What type of probability distribution will the consulting firm most likely employ to analyze the insurance claims in the following problem?
An insurance company has called a consulting firm to determine if the company has an
Unusually high number of false insurance claims. It is known that the industry proportion for
False claims is 3%. The consulting firm has decided to randomly and independently sample
100 of the company's insurance claims. They believe the number of these 100 that are false
Will yield the information the company desires.
A) binomial distribution.
B) Poisson distribution.
C) hypergeometric distribution.
D) none of the above.

Question

Quizplus · Accepted Answer

The binomial distribution is appropriate here because the problem involves a fixed number of independent trials (100 claims), each with two possible outcomes (false claim or not), and a constant probability of success (3% false claims).

What Type of Probability Distribution Will the Consulting Firm Most