Management: Credit Card and Initial Chance Plane

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Business Statistics
Homework 2
Due: December 5, 2012
Show all your works.
1.

It is known that screws produced by a certain company will be defective with probability 0.01 independently of each other. The company sells screws in packages of 10 and offers a money-back guarantee that at most 1 of the 10 screws is defective. What proportion of package sold must the company replace?

2.

A local bank reviewed its credit card policy with the intention of recalling some of its credit cards. In the past approximately 5% of cardholders defaulted, leaving the bank unable to collect the outstanding balance. Hence, management established a prior probability of 0.05 that any particular cardholder will default. The bank also found that the probability of missing a monthly payment is 0.2 for customers who do not default. Of course, the probability of missing a monthly payment for those who default is 1.

(a)
(b)

3.

Fifty percent of Americans believed the country was in a recession, even though technically the economy had not shown two straight quarters of negative growth. For a sample of 20 Americans, make the following calculations.

(a)
(b)
(c)
(d)

4.

Given that a customer missed one of more monthly payments, compute the posterior probability that the customer will default.
The bank would like to recall its card if the probability that a customer will default is greater than 0.2. Should the bank recall its card if the customer misses a monthly payment? Why or why not?

Compute the probability that exactly 12 people believed the country was in a recession. Compute the probability that no more than three people believed the country was in a recession.
How many people would you expect to say the country was in a recession? Compute the variance and standard deviation of the number of people who believed the country was in a recession.

A small plane has gone down, and the search is organized into three regions. likeliest, they are:
Region...
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