PROBABILITY ASSIGNMENT

1. Fortune magazine publishes an annual issue containing information on Fortune 500 companies. The following data show the six states with the largest number of Fortune 500 companies as well as the number of companies headquartered in those states State Number of Companies New York 56 California 53 Texas 43 Illinois 37 Ohio 28 Pennsylvania 28 Suppose a Fortune 500 company is chosen for a follow up questionnaire. What are the probabilities of the following events? a. Let N be the event the company is headquartered in New York. Find P(N). b. Let T be the event the company is headquartered in Texas. Find P(T). c. Let B be the event the company is headquartered in one of these six states. Find P(B). 2. A survey of magazine subscribers showed that 45.8% rented a car during the past 12 months for business reasons, 54% rented a car during the past 12 months for personal reasons , and 30% rented a car during the past 12 months for both business and personal reasons. a. What is the probability that a subscriber rented a car during the past 12 months for business or personal reasons? b. What is the probability that a subscriber did not rent a car during the past 12 months for either business or personal reasons? 3. A study of job satisfaction was conducted for four occupations: Cabinetmaker, lawer, physical therapist, and systems analyst. Job satisfaction was measured on a scale of 0-100. The data obtained are summarized in the following crosstabulation. Occupation Cabinetmaker Lawyer Physical Therapist Systems Analyst Under 50 0 6 0 2 50 - 59 2 2 5 1 60 -69 4 1 2 4 70 79 3 1 1 3 80 89 1 0 2 0

a. Develop a joint probability table. b. What is the probability one of the participants studied received a satisfaction score in the 80s? c. What is the probability of a satisfaction score in the 80s given the study participant was a physical therapist? d. What is the probability one of the participants studied was a lawyer?

e. What is the probability one of the participants was a lawyer and received a score under 50? f. What is the probability of receiving a satisfaction score under 50 given a person is a lawyer? g. What is the probability of a satisfaction score 70 or higher? h. What is the probability one of the participants studied received a satisfaction score in 90s? 4. A local bank reviewed its credit card policy with the intension of recalling some of its credit cards. In the past approximately 5% of cardholders defaulted, leaving the bank unable to collect the outstanding balance. Hence management established a prior probability of .05 that any particular cardholder will default. The bank also found that the probability of missing a monthly payment is .20 for customers who do not default. Of course, the probability of missing a monthly payment for those who default is 1. a. Given that a customer missed one or more monthly payments, compute the posterior probability that the customer will default. b. The bank would like to recall its card if the probability that a customer will default is greater than .20. Should the bank recall its card if the customer misses a monthly payment? Why or why not?