Determine whether the following probability experiment represents a binomial exp

Question

Determine whether the following probability experiment represents a binomial experiment and explain the reason for your answer.

An investor randomly purchases 17 stocks listed on a stock exchange. Historically, the probability that a stock listed on this exchange will increase in value over the course of a year is 47%.The number of stocks that increase in value is recorded.

Does the probability experiment represent a biniomial experiment?

A. No, because there are more than two mutually exclusive outcomes for each trial.

B. No, because the trials of the experiment are not independent.

C. Yes, because the experiment satisfies all the criteria for a binomial experiment.

D. No, because the probability of success differs from trial to trial.

Explanation / Answer

The correct option is C

Yes, because the experiment satisfies all the criteria for a binomial experiment.

Explanantion:

There are two outcomes (increases, doesn't increase) so A is out.
Just because one stock increased or didn't does not affect the probability for another stock so B is out.
And P(increase) is always 0.47 so D is out.

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