of course, the probability of missing a monthly payment for those who default is 1

A local bank reviewed its credit card policy with the intention of Recalling some of its credit card.In the past approximately 5% of cardholders defaulted, leaving the bank unable to collect the outstanding balance.Hence, management established a prior probability of 0.05 that any particular cardholder will default.The bank also found that the probability of missing a monthly payment is 0.20 for customers who do not default.Of course the probability of missing our monthly payment for those who default is 1.Given that the customer missed one or more monthly payments compute the posterior probability that the customer will default.The bank would like to recall its card if the probability that a customer will default is greater than 0.20 should the bank record it's card if the customer misses a monthly payment?

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What is the probability of missing a monthly payment?

The bank also found that the probability of missing a monthly payment is 0.20 for customers who do not default. Of course, the probability of missing a monthly payment for those who default is 1. i. Given that a customer missed one or more monthly payments, compute the posterior probability that the customer will default. (10 marks) ii. The bank would like to recall its card if …

What is the probability of defaulting on a credit card?

Hence, management established a prior probability of 0.05 that any particular cardholder will default. The bank also found that the probability of missing a monthly payment is 0.20 for customers who do not default. Of course, the probability of missing a monthly payment for those who default is 1. a.

What is a chapter 5 problem 11p?

The bank also found that the probability of missing a monthly payment is .10 for customers who do not default. Of course, the probability of missing a monthly payment for those who default is 1. a. Given that a customer missed one or more monthly payments, compute the posterior probability that the customer will default (to 2 decimals). b. The bank would like to recall its …

Problem 42 Medium Difficulty

A local bank reviewed its credit card policy with the intention of recalling some of its credit#N#cards. In the past approximately 5 % of cardholders defaulted, leaving the bank unable to#N#collect the outstanding balance. Hence, management established a prior probability of .05#N#that any particular cardholder will default.

Video Transcript

for this problem, we're told that 5% of cardholders defaulted.