Answer:
a) the probability is P(G∩C) =0.0035 (0.35%)
b) the probability is P(C) =0.008 (0.8%)
c) the probability is P(G/C) = 0.4375 (43.75%)
Step-by-step explanation:
defining the event G= the customer is a good risk , C= the customer fills a claim then using the theorem of Bayes for conditional probability
a) P(G∩C) = P(G)*P(C/G)
where
P(G∩C) = probability that the customer is a good risk and has filed a claim
P(C/G) = probability to fill a claim given that the customer is a good risk
replacing values
P(G∩C) = P(G)*P(C/G) = 0.70 * 0.005 = 0.0035 (0.35%)
b) for P(C)
P(C) = probability that the customer is a good risk * probability to fill a claim given that the customer is a good risk + probability that the customer is a medium risk * probability to fill a claim given that the customer is a medium risk +probability that the customer is a low risk * probability to fill a claim given that the customer is a low risk = 0.70 * 0.005 + 0.2* 0.01 + 0.1 * 0.025
= 0.008 (0.8%)
therefore
P(C) =0.008 (0.8%)
c) using the theorem of Bayes:
P(G/C) = P(G∩C) / P(C)
P(C/G) = probability that the customer is a good risk given that the customer has filled a claim
replacing values
P(G/C) = P(G∩C) / P(C) = 0.0035 /0.008 = 0.4375 (43.75%)
