CFA Level 1: Probability of No Returns for Diamond Wedding Rings

Probability of No Returns for Diamond Wedding Rings

Prev Question Next Question

Question

Carlson Jewelers permits the return of their diamond wedding rings, provided the return occurs within two weeks of the purchase date. Their records reveal that 10 percent of the diamond wedding rinds are returned. Five rings are bought by five different customers. What is the probability that none will be returned?

Answers

Explanations

Click on the arrows to vote for the correct answer

A. B. C. D. E.

Explanation

This is a binomial probability. The probability of getting r successes out of n trials where the probability of success each trial is p and probability of failure each trial is q (where q = 1-p) is given by: n!(p^r)[q^(n-r)]/r!(n-r)!. Here n = 5, r = 0,p = 0.10 and q = 0.90. Therefore we have 5!(0.1^0)(0.9^5)/0!5! = 0.590.

Prev Question Next Question