Mean for binomial probability distribution

Reference no: EM13100073

Imagine you are the CEO of a local bank whose credit card holders engage in 1 billion credit card transactions per year; that the likelihood of a fraudulent transaction is 2%; that the average transaction purchase value for all transactions is equal to $38.50; and that the bank bears the full cost of all fraudulent transactions (i.e., you hold the cardholder harmless and lose the money yourself). A technology vendor proposes a software solution that will allow you to identify and decline 50% of all fraudulent transaction, thus reducing your fraudulent transaction rate to 1%. What is the maximum amount of money that you would be willing to pay for this investment? Why (please justify using mathematical/statistical tools)? What other information would be important to you in deciding whether the software is worth the investment?

Reference no: EM13100073

Questions Cloud

Average amount that mall customers spend on food : MoE's concessions manager believes the average amount that mall customers spend on food during a visit has increased over the historical average of $18.75, due to the opening of some new upscale restaurants in the mall. Use the data in the file to..

Which of the following forms of brain injuries : Which of the following forms of brain injuries are permanent and are seen at the point of impact. The bruised necrotic tissues is phagocytized.

Explain ethical issues-organizational level-societal level : Write down the facts in case. Write down the ethical issues which need to be addressed on - the individual level, the organizational level and on societal level.

Distinguish between utilization and efficiency : What are the four special considerations for a good capacity decision? Distinguish between utilization and efficiency.

Mean for binomial probability distribution : Imagine you are the CEO of a local bank whose credit card holders engage in 1 billion credit card transactions per year; that the likelihood of a fraudulent transaction is 2%

Poisson distribution formula : During normal business hours on the east coast, calls to the toll-free reservation number of the Nite Time Inn that the numb roy calls per minute can be described by the Poisson distribution.

Determine the training costs : One group of 20 trainees estimated a total overall monthly cost benefit of $336,000 related to business improvements and showed an average 70 percent confidence level with that estimate.

Creating a gantt chart : A project requires completion of activities A, B, C, D, E, F, G, H, I and J.Additionally, there are two other logic relationships. Activity ‘H' can start only after 3 days have elapsed following the completion of activity ‘E'.

What restaurants are immensely successful in market : Are you aware of any restaurants in market which have failed/closed over past few years? If so, why do you believe that these restaurants failed/closed?

User Account

All Pages