Question : What is the probability that of 15 such returns at most four will be audited?
Let X be the number of tax returns over $ 80k that will be audited. What is the probability of X? find the probability

Suppose that the Internal Revenue Service will audit 20% of income tax returns reporting an annual gross income of over $ 80K.
internal revenue audit

Best answer:

Answer by M3
binomial distribution with n = 15, p = .2, q = 1-p = .8

and formula for x audits in n returns being

P[x] = nCx * p^x * q^(n-x), eg

P[4] = 15c4 *.2^4 *.8^11 = .1876

we need to compute P[< = 4] = P[0] + P[1] +….P[4] in the above manner to get

reqd. probability

= .8358
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