Question

A credit card company has found that 0.1% of all transactions are fraudulent. It has developed a computer program that correctly identifies whether a transaction is fraudulent or not 99% of the time. If the program scans 5,000,000 transactions, about how many of them will it identify as fraudulent?

Answer 1

Answer: 4,950

Explanation:

you just do .99 x 5,000 and you get 4,950

Answer 2

Given:
0.1% of all transactions are fraudulent
99% correct identification whether a transaction is fraudulent or not.
Scanned 5,000,000 transactions.

5,000,000 x 0.1% = 5,000 fraudulent transactions.

For me, there are 5,000 fraudulent transactions. This is based on the 0.1% rather than the 99%. Because the problem clearly states that the 0.1% of ALL transaction is identified as fraudulent. The 99% of the computer program only deals with the correct identification of the transaction as either fraudulent or not. For me, it is not a clear measure of the true number of fraudulent transactions.