Problem 5A bank is considering extending credit to anew customer and is interested in theprobability that the client will default on theloan. Based on data that the bank hasaccumulated over many years of business,there is a 5% chance that a customer whohas overdrawn an account will default onthe loan, whereas there is only a 0.5%chance that a customer who has neveroverdrawn an account will default on theloan. Unfortunately, the bank does notknow for sure what type of risk the newcustomer will turn out to be. Based onbackground checks and credit reports, thebank believes that there is a 30% chancethat the new customer will overdraw theaccount.Determine the probability that thecustomer will default on the loan if credit isextended.

Given: Let O denotes who has overdrawn, D denotes default P(O) = 0.30 P(D |O) = 0.05 P(D | O') =…

Answered: A bank is considering extending credit…

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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