Question

The First National Bank recently acquired three mortgages from the failed Fargo Bank. It estimates that the chances of these mortgages being repaid are 0.6, 0.4, 0.25. Assuming independence, fine the probability that:_________.

Answer 1

a. 0.06

b. 0.18

Step-by-step explanation:

a) all of them will be repaid

b) none of them will be repaid

P1 = 0.6, P2= 0.4, P3 = 0.25

a. The Probability that all will be repaid = (P1∩P2∩P3)

= P1 * P2 * P3 (Since independent)

= 0.6*0.4*0.25

= 0.06

Thus, the Probability that all will be repaid is 0.06

b. The Probability that none of them will be repaid = (1-P1)*(1-P2)*(1-P3)

= (1-0.6)(1-0.4)(1-0.75)

= 0.4 * 0.6 * 0.75

= 0.18

Thus, the Probability that none of them will be repaid is 0.18