An April 14, 2015, article by Kara Brandeisky on Money magazine’s website states that overall the chance of being audited by the IRS in 2014 was 0.86%. If a person’s adjusted gross income was between $50,000 and $74,999, the chance of being audited drops to 0.53%, and for those with incomes higher than $10 million, the chance goes up to 16.22%.
a. Considering these probabilities, discuss which probability assessment method you believe was most likely used to arrive at the probabilities.
b. Based on chance alone and not taking income into account, what is the overall probability that you and your best friend will both be audited? (Assume the 2014 chances still apply.)
c. Suppose Harry made $13 million in 2014 and his daughter, Sarah, made $55,000. What is the probability that neither of them was audited by the IRS based on chance alone?