CFA Practice Question

There are 434 practice questions for this study session.

CFA Practice Question

A trial generates only two results, "success" and "failure." The probability of success is higher than that of failure. The variance of the number of failures in 20 trials equals 2.35. The probability of success on a given trial equals ______.
A. 0.136
B. 0.864
C. 0.452
Explanation: For a binomial distribution with N trials, with the probability of success = p in each trial, the variance equals Np(1-p). Hence, 20 x p x (1 - p) = 2.35. Solving this quadratic equation gives p = 0.136 or p = 0.864.

User Contributed Comments 9

User Comment
DAS11 Should be q=.136 (prob of failure), then p=.864 (prob of success). right?
dimos right!
PedroEdmundo No need to calculate, sinceP has to be greater than 0.50 and only B is greater than that.
andy4cfa Remembe the formular: variance = Np(1-p)
labsbamb right pedro p is higher than q
hence p>0.5
The only choice is B
cfaeater Could someone just please state the formula to calculate this rather than just guessing? Do we need to rearrange the formula np(1-p)? If so how does this rearranged formula look?
poomie83 yes variance and number are given so you have to solve for probability of success/failure
shwade Is there a calc. shortcut for the quad. equation on the BA II Plus
CJHughes Would appreciate it if someone could break down the quadratic equation. Thanks
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