At a financial institution, a fraud detection system identifies suspicious transactions and sends them to a specialist for review. The specialist reviews the transaction, the customer profile, and past history. If there is sufficient evidence of fraud, the transaction is blocked. Based on past history, the specialist blocks 40 percent of the suspicious transactions. Assume a suspicious transaction is independent of other suspicious transactions. Suppose the specialist wants to know the number of suspicious transactions that will need to be reviewed until reaching the first transaction that will be blocked. (i) Define the random variable of interest and state how the variable is distributed. (ii) Determine the expected value of the random variable and interpret the expected value in context.
At a financial institution, a fraud detection system identifies suspicious transactions and sends them to a specialist for review. The specialist reviews the transaction, the customer profile, and past history. If there is sufficient evidence of fraud, the transaction is blocked. Based on past history, the specialist blocks 40 percent of the suspicious transactions. Assume a suspicious transaction is independent of other suspicious transactions.
Suppose the specialist wants to know the number of suspicious transactions that will need to be reviewed until reaching the first transaction that will be blocked.
(i) Define the random variable of interest and state how the variable is distributed.
(ii) Determine the expected value of the random variable and interpret the expected value in context.
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