Show all your work. Indicate clearly the methods you use, because you will be scored on the correctness of your methods as well as on the accuracy and completeness of your results and explanations. At a financial institution, a fraud detection system identifies suspicious transactions and sends them to a specialist for review. The specialist reviews the transaction, the customer profile, and past history. If there is sufficient evidence of fraud, the transaction is blocked. Based on past history, the specialist blocks 40 percent of the suspicious transactions. Assume a suspicious transaction is independent of other suspicious transactions. (a) Suppose the specialist will review 136 suspicious transactions in one day. What is the expected number of blocked transactions by the specialist

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Answer:

54.4

Explanation:

According to the scenario, computation of the given data are as follows:-  

We can calculate the Expected Number of Blocked Transactions by using following formula:-

Probability of the specialist blocked the suspicious transactions(P) = 40%

= 40/100 =0.40

Number of the suspicious transactions reviewed(N) = 136  

Expected Number of Blocked Transactions by the Specialist = P × N

= 0.40 × 136

= 54.4

Suppose the specialist will review 136 suspicious transactions in one day.

The expected number of blocked transactions by the specialist will be 54.4.

The expected number of blocked transactions is calculated using following

below:

  • Probability of the specialist blocked the suspicious transactions (P) is 40% = 40/100 =0.4
  • The number of suspicious transactions reviewed(N) = 136  

Therefore the expected Number of Blocked Transactions by the Specialist

  = P × N

  = 0.40 × 136

  = 54.4.

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