A department store is considering a new credit policy to try to reduce the number of customers defaulting on payments. A suggestion is made to discontinue credit to any customer who has been one week or more late with his/her payment at least twice. Past records show 95 percent of defaults were late at least twice. Also, 3 percent of all customers default, and 30 percent of those who have not defaulted have had at least two late payments.

Question

A department store is considering a new credit policy to try to reduce the number of customers defaulting on payments. A suggestion is made to discontinue credit to any customer who has been one week or more late with his/her payment at least twice. Past records show 95 percent of defaults were late at least twice. Also, 3 percent of all customers default, and 30 percent of those who have not defaulted have had at least two late payments.

Answer 1

To analyze the credit policy suggestion, we can break down the information given into the following points:

1. 95 percent of defaults were late at least twice.
2. 3 percent of all customers default.
3. 30 percent of those who have not defaulted have had at least two late payments.

Now, let's try to answer the following questions based on this information:

Question 1: What percentage of customers have been late at least twice?

To calculate this, we can use the information given in point 3. We know that 30 percent of non-defaulting customers have been late at least twice. So, the percentage of customers who have been late at least twice is 30 percent.

Answer: 30 percent.

Question 2: What percentage of customers have not defaulted and have been late at least twice?

To answer this question, we need to consider the information given in points 2 and 3. We know that 3 percent of all customers default and 30 percent of non-defaulting customers have been late at least twice. Therefore, we can subtract the percentage of defaulting customers (3 percent) from the overall percentage of customers who have been late at least twice (30 percent) to find the percentage of customers who have not defaulted but have been late at least twice.

Calculation: 30 percent - 3 percent = 27 percent

Answer: 27 percent.

Question 3: What percentage of customers default after being late at least twice?

To answer this question, we can use the information given in points 1 and 3. We know that 95 percent of defaults were late at least twice, and 30 percent of non-defaulting customers have been late at least twice. Therefore, we can calculate the percentage of customers who default after being late at least twice by multiplying these two percentages.

Calculation: 95 percent x 30 percent = 28.5 percent

Answer: 28.5 percent.

By analyzing and using the information provided, we were able to answer these questions and gain insight into the credit policy suggestion.