As accounts manager in your company, you classify 75% of your customers as "good credit" and the rest as "risky credit" depending on their credit rating. Customers in the "risky" category allow their accounts to go overdue 50% of the time on average, whereas those in the "good" category allow their accounts to become overdue only 10% of the time. What percentage of overdue accounts are held by customers in the "risky credit" category?

Question

Mathematics

Elaina Romero

28 September, 20:46

As accounts manager in your company, you classify 75% of your customers as "good credit" and the rest as "risky credit" depending on their credit rating. Customers in the "risky" category allow their accounts to go overdue 50% of the time on average, whereas those in the "good" category allow their accounts to become overdue only 10% of the time. What percentage of overdue accounts are held by customers in the "risky credit" category?

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Madison Chung · Answer 1

The percentage of overdue accounts are held by customers in the "risky credit" category is 62.5%

Step-by-step explanation:

Customers in the "risky" category (25% of total accounts) allow their accounts to go overdue 50% of the time on average.

That means that on average, 12.5% of total accounts is overdue.

0.25*0.50 = 0.125

In the "good credit" category only 10% goes overdue. That means 7,5% of total accounts goes overdue in this category.

0.75*0.10=0.075

The total accounts that go overdue is 0.125+0.075 = 0.200.

The percentage of overdue accounts held by customers in the "risky credit" category is:

0.125/0.200 = 0.625 or 62.5%