Determine whether the events E and F are independent or dependent. Justify your

Question

Determine whether the events E and F are independent or dependent. Justify your answer. (a) E: A person going into debt. F: The same person having a credit card. A. E and F are dependent because having a credit card can affect the probability of a person going into debt. B. E and F are independent because going into debt has no effect on the probability of a person having a credit card. C. E and F are independent because having a credit card has no effect on the probability of a person going into debt. D. E and F are dependent because going into debt has no effect on the probability of a person having a credit card.

Explanation / Answer

From the above question we can clearly say that the correct answer for this question will be option A i.e,"E and F are dependent because having a credit card can affect the probability of a person going into debt".

We all know that owing a credit card is always easy but repaying the debt within the deadline of the bank is really hard in the long run. Initially, when the credit card holders start out, their credit limit is usually low, but as time passes by, the credit limit typically rises which makes overcharging tempting. If a person owns a credit card of a certain bank, he goes cashless to some extent and never thinks twice to spend big. Now in the event of failing to pay the bill at the right time, the debts gets accumulated in a cumulative manner. The balance climbs to a higher rate, the interest compounds and the payments rise which increases the difficulty to pay down the debt.

We can have an example regarding this. Let us suppose we want $1500 worth of living room furniture, but we do not have the instant cash to make the payment immediately. If we charge the items to a credit card with an 18% interest rate and cover the balance in 4 months, the finance fees (the total cost of borrowing, including interest and fees) would total just $57 which is not at all a bad deal. If we ignore it and stretch it out over 2 years, however, we have to pay an extra amount of $300 which is quite high and will become significant in the long run.

Thus, we can conclude that having a credit card can affect the probability of a person to go into debt.

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.