Step 1: Binomial Probability Formula
\[
P(X = k) = \binom{n}{k} p^k (1 - p)^{n - k}
\]
Given: \( n = 5, k = 3, p = 0.2 \),
\[
P(X = 3) = \binom{5}{3} (0.2)^3 (0.8)^2
\]
Step 2: Computation
\[
= 10 \times (0.008) \times (0.64)
\]
\[
= 10 \times 0.00512 = 0.0512
\]
\[
= \frac{32}{625}
\]
Thus, the correct answer is \( \frac{32}{625} \).