1.Crown Royal Financial has done a review of unsecured loans in excess of $10,000.They found that 5% of borrowers defaulted on their loan (did not pay it back on time).Among those who defaulted, only 30% owned their homes (70% rented), whereas among those who did not default, 60% owned their homes.Furthermore, among defaulters who rented, 75% had changed jobs within the last 5 years and among defaulters who owned homes, 60% had changed jobs.Those that did not default were quite different.Only 25% who rented had changed jobs and only 20% who owned homes had changed jobs.

a)Construct a probability tree for which the ends of the branches show the probability of whether a borrower defaults (or not), rents (or owns) and changes job (or not).Label all branches with respect to the event represented by the branch and the (conditional) probability of the event.

Summarize the probabilities in a table like the one below

Crown Royal Financial has done a review of unsecured loans in Excess of $10, 00 0 . They found that 5%{ of borrowers defaulted on their loan ( did not pay it back on time ) . Among those who defaulted , only 30% owned their homes ( 70% rented ) , whereas among those who did not default , 50% owned their homes . Furthermore , among defaulters who rented , 75%/6 had changed jobs within the last 5 years and among defaulters who owned homes , 60% had changed jobs . Those that did not default were quite different . Only 25% who rented had changed jobs* and only 20% who owned homes had changed jobs .` 2) Construct a probability tree for which the ends of the branches show the probability of whether a borrower defaults ( or not ) , rent = ( or owns ) and changes job ( or not ) . Label all branches with respect to the Event represented by the branch and the ( conditional probability of the event . ` ) Summarize the probabilities in a table like the one below . Do not round off the probabilities . Default* Not default Total Rents Changed job Not change jobs Total Own home Changed job Not change job Total Total Changed job Not change jobs Total What proportion of borrowers rent their accommodations ?" ` ) What proportion of borrowers changed jobs ?" { ) What is the probability that a borrower who rents and has changed jobs will default on their loan