Discuss the below:
Q1: An oil explorer orders seismic tests to determine whether oil is likely to be found in a certain drilling area. The seismic tests have a known reliability: when oil does exist in the testing area, the test will indicate so 90% of the time; when oil does not exist in the test area, 5% of the time the test will erroneously indicate that it does exist. The explorer believes that the probability of an oil deposit in the area is 0.4. If a test is conducted and indicates the presence of oil, what is the probability that an oil deposit exists?
a. 0.9231
b. 0.9000
c. 0.8825
d. 0.8573
Q2: The amounts of money requested on home loan applications at Easy Federal Savings and Loan Association follow a normal distribution, with a mean of $320,611.00, and a standard deviation of $84,321.00. A loan application is received this morning. What is the probability?
a. The amount requested is $400,000.00 or more.
b. The amount requested is between $300,000.00 and $350,500.00.
c. How would you characterize the symmetric range consisting of 90% of the mortgages.