QUESTION 10 Credit scorecards are used by financial institutions to help them de

Question

QUESTION 10 Credit scorecards are used by financial institutions to help them decide to whom loans should be granted An analysis of records at a large bank produced the following probabilities of loan performance and credit score. Define the following events 4,- (loan is fully repaid) A:" (loan is defaulted) B,- (credit score is under 400) B (credit score is 400 or more) Under 400 400 or More Total Fully repaid Defaulted Total 0.13 0.19 0.32 0.64 0.04 0.68 0.77 0.23 What is P(A21B) in the context of the problem? O a The probabilty of a score being under 400 given that a customer has defaulted O b The probability of a loan being defaulted, given that a customer had a score of 400 or more. O c. The probability of a loan being repaid given a customer had a score of under 400 o d. The probability of a loan being repaid and a customer having a score of 400 or more. e The probability of a loan being defaulted given a customer had a score of under 400.

Explanation / Answer

P(A2 | B1) denotes:

e. The probability that loan is defaulted given a customer had a score of under 400

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