A bank classifies its customer as either good or bad credit risks. Based on historical data,...

 

Transcribed Image Text:

A bank classifies its customer as either good or bad credit risks. Based on historical data, the bank observed that 1% of good credit risks and 10% of bad credit risks are late in paying their loan in any given month. A new customer was approved for a loan at this bank. From the credit agency checking, the bank believes that there is a 70% chance the customer will turn out to be a good credit risk. (a) (b) (c) Suppose that this customer's account is overdue in the first month. Calculate the probability of this customer's creditworthiness. [7 marks] If the customer's account is also overdue in the second month, calculate the probability of this customer's creditworthiness. [ 4 marks] Comment on the bank's opinion of this customer's creditworthiness. [1 mark] A bank classifies its customer as either good or bad credit risks. Based on historical data, the bank observed that 1% of good credit risks and 10% of bad credit risks are late in paying their loan in any given month. A new customer was approved for a loan at this bank. From the credit agency checking, the bank believes that there is a 70% chance the customer will turn out to be a good credit risk. (a) (b) (c) Suppose that this customer's account is overdue in the first month. Calculate the probability of this customer's creditworthiness. [7 marks] If the customer's account is also overdue in the second month, calculate the probability of this customer's creditworthiness. [ 4 marks] Comment on the bank's opinion of this customer's creditworthiness. [1 mark]

Answer rating: 100% (QA)

a The probability of this customers creditworthiness p fx y x Y x ... View the full answer