A bank classifies borrowers as "high risk" or "low risk," and 23% of its loans are...

90.2K

Verified Solution

Question

Basic Math

A bank classifies borrowers as "high risk" or "low risk," and23% of its loans are made to those in the "high risk" category. Ofall the bank's loans, 8% are in default. It is also known that 46%of the loans in default are to high-risk borrowers. Let H representthe event that a randomly selected loan is issued to a "high risk"borrower. Let D be the event that a randomly selected loan is indefault. Round your answers to 4 decimal places. Your workfor this entire problem will be hand-graded, see instructionsbelow.
a. What is the probability that a randomlyselected loan is in default and issued to a high-risk borrower?
Tries 0/5
b. What is the probability that a loan willdefault, given that it is issued to a high-risk borrower?
Tries 0/5
c. What is the probability that a randomlyselected loan is either in default or issued to a high-riskborrower?
Tries 0/5
d. A loan is being issued to a borrower who isnot high-risk. What is the probability that this loan willdefault?
Tries 0/5
e. Are events D and H independent? Justify theanswer.
Yes, because P(D) ? P(H)
Yes, because P(H | D) > P(H) + P(D)
No, because P(D ? H) ? P(D) × P(H)
No, because P(D | H) ? P(H)
Not enough information to determine

Answer & Explanation Solved by verified expert

4.1 Ratings (472 Votes)

We have PH 023PD 008 PH D 046Let L be the event of a loan being in low risk categoryThus PL 1 023 077a The probability that a randomly selected See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member