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) Poisson distribution
B) binomial distribution
C) hypergeometric distribution
D) none of the above

Question

Quizplus · Accepted Answer

The financial analyst is selecting 3 companies out of the group of 60, which is a sample without replacement. This fits the definition of a hypergeometric distribution, which is used for calculating probabilities in situations where the sample size is small relative to the population size and where sampling without replacement is involved. The Poisson distribution is used for calculating the probability of rare events occurring in a fixed interval of time or space. The binomial distribution is used for calculating probabilities of success or failure in a fixed number of independent trials. Neither of these fits the scenario presented in the question.

A Financial Analyst Is Presented with Information on the Past