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23 July, 00:36

5.16. According to Cerulli Associates of Boston, 30% of all CPA financial advisors have an average client size between $500,000 and $1 million. Thirty-four percent have an average client size between $1 million and $5 million. Suppose a complete list of all CPA financial advisors is available and 18 are randomly selected from that list. What is the expected number of CPA financial advisors that have an average client size between $500,000 and $1 million? What is the expected number with an average client size between $1 million and $5 million?

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  1. 23 July, 00:58
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    (a) 5

    (b) 6

    Explanation:

    (a) Expected number of CPA financial advisors that have client size between $500,000 and $1 million:

    No. of financial advisors randomly selected, n = 18

    CPA financial advisors have an average client size between $500,000 and $1 million, p1 = 0.30

    As it follows Binomial distribution:

    So, expected number of client size = np 1

    = 18 * 0.3

    = 5.4 or 5 (approx)

    (b) CPA financial advisors have an average client size between $1 million and $5 million, p2 = 0.34

    Expected number of CPA financial advisors that have client size between $1 million and $5 million:

    So, expected number of client size = np2

    = 18 * 0.34

    = 6.1 or 6 (approx)
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