Credit card debt. The average credit card debt for college seniors in $3262. If the debt is normally distributed with a standard deviation of $1100, find these probabilities (6 points). Please show your steps. a. That the senior owes at least $1000 b. That the senior owes more than $4000 c. That the senior owes between $3000 and $4000

Explanation:

standard deviation by which debt is distributed  = $1100

average credit card debt for college seniors = $3262

A)  probability that senior owes at least $1000

P (x ≥ 1000 ) = P ( Z ≥  )

where = $3262

= $1100

Z = random variable representing credit card debt for college seniors

back to equation P ( Z ≥ )

therefore  P ( z ≥ -2.06 )

                 1 - p ( z ≤ -2.06 )

therefore probability of the senior owing $1000 = 1 - 0.0199 = 0.9801

B) probability that senior owes more than $4000

p ( x ≥ 4000) = P ( Z ≥ )

                     = P ( Z ≥ )

                     = 1 - p ( Z ≤ 0.67 ) therefore probability that senior owes more than $4000 = 1 - 0.7468 = 0.2514

C ) Probability that the senior owes between $300 and $4000

P ( 3000 ≤ x ≤ 4000) = P ( ≤ Z ≤ )

                                  = P ( ≤ z ≤ )

                                  = P ( - 0.24 ≤ z ≤ 0.67 )  

                                 = p ( z ≤ 0.67 ) - p ( z ≤ - 0.24 )        

                                 = 1 - p ( z ≥ 0.67 ) - 1 - p ( z ≥ -0.24 )

                                 = 0.7846 - 0.4052 = 0.3434                  

you will have $2593.74 in 10 years if you set aside $1,000 at 10%

you will have $9321.91 in 20 years if you set aside $2000 at 8%

you will have $1469.32 in 5 years if you set aside $1000 at 8%

you will have $1296.87 in 10 years if you set aside $500 at 10%

you will have $239.66 in 15 years if you set aside $100 at 6%

you will have $4660.96 in 20 years if you set aside $1000 at 8%

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