Question
Suppose that at a certain bank that the probability that someone who has overdrawn their account in the past will subsequently default on a new
Suppose that at a certain bank that the probability that someone who has overdrawn their account in the past will subsequently default on a new loan is 8%.The probability that someone who has not overdrawn their account will subsequently default is 0.6% (or 0.006).The probability that a customer will overdraw their account in general is 40%.
Let O represent Overdrawing and D represent Defaulting.NO represent Not Overdrawing and ND represent Not Defaulting
Use this notation for the remainder of the problem below.
A.Write the three given probabilities using the symbol for conditional probability where necessary.
Probability ( ) = ________Probability ( |) = ________
Probability (|) = ________
B. What is the probability of Default on a loan?Show all work. Mark your final answer.
C.Of those who default on their loan, what is the proportion who had previously overdrawn their account?That is, what is Pr(O|D)?Show all work.Mark your final answer.
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