Question: -------------------------- Problem 43E: Chapter: CH6 Problem: 43E Credit scorecards are used by financial institutions to help decide to whom loans should be granted. An analysis

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Problem 43E: Chapter: CH6 Problem: 43E Credit scorecards are used by financial institutions to help decide to whom loans should be granted. An analysis of the records of one bank produced the following probabilities. Loan Performance Score Under400 400orMore Fully repaid 19 64 Defaulted 13 04 a. What proportion of loans are fully repaid? b. What proportion of loans given to scorers of less than 400 fully repay? c. What proportion of loans given to scorers of 400 or more fully repay? d. Are score and whether the loan is fully repaid independent? Explain. Step-by-step solution: Step 1 of 3 For the given information, Credit scorecards are used by financial institution to help decide to whom loans should be granted. An analysis of the records of one bank produced the following probabilities: Loan Score Performance Under 400 400 or more Fully repaid 0.19 0.64 Defaulted 0.13 0.04 Let us define the variables as follows: A, = Fully repaid loan performance A, = Defaulted loan performance B, = Score under 400 B, = Score 400 or more

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