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An accounting firm serves many companies (clients). Each client submits an annual financial report to the firm for auditing. The report may be fraudulent (denoted

An accounting firm serves many companies (clients). Each client submits an annual financial report to the firm for auditing. The report may be fraudulent (denoted by class 1 or C1) or may be truthful (denoted by class 2 or C2). Each client may or may not have legal trouble before (denoted by x1) and may be of either small or large capital size (denoted by x2). Please compute the propensity of a new client submitting fraudulent report using the pivot tables below.

Prior Legal (x1 = 1)

No Prior Legal (x1 = 0)

Total

Fraudulent (C1)

55

65

120

Truthful (C2)

200

680

880

Total

255

745

1000

Small (x2 = 1)

Large (x2 = 0)

Total

Fraudulent (C1)

100

20

120

Truthful (C2)

100

780

880

Total

200

800

1000

Given a new client with legal trouble before (x1 = 1) with small size (x2 = 1), what is the propensity of this client submitting a fraudulent report?

P(C1 | x1 = 1, x2 = 1) =

Given a new client with legal trouble before (x1 = 1) with small size (x2 = 1), what is the propensity of this client submitting a truthful report?

P(C2 | x1 = 1, x2 = 1) =

Given a new client with no legal trouble before (x1 = 0) and large size (x2 = 0), what is the propensity of this client submitting a fraudulent report?

P(C1 | x1 = 0, x2 = 0) =

Given a new client with no legal trouble before (x1 = 0) and large size (x2 = 0), what is the propensity of this client submitting a truthful report?

P(C2 | x1 = 0, x2 = 0) =

Given a new client with no legal trouble before (x1 = 0) and small size (x2 = 1), what is the propensity of this client submitting a fraudulent report?

P(C1 | x1 = 0, x2 = 1) =

Given a new client with no legal trouble before (x1 = 0) and small size (x2 = 1), what is the propensity of this client submitting a truthful report?

P(C2 | x1 = 0, x2 = 1) =

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