Question
A loan officer at a bank receives an application for a loan from a new customer. The customer claims to have a credit score above
A loan officer at a bank receives an application for a loan from a new customer. The customer claims to have a credit score above 700, but the officer is not sure whether to believe them. The officer knows that in the general population, about 20% of people have a credit score above 700. The officer has access to a credit bureau that can verify the customer's credit score with 95% accuracy, i.e., if a person has a credit score above 700, the credit bureau can give a correct report 95% of time, if a person has a credit score below 700, the credit bureau can give a correct report 95% of the time as well.
What is the probability that the customer actually has a credit score above 700, given that the credit bureau reports a score above 700? (round to three decimal places)
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