20 r =0, for 1 you have n=20 r=1 |

safash |
Binomial formula rules!!!!!!!!!!! |