A financial analyst is presented with information on the past records of 60 start-up companies and told that in fact only 3 of them have managed to become highly successful. He selected 3 companies from this group as the candidates for success. To analyze his ability to spot the companies that will eventually become highly successful, he will use what type of probability distribution?
A) binomial distribution
B) Poisson distribution
C) hypergeometric distribution
D) None of the above.

Question

Quizplus · Accepted Answer

The analyst is selecting 3 companies from a group of 60, which means the sample size is fixed and the probability of success (a start-up becoming highly successful) changes for each selection (i.e. it is not independent). Therefore, the appropriate probability distribution to use is the hypergeometric distribution.

A Financial Analyst Is Presented with Information on the Past