Tax Audits In Exercise 6.28, we suggested that the IRS assigns auditing rates per state by randomly selecting 50 auditing percentages from a normal distribution with a mean equal to 1.55% and a standard deviation of .45%.
a. What is the probability that a particular state would have more than 2% of its tax returns audited?
b. What is the expected value of x, the number of states that will have more than 2% of their income tax returns audited?
c. Is it likely that as many as 15 of the 50 states will have more than 2% of their income tax returns audited?
Reference:
Tax Audits How does the IRS decide on the percentage of income tax returns to audit for each state? Suppose they do it by randomly selecting 50 values from a normal distribution with a mean equal to 1.55% and a standard deviation equal to .45%. (Computer programs are available for this type of sampling.)
a. What is the probability that a particular state will have more than 2.5% of its income tax returns audited?
b. What is the probability that a state will have less than 1% of its income tax returns audited?
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