Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Statistics and Probability Expert

A manufacturer should decide whether to extend credit to the retailer who would like to open the account with the firm. Past experience with the new accounts points out that 45% are high-risk customers, 35% are moderate-risk customers, and 20% re low-risk customers. If credit is extended, the manufacturer can expect to lose $60,000 with the high-risk cutomer, make $50,000 with the moderate-risk customer, and make $100,000 with the low-risk customer. If the manufacturer decides not extend credit to customer, the manufacturer neither make nor loses any money. Prior to making the credit extension decision, the manufacturer can get a credit rating agency concedes that its rating procedure isn't completely reliable. In particular, the credit rating procedure will rate the low-risk customer as moderate-risk customer with probability 010 and as ahigh-risk customer with probability 0.05. Furthermore, the given rating procedure will rate the moderate-risk customer as a low-risk customer with probability 0.06 and as high-risk customer with probability 0.07. At last, the rating procedure will rate a high-risk customer as a low-risk customer with probability 0.01 and as a moderate-risk customer with probability 0.05.

1. Determine the strategy which maximizes the manufacturer's expected net earnings.

2. Should the manufacturer routinely get credit rating reports on those retailers who seek credit approval? Why or why not?

Statistics and Probability, Statistics

  • Category:- Statistics and Probability
  • Reference No.:- M923347

Have any Question? 


Related Questions in Statistics and Probability

Write a matlab program to calculate the Write a MATLAB program to calculate the

Write a MATLAB program to calculate the probability   is a Gaussian random variable for an arbitrary x 1  and x 2 . Note you will have to specify the mean and variance of the Gaussian random variable.

Let wnnbspbe an iid sequence of zero-mean gaussian random

Let W n  be an IID sequence of zero-mean Gaussian random variables with variance    Define a discrete-time random process   where   is a constant. (a) Find the mean function  (b) Find the autocorrelation function,

A communication system sends binary data 0 or 1 which is

A communication system sends binary data {0 or 1} which is then detected at the receiver. The receiver occasionally makes mistakes and sometimes a 0 is sent and is detected as a 1 or a 1 can be sent and detected as a 0. ...

Consider a geometric random variablenbspnbspfind the

Consider a geometric random variable,    Find the entropy of this random variable as a function of p .

The mean monthly mortgage paid by all home owners in a city

The mean monthly mortgage paid by all home owners in a city is $1260 with a standard deviation of $140 . Using Chebyshev's theorem, find the interval [L, U], that contains monthly mortgage payments of at least 90% of all ...

For each of these questions you must provide a diagram

For each of these questions you must provide a diagram indicating the area or the percentile of the relevant distribution for the question. These diagrams can be drawn and photographed with the picture file pasted in the ...

Estimation of range and bearing angle -1 bearing-angle

Estimation of Range and Bearing Angle - 1. Bearing-angle estimation A passive detection system consists of two acoustic receivers. The separation between the receivers is 2.5 meters. The acoustic propagation speed in air ...

If the input to a linear filter is a random telegraph

If the input to a linear filter is a random telegraph process with zero-crossings per second and an amplitude A, determine the output PSD. The filter impulse response is

Describe the differences between correlations and

Describe the differences between correlations and regressions.  For these next three general questions, consider how we used the jargon of dependent and independent variable in College Algebra. Which would be the indepen ...

Two six-sided balanced dice are thrown find the

Two six-sided (balanced) dice are thrown. Find the probabilities of each of the following events: (a) a= 5 does not occur on either throw; (b) the sum is 7; (c) a 5 and a 3 occur in any order; (d) the first throw is a 5 ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate