SOLUTION: This question really has me stumped.
A banker knows from previous experience that 3% of loans will default. He makes 50 loans in a day. What is the probability that 5 of those 5
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Question 643651: This question really has me stumped.
A banker knows from previous experience that 3% of loans will default. He makes 50 loans in a day. What is the probability that 5 of those 50 loans will default?
I tried viewing it as each loan either defaults or it doesn't so each loan is a .5% probability.
Which gave me 0.5 x 0.5 x 0.5 x 0.5 x 0.5 = 0.03125 but that seems to completely negate the need for the previous experience factor given.
Answer by solver91311(24713) (Show Source): You can put this solution on YOUR website!
The probability of 
successes in 
trials where 
is the probability of success on any given trial is given by:
\ =\ {{n}\choose{k}}\left(p\right)^k\left(1\,-\,p\right)^{n\,-\,k})
Where 
is the number of combinations of things taken at a time and is calculated by !})
You want:
\ =\ {{50}\choose{5}}\left(0.03\right)^5\left(0.97\right)^{45})
The arithmetic is all yours. Have fun.
John
My calculator said it, I believe it, that settles it
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