# Question

In the current tax year, suppose that 5% of the millions of individual tax returns are fraudulent. That is, they contain errors that were purposely made to cheat the government.

a. Although these errors are often well concealed, let’s suppose that a thorough IRS audit will uncover them. If a random 250 tax returns are audited, what is the probability that the IRS will uncover at least 15 fraudulent returns?

b. Answer the same question as in part a, but this time assume there is only a 90% chance that a given fraudulent return will be spotted as such if it is audited.

a. Although these errors are often well concealed, let’s suppose that a thorough IRS audit will uncover them. If a random 250 tax returns are audited, what is the probability that the IRS will uncover at least 15 fraudulent returns?

b. Answer the same question as in part a, but this time assume there is only a 90% chance that a given fraudulent return will be spotted as such if it is audited.

## Answer to relevant Questions

Suppose you work for a survey research company. In a typical survey, you mail questionnaires to 150 companies. Of course, some of these companies might decide not to respond. Assume that the non-response rate is 45%; that ...Suppose the number of baskets scored by the Indiana University basketball team in one minute follows a Poisson distribution with λ = 1.5. In a 10-minute span of time, what is the probability that Indiana University scores ...A finance professor has just given a midterm examination in her corporate finance course and is interested in learning how her class of 250 students performed on this exam. The data are in the file P05_50.xlsx. Use @RISK to ...When you sum 30 or more independent random variables, the sum of the random variables will usually be approximately normally distributed, even if each individual random variable is not normally distributed. Use this fact to ...A soft-drink company produces 100,000 12-ounce bottles of soda per year. By adjusting a dial, the company can set the mean number of ounces placed in a bottle. Regardless of the mean, the standard deviation of the number of ...Post your question

0