Question: An analyst develops a model for forecasting bond defaults. The model is 90% accurate. In other words, of the bonds that actually default, the model

An analyst develops a model for forecasting bond defaults. The model is 90% accurate. In other words, of the bonds that actually default, the model identifies 90% of them; likewise, of the bonds that do not default, the model correctly predicts that 90% will not default. You have a portfolio of bonds, each with a 5% probability of defaulting. Given that the model predicts that a bond will default, what is the probability that it actually defaults?

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