1. For a group of customers in a bank you are given the following information.

• P(a customer will default on current credit charges) = .07
• Total credit charges for a customer is Normal($350, $100)
• If a customer defaults, assume 20% of the charges can be recovered; the remaining is written off as bad debt

Where appropriate, show the formulae you entered in Excel and then show the answer corresponding to that.

A. Suppose nothing is recovered from defaultthe whole amount is written off as bad debt. Show in two cells the Excel formulae you will sequentially enter to simulate the total amount of bad debt from 500 customers: cell 1 will have a binomial formula; cell 2 will have a normal distribution formula. For the latter, if you have a random sample of "n" customers that defaults from the value in cell 1, then you have to redefine the mean ($350) and SD ($100) of the normal distribution given above.

State the Excel Formula for number who will default and then provide the corresponding numerical answer:

State the definition of the new Normal Mean and Normal SD:

State the numerical answer of the new Normal Mean and Normal SD:

State the Excel Formula for the total amount of charges, and then provide the corresponding numerical answer: