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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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View Full Document 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.
 Fall '09
 Rollins

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