CFA Practice Question

There are 434 practice questions for this study session.

CFA Practice Question

A manufacturer of headache medicine claims it is 70 percent effective within a few minutes. That is, out of every 100 users 70 get relief within a few minutes. A group of 12 patients are given the medicine. If the claim is true, what is the probability that 8 have relief within a few minutes?
A. 0.231
B. 0.667
C. 0.168
Explanation: This is a binomial probability. The probability of getting r successes out of n trials where the probability of success each trial is p and probability of failure each trial is q (where q = 1-p) is given by: n!(pr)[q(n-r)]/r!(n-r)!. Here n = 12, r = 8,p = 0.7 and q = 0.3. Therefore we have 12!(0.78)(0.34)/8!4! = 0.231.

User Contributed Comments 4

User Comment
flobeebhead anyone have an explanation for this question? thanks
Alionik Excersice to train a for binominal probability formular (see page 378)
12! / ((12-8)!*8!) * 0.7 ^8 * 0.3^4 = 0.2311
rsanfo BA II Plus
==========
12
2ND nCr
8 = <answer is 495)
x (.7 y_to_the_x 8)
x (.3 y_to_the_x 4)
= <answer is 0.23114>
maria15 Thanks rsanfo. That's a big help!
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