Answered step by step
Verified Expert Solution
Question
1 Approved Answer
A credit union classifies car loans into one of four categories: the loan has been paid in full ( F ) , the account is
A credit union classifies car loans into one of four categories: the loan has been paid in fullF the account is in good standingG with all payments up to date, the account is in arrearsA with one or more missing payments, or the account has been classified as a bad debtB and sold to a collection agency. Past records indicated that each month, of the accounts in good standing pay the loan in full, remain in good standing, and become in arrears. Furthermore, of the accounts in arrears are paid in full, become accounts in good standing, remain in arrears, and are classified as bad debts. Complete partsA throughC below.
A In the long run, what percentage of the accounts in arrears will pay their loan in full?
Present the given information in a standard form matrix. Within the group of absorbing states and within the group of nonabsorbing states, from left to right and top to bottom, list F before A B and G; list B before A and G; and list G before A
Now determine the limiting matrix Upper P overbar.
In the long run, what of the accounts in arrears will pay their loan in full.
Part
B In the long run, what percentage of the accounts in good standing will become bad debts?
Part
C What is the average number of months that an account in arrears will remain in this system before it is either paid in full or classified as a bad debt?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started