28. Mortgages. In early 2007 the Mortgage Lenders Association reported that homeowners, hit hard by rising interest
Question:
28. Mortgages. In early 2007 the Mortgage Lenders Association reported that homeowners, hit hard by rising interest rates on adjustable-rate mortgages, were defaulting in record numbers. The foreclosure rate of 1.6% meant that millions of families were in jeopardy of losing their homes. Suppose a large bank holds 1731 adjustable-rate mortgages.
a) Can you use the Normal model to describe the sampling distribution model for the sample proportion of foreclosures?
Check the conditions and discuss any assumptions you need to make.
b) Sketch and clearly label the sampling model, based on the 68–95–99.7 Rule.
c) How many of these homeowners might the bank expect will default on their mortgages? Explain.
Step by Step Answer:
Business Statistics
ISBN: 9780321716095
2nd Edition
Authors: Norean D. Sharpe, Paul F. Velleman, David Bock, Norean Radke Sharpe