Postulate an appropriate model for the random variable

Assignment Help Finance Basics

Reference no: EM131000788

According to the 1986 Statistical Abstracts of the United States, in the ?ve- year period from 1977-1981, failures among banks insured by the Federal Deposit Insurance Corporation (FDIC) averaged approximately 8.5 per year. Speci?cally, 10 failures were reported in 1980. If FDIC-insured bank failures are considered rare events,

(i) Postulate an appropriate model for the random variable X representing the total number of FDIC-insured bank failures per year, and use this model to compute the probability of observing the number of failures reported in 1980.

(ii) What is the "most likely" number of failures in any one year, if this number, x∗, is so designated because f (x∗) is the highest probability of all possible values of x? Determine the probability of having more failures in one year than this "most likely" number of failures.

(iii) An FDIC "quality control inspector" suggested that the occurrence of 13 or more failures in one year should be considered cause for alarm. What is the proba- bility of such an event occurring and why do you think that such an event should truly be a cause for alarm?

Reference no: EM131000788

Questions Cloud

Calculate the direction and magnitude of the force supplied : The three major forces acting are shown. FM = 80 N, w = 45 N. Calculate the direction and magnitude of the force supplied by the upper vertebrae FV to hold the head stationary, assuming that it acts along a line through the center of mass as do th..

Identify and clearly define the relevant law : Clearly summarize lessons learned from the week as they apply to your fact pattern and make links to the readings and/or module.

What is the relationship between tqm and iso 9000 : Explain how you would summarize the implementation of TQM for the "new" WonderWash.

Determine the probability of recording : Determine the probability of recording 4 eye injuries, 3 hand injuries, 2 hand injuries, and 1 injury of the "other" variety. Of 5 total recorded injuries, what is the probability that fewer than 2 are eye injuries?

Postulate an appropriate model for the random variable : Postulate an appropriate model for the random variable X representing the total number of FDIC-insured bank failures per year, and use this model to compute the probability of observing the number of failures reported in 1980.

Long incubation period infects a population of people : When a rare respiratory disease with a long incubation period infects a population of people, there is only a probability of 1/3 that an infected patient will show the symptoms within the ?rst month.

What other factors had a huge impact on the art deco : What other factors had a huge impact on the Art Deco - Critical analysis is a skill that you must develop as a designer? Observing the objects displayed write an analytical sentence that reveals the similarities and differences?

Annual sickle-cell disease-related medical cost : What annual sickle-cell disease-related medical cost can this family expect to incur? If these "crisis" episodes occur infrequently at an average rate of 1.5 per year in this country (3 every two years), and these occurrences are well-mo..

User Account

All Pages