Question: A bank classifies borrowers as high risk or low risk. Only 15% of its loans are made to those in the high-risk category. Of all

A bank classifies borrowers as high risk or low risk. Only 15% of its loans are made to those in the high-risk category. Of all its loans, 5% are in default, and 40% of those in default were made to high-risk borrowers.
What is the probability that a high-risk borrower will default?

Step by Step Solution

★★★★★

3.35 Rating (167 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Let event A high risk borrowe... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

488-M-S-P (2108).docx

120 KBs Word File

Students Have Also Explored These Related Statistics Questions!

What is the probability that the following project will take more than 10 weeks to complete if the activity means and standard deviations are as shown below? Activity Mean Standard Deviation 1-2 2-3...

What is the probability that no two students will have the same birth date in a size of 60 classes?

What is the probability that an electron in the ground state of the hydrogen atom will be found between two spherical shells whose radii are r and r + r, (a) if r = 0.500a and r = 0.010a and (b) If r...

Please help me to solve this question Question 4: A bank classifies borrowers as high risk and low risk. Only 15% of its loans are made to those in the high-risk category. Of all its loans, 5% are in...

A bank classifies borrowers as high risk or low risk. Only 15% of its loans are made to those in the highrisk category. Of all its loans, 5% are in default, and 40% of those in default were made to...

For all questions asking for probabilities you must write the probability statement of what you are asked to find. (e.g., P(AnB)) 1. A bank classifies borrowers as "high risk" or "low risk". A recent...

3.45 A bank classifies borrowers as high risk or low risk. Only 15% of its loans are made to those in the highrisk category. Of all its loans, 5% are in default, and 40% of those in default were made...

You must show all of your work to receive full credit on problems. You must write complete sentences when asked to show/prove something or provide an explanation/justification. You are encouraged to...

Hi, I have an Assignment for my Finance Subject. I have attached the necessary documentation here for you to view including the Lecture slides of all the Topics covered for this assignment. Please...

1.Establishing a market value for older buildings is more problematic using the: cost approach. direct comparison approach. capitalisation approach. both a and b. 2.The capitalisation approach...

How may the 8 specific areas of corruption discussed in Kevin J. Grants article, Ethic and law Enforcement , FBI bulletin, Dec. 2002, influence the operations of a police organization? Name the areas.

Larry's Appliance Shop operates retail stores that sell appliances. The cost objects are the individual sales of a given type of appliance and sales support. For refrigerators in July, the following...

Financial Accounting provides a historical perspective, whereas management accounting: a . only enables managers to make decisions b . emphasizes reports to shareholders c . emphasizes a current...

13. Typically, the analyst must modify the underlying assumptions, ____________and therefore the projections, several times during the year as diverges from ____________.

Problems 1 and 2 used different forecasting methods. Which method appears to provide the more accurate forecasts for the historical data?Explain. Week 2 3 4 5 6 Valu 18 13 16 1 17 14

Consider the following time series data: a. Compute MSE using the most recent value as the forecast for the next period. What is the forecast for month 8? b. Compute MSE using the average of all the...

The values of Alabama building contracts (in millions of dollars) for a 12-month period follow: 240 350 230 260 280 320 220 310 240 310 240 230 a. Construct a time series plot. What type of pattern...

I need help with these questions Suppose that over a certain region of space the electrical potential V is given by V(x. y. 2) = 7r - Ary + ryz. Find the rate of change of the potential at P(1. 3, 7)...

Week 9 * Question Completion Status: Week 10 Week 11 Which of the following are characteristics of the normal distribution O A. It is bell-shaped Week 12 O B. It extends indefinitely in each...

Fitness Machine A fitness center bought a new exercise machine called the Mountain Climber. They decided to keep track of how many people used the machine over a 3-hour period, Here X is the number...