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2-95. Software to detect fraud in consumer phone cards tracks the number of metropolitan
Chapter 2, Problem 2-95(choose chapter or problem)
2-95. Software to detect fraud in consumer phone cards tracks the number of metropolitan areas where calls originate each day. It is found that 1% of the legitimate users originate calls from two or more metropolitan areas in a single day. However, 30% of fraudulent users originate calls from two or more metropolitan areas in a single day. The proportion of fraudulent users is 0.01%. If the same user originates calls from two or more metropolitan areas in a single day, what is the probability that the user is fraudulent?
Questions & Answers
QUESTION:
2-95. Software to detect fraud in consumer phone cards tracks the number of metropolitan areas where calls originate each day. It is found that 1% of the legitimate users originate calls from two or more metropolitan areas in a single day. However, 30% of fraudulent users originate calls from two or more metropolitan areas in a single day. The proportion of fraudulent users is 0.01%. If the same user originates calls from two or more metropolitan areas in a single day, what is the probability that the user is fraudulent?
ANSWER:Step 1 of 2
Given data:
Percentage of call originated from two or more metro areas by legitimate users:
Percentage of calls originated from two or more metro areas are fraudulent:
Proportion of fraudulent user:
Let us denote C as an event choosing the same user with calls originating from two or more cities.