Question

Forty percent of the home owners applying for a home equity loan are approved by lenders. If in a given day 20 applications are received, what probability distribution should be used to calculate the probability that 10 applications are approved

Answer 1

Binomial probability distribution.

0.1171

Explanation:

p = 40% = 0.4 ; q = 1-p = 1 - 0.4 = 0.6

n = 20 ; x = 10

P(x = x) = nCr * p^x * q^(n-r)

P(x = 10) = 20C10 * 0.4^10 * 0.6^10

P(x = 10) = 184756 * 0.0001048576 * 0.0060466176

P(x = 10) = 0.11714155

P(x = 10) = 0.1171