Variance of Failures in 20 Trials: Calculation and Probability of Success | CFA Level 1 Exam Preparation

Probability of Success in a Trial

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Question

A trial generates only two results, "success" and "failure." The variance of the number of failures in 20 trials equals 2.35. The probability of success on a given trial equals ________.

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A. B. C. D.

B

For a binomial distribution with N trials, with the probability of success = p in each trial, the variance equals Np(1-p). Hence, 20*p*(1-p) = 2.35. Solving this gives quadratic equation gives p = 0.136.

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