A bank classifies its customer as either good or bad credit risks. Based onhistorical data, the bank observed that 1% of good credit risks and 10% of badcredit risks are late in paying their loan in any given month. A new customer wasapproved for a loan at this bank. From the credit agency checking, the bankbelieves that there is a 70% chance the customer will turn out to be a good creditrisk.(a)(b)(c)Suppose that this customer's account is overdue in the first month.Calculate the probability of this customer's creditworthiness.If the customer's account is also overdue in the second month, calculatethe probability of this customer's creditworthiness.Comment on the bank's opinion of this customer's creditworthiness.

We are given here that: P( late | good) = 0.01 P( late | bad) = 0.1 P( good ) ) = 0.7

Answered: A bank classifies its customer as…

A First Course in Probability (10th Edition)

10th Edition

ISBN:9780134753119

Author:Sheldon Ross

Publisher:Sheldon Ross

Chapter1: Combinatorial Analysis

Section: Chapter Questions

Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...

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Westminster Financial has released a summary of investment package information from the past fiscal year. During that time, Westminster provided a choice of several pre-designed investment packages. Westminster classified the packages into three categories according to riskiness. We're interested in the possible relationship between the age of an investor and the riskiness of the investment package she chose. So, there are two variables under consideration: age of Westminster investor ("under 35", "35-49", or "50+") and riskiness of investment choice ("risky", "moderate/mixed", or "conservative"). The contingency table below gives a summary of the information released by Westminster regarding age and riskiness of investment package for a random sample of 150 investors. Each cell of the table contains three numbers: the first number is the observed cell frequency (fo); the second number is the expected cell frequency (f) under the assumption that there is no relationship between the two…
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12
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