Four percent of the customers of a mortgage company default on their payments. A sample of five customers is selected. What is the probability that exactly two customers in the sample will default on their payments?
A)0.2592
B)0.0142
C)0.9588
D)0.7408

Question

Quizplus · Accepted Answer

This problem involves a binomial probability distribution with n=5 and p=0.04. The probability of exactly two defaulting is:
P(X=2) = (5 choose 2) * (0.04)^2 * (0.96)^3
= 0.0142
Therefore, the answer is B.

Four Percent of the Customers of a Mortgage Company Default