A stock analyst was provided with a list of 25 stocks.He was expected to pick 3 stocks from the list whose prices are expected to rise by more than 20% after 30 days.The prices of only 5 stocks would rise by more than 20% after 30 days.If he randomly selected 3 stocks from the list,he would use what type of probability distribution to compute the probability that all the chosen stocks would appreciate more than 20% after 30 days?
A)binomial distribution.
B)Poisson distribution.
C)hypergeometric distribution.
D)none of the above.

Question

Quizplus · Accepted Answer

The situation described fits the hypergeometric distribution, which models the probability of obtaining a specific number of successes (in this case, stocks that appreciate more than 20%) in a fixed sample size (3 stocks) without replacement from a finite population (25 stocks). The binomial distribution would apply if the analyst was picking with replacement from an infinite population or a very large population. The Poisson distribution would apply if the events were rare and could be approximated by a Poisson process, but this is not the case here.

A Stock Analyst Was Provided with a List of 25