The bank of Hawaii that reports 7 percent of its credit card holders will defaul

Question

The bank of Hawaii that reports 7 percent of its credit card holders will default at some time in their life. The Hilo branch just mails out 15 new cards today. A) what is the likelihood that non of the card holders will default. B)what is the likeliehood that two will default. The bank of Hawaii that reports 7 percent of its credit card holders will default at some time in their life. The Hilo branch just mails out 15 new cards today. A) what is the likelihood that non of the card holders will default. B)what is the likeliehood that two will default. A) what is the likelihood that non of the card holders will default. B)what is the likeliehood that two will default.

Explanation / Answer

a)

P( no defaults)

= 15C0 * 0.07^0 * 0.93^15

= 0.3367

b)

P( two will default)

= 15C2 * 0.07^2 * 0.93^13

= 0.2003

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