An Insurance Company Receives 40 Claims in a Certain Month

question 109

Multiple Choice

An insurance company receives 40 claims in a certain month. Company policy mandates that a random selection of 5 of these claims be thoroughly investigated. If 3 of the 40 claims are fraudulent, find the probability that none of the fraudulent claims are thoroughly investigated. Round your answer to three decimal places. ​

• A)0.025
• B)0.001
• C)0.662
• D)0.493

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Definitions:

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or the normal operating cycle of the business, whichever is longer.

Balance Sheet

A financial statement that displays the company's assets, liabilities, and shareholders' equity at a specific point in time, offering insight into its fiscal health.

Direct Write-Off Method

A method of accounting for bad debts that charges the amount of an outstanding account directly to the expense account at the time it is deemed uncollectable.

Accounting Equation

A fundamental principle of accounting that equates assets with the sum of liabilities and shareholders' equity (Assets = Liabilities + Equity).