Probability- Mutliple Choice

Question

There is a 1% delinquency rate for consumers with FICO (Fair Isaac & Company), credit rating scores above 800. If the Jefferson Valley Bank provides large loans to 12 people with FICO scores above 800, what is the probability that at least one of them becomes delinquent?

 

a. approximately 11.3% or 11.4%

 

b. approximately 8%

 

c. approximately 96%

 

d. approximately 0.015

Answer 1

This question is solved through the use of a proportion.

 

1% is to 800 as x% is to 12 (in algebraic notation 1% : 800 :: x : 12)

 

our proportion is (1%/800) = (x/12)

 

we then cross multiply to get (1% • 12 ) / 800 which = 0.015

 

so, the answer is d