4.29 Of a finance company's loans, 1% are defaulted (not completely repaid). The companyroutinely runs credit checks on all loan applicants. It finds that 30% of defaulted loans went topoor risks, 40% to fair risks, and 30% to good risks. Of the nondefaulted loans, 10% went to poorrisks, 40% to fair risks, and 50% to good risks. Use Bayes' Formula to calculate the probabilitythat a poor-risk loan will be defaulted.

In this problem, we are asked to find the probability that a poor-risk loan will be defaulted using…

Answered: 4.29 Of a finance company's loans, 1%…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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Similar questions

Brandybuck Insurance Company (BIC) is deciding whether to insure the lives of those leading a quest to Moria. Based on past experience, the probability of surviving such a quest is 91.8%. If BIC charges a premium of 8,449 silver coins and would pay a death benefit of 87,797 silver coins if the insured were to die, what is the expected value of this insurance policy to BIC? Round to the nearest silver coin as needed. If the expected value is a loss to BIC, enter your answer as a negative number.
A local TV station employs Desmorelda, “Mistress of the Zodiac”, as its weather forecaster. She predicts a rainy day on the basis of Lunar phases. From statistical data (which is available to Desmorelda too) it is known that the probability of a rainy day during the Full Moon is 0,478, during the Third Quarter – 0,513, during the New Moon – 0,499, and during the First Quarter – 0,506. All phases last equally and the whole Lunar cycle takes 28 days. What is the probability that on a certain day Desmorelda will predict rain?
A certain model phone costs $599. The probability of the phone breaking over the course of a year is .07. What is the maximum amount you could pay for phone replacement insurance and still have a non-negative expected value on the policy? In other words, for what price or below would it be worth it to get the insurance?
An airline is considering adding a route to the city of Buffalo, NY. Market research predicts that if the airline serves Buffalo, there is a 32% probability of making a $500,000 profit, a 22% chance of breaking even, and a 46% probability of losing $300,000. What is the expected value of adding a route to Buffalo?
Brandybuck Insurance Company (BIC) is deciding whether to insure the lives of those leading a quest to Moria. Based on past experience, the probability of surviving such a quest is 80.6%. If BIC charges a premium of 8,499 silver coins and would pay a death benefit of 52,297 silver coins if the insured were to die, what is the expected value of this insurance policy to BIC?
A company estimates that 0.7% of their products will fail after the original warranty period but within 2 years of the purchase, with a replacement cost of $50.If they offer a 2 year extended warranty for $4, what is the company's expected value of each warranty sold?
A small business is studying the number of customers that enter the store. They record the number of customers entering every hour for three days, and find that 27% of the time two customers enter the store in an hour, 28% of the time of the time one customer enters the store in an hour, and the remainder of the time no one enters the store in an hour. What is the expected number of customers per hour?
A company estimates that 0.1% of their product will fail after th original warranty period but within 2 years of the purchase, with a replacement cost of $350. If they offer a 2 year warranty for $18 , what is the company's expected value of each warranty sold?
There is a 0.9985 probability that a randomly selected 33 year old male lives through the year. A life insurance company charges $155 for insuring that the male will live through the year. If the male does not survive the year, the policy pays out $100,000 as a death benefit. From the perspective of the 33 year old male, what are the monetary values corresponding to the two events of surviving the year and not surviving?
Brandybuck Insurance Company (BIC) is deciding whether to insure the lives of those leading a quest to Moria. Based on past experience, the probability of surviving such a quest is 88.9%. If BIC charges a premium of 8,240 silver coins and would pay a death benefit of 56,881 silver coins if the insured were to die, what is the expected value of this insurance policy to BIC? Round to the nearest silver coin as needed. If the expected value is a loss to BIC, enter your answer as a negative number. Phil Dunphy, a real estate agent, is considering whether he should list an unusual $303,402 house for sale. If he lists it, he will need to spend $3,848 in advertising, staging, and fresh cookies. The current owner has given Phil 6 months to sell the house. If he sells it, he will receive a commission of $23,557. If he is unable to sell the house, he will lose the listing and his expenses. Phil estimates the probability of selling this house in 6 months to be 73%. What is the expected…
Suppose a life insurance company sells a $280,000 one-year term life insurance policy to a 24-year-old female for $180. The probability that the female survives the year is 0.999522. Compute and interpret the expected value of this policy to the insurance company.
Brandybuck Insurance Company (BIC) is deciding whether to insure the lives of those leading a quest to Moria. Based on past experience, the probability of surviving such a quest is 95.5%. If BIC charges a premium of 9,900 silver coins and would pay a death benefit of 49,518 silver coins if the insured were to die, what is the expected value of this insurance policy to BIC? Round to the nearest silver coin as needed. If the expected value is a loss to BIC, enter your answer as a negative number.

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