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…

Calculus For The Life Sciences

2nd Edition

ISBN:9780321964038

Author:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.

Publisher:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.

Chapter12: Probability

Section12.CR: Chapter 12 Review

Problem 16CR

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