Respuesta :
Answer:
(a) The probability that the new municipal bond issued will receive an A rating given that it was issued by a city is 0.196.
(b) Thus, the probability of municipal bonds issued by suburbs is 0.325.
Step-by-step explanation:
The data provided is as follows:
P (A) = 0.70
P (B) = 0.20
P (C) = 0.10
P (c | A) = 0.50
P (s | A) = 0.40
P (r | A) = 0.10
P (c | B) = 0.60
P (s | B) = 0.20
P (r | B) = 0.20
P (c | C) = 0.90
P (s | C) = 0.05
P (r | C) = 0.05
(a)
The Bayes' theorem states that the conditional probability of an event Y[tex]_{i}[/tex] given that another event X has already occurred is:
[tex]P(Y|X)=\frac{P(X|Y)P(Y)}{\sum\limits_{i} {P(X|Y_{i})P(Y_{i})}}[/tex]
Compute the probability that the new municipal bond issued will receive an A rating given that it was issued by a city as follows:
[tex]P(A|c)=\frac{P(c|A)P(A)}{P(c|A)P(A)+P(c|B)P(B)+P(c|C)P(C)}[/tex]
[tex]=\frac{(0.50\times 0.70)}{(0.50\times 0.70)+(0.60\times 0.20)+(0.10\times 0.90)}\\\\=\frac{0.35}{0.56}\\\\=0.196[/tex]
Thus, the probability that the new municipal bond issued will receive an A rating given that it was issued by a city is 0.196.
(b)
The law of total probability states that:
[tex]P(X)=\sum\limits_{i} {P(X|Y_{i})}[/tex]
Compute the probability of municipal bonds issued by suburbs as follows:
[tex]P(s)=P(s|A)P(A)+P(s|B)P(B)+P(s|C)P(C)[/tex]
[tex]=(0.40\times 0.70)+(0.20\times 0.20)+(0.10\times 0.05)\\\\=0.28+0.04+0.005\\\\=0.325[/tex]
Thus, the probability of municipal bonds issued by suburbs is 0.325.
