Question

In the following problem, check that it is appropriate to use the normal approximation to the binomial. Then use the normal distribution to estimate the requested probabilities.

Do you try to pad an insurance claim to cover your deductible? About 39% of all U.S. adults will try to pad their insurance claims! Suppose that you are the director of an insurance adjustment office. Your office has just received 126 insurance claims to be processed in the next few days. Find the following probabilities. (Round your answers to four decimal places.)

(a) half or more of the claims have been padded


(b) fewer than 45 of the claims have been padded


(c) from 40 to 64 of the claims have been padded


(d) more than 80 of the claims have not been padded

Answer 1

Here, np=126*0.39=49.14>5 and nq=126*(1-0.39)=76.86>5

Therefore , use the normal approximation ,

(a) Now ,

; From the standard normal probability table

Therefore , the probability that the half or more of the claims have been padded is 0.0057

(b) Now ,

  ; From the standard normal probability table

Therefore , the probability that the fewer than 45 of the claims have been padded is 0.2236

(c) Now ,

  ; From the standard normal probability table

Therefore , the probability that from 40 to 64 of the claims have been padded is 0.9481

(d) Now ,

  ; From the standard normal probability table

Therefore , required probability = 1-0.00001

Therefore , the probability that the more than 80 of the claims have not been padded is approximately 1.