Notes pg74-80 - 1 Rule of Conditional Probability: Example:...

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Rule of Conditional Probability : Example : A large department store chain offers credit cards to its customers. A recent audit of 2000 store credit card customers who have had a store card for more than three years revealed the following: Defaul t No Default Tota l Late Payment 150 1100 1250 No Late Payment 0 750 750 Total 150 1850 2000 P(late default) = P(not late default) = P(late no default) = P(not late no default) = P(default) = P(no default) P(late) = P(not late)= 1
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Independent Events . Two events, A and B, are independent if the probability of event A does not change whether or not B occurs. Similarly, if A and B are independent, the probability of event B does not change whether or not A occurs. That is, Example1 : A=get H on first toss of a coin B=get H on second toss of a coin Example 2 : Defaul t No Default Tota l Late Payment 150 1100 1250 No Late Payment 0 750 750 Total 150 1850 2000 Back to the store credit card problem. Are the events ‘late payment’ and ‘default’ independent events?
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This note was uploaded on 06/06/2011 for the course MGSC 291 taught by Professor Rollins during the Fall '09 term at South Carolina.

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Notes pg74-80 - 1 Rule of Conditional Probability: Example:...

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