Find the Indicated Probability

question 193

Multiple Choice

Find the indicated probability. Round to the nearest thousandth.
-In a batch of 8,000 clock radios 2% are defective. A sample of 11 clock radios is randomly selected without replacement from the 8,000 and tested. The entire batch will be rejected if at least one of those tested is defective.
What is the probability that the entire batch will be rejected?

• A) 0.0909
• B) 0.199
• C) 0.801
• D) 0.0200

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Definitions:

At-The-Money

A financial term describing an option whose strike price is identical to the current price of the underlying asset.

Put Option

A financial contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified time.

Stock Price

The cost of purchasing a share of a company, which fluctuates based on supply and demand in the stock market.

Exercise Price

The predetermined price at which the holder of an option can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset.