Accounts receivable have been grouped into the following states:
State 1: Paid
State 2: Bad debt
State 3: 0–30 days old
State 4: 31–60 days old
Sixty percent of all new bills are paid before they are 30 days old. The remainder go to state 4. Seventy percent of all 30-day-old bills are paid before they become 60 days old. If not paid, they are permanently classified as bad debts. What is the probability that an account in state 4 will be in bad debt?
0.3
0.12
0.7
0.8