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Financial analysts have developed models based on financial ratios that predict whether or not a company will go bankrupt within the next year. In a test of one such model, the model correctly predicted the bankruptcy of 88% of firms that in fact did fail. The model also correctly predicted the non-bankruptcy for 82% of firms that did not fail. Suppose that the model maintains the same reliability when applied to a new group of 82 firms, of which 7 fail in the year following the time at which the model makes its predictions. Define the event F as firm failure and event B as the outcome of a test for bankruptcy. Given this information, what is the probability that a

Financial analysts have developed models based on financial ratios that predict whether or not a company will go bankrupt within the next year. In a test of one such model, the model correctly predicted the bankruptcy of 88% of firms that in fact did fail. The model also correctly predicted the non-bankruptcy for 82% of firms that did not fail. Suppose that the model maintains the same reliability when applied to a new group of 82 firms, of which 7 fail in the year following the time at which the model makes its predictions. Define the event F as firm failure and event B as the outcome of a test for bankruptcy. Given this information, what is the probability that a

Calculus For The Life Sciences
Calculus For The Life Sciences
2nd Edition
ISBN:9780321964038
Author:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Publisher:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Chapter1: Functions
Section1.EA: Extended Application Using Extrapolation To Predict Life Expectancy
Problem 7EA
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Financial analysts have developed models based on financial ratios that predict whether or not a company will go bankrupt within the next year.

In a test of one such model, the model correctly predicted the bankruptcy of 88% of firms that in fact did fail. The model also correctly predicted the non-bankruptcy for 82% of firms that did not fail.

Suppose that the model maintains the same reliability when applied to a new group of 82 firms, of which 7 fail in the year following the time at which the model makes its predictions.

Define the event F as firm failure and event B as the outcome of a test for bankruptcy.

Given this information, what is the probability that a firm will fail P(F)?

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