About 74% of Freddie Mac-owned loans were refinanced in the second
quarter of 2005 (USA Today, Lifeline, August 3, 2005), resulting in new
mortgages carrying loan amounts at least 5% above the original mortgage
balance. The median loan refinanced in the second quarter was 2.6 years old.
If a sample size of 2,500 was used to obtain this information,
a. Determine if the sample size for the test is large enough to warrant
approximating the sample proportion?s distribution with a normal
distribution. (5 marks)
b. Use this information to determine if less than 75% of new mortgages
had a loan amount at least 5% above the original mortgage balance.
Use a test statistic approach with a = 0.025. (5 marks)

About 74% of Freddie Mac-owned loans were refinanced in the second quarter of 2005 (USA Today, Lifeline, August 3, 2005), resulting in new mortgages carrying loan amounts at least 5% above the original mortgage balance. The median loan refinanced in the second quarter was 2.6 years old. If a sample size of 2,500 was used to obtain this information, a. Determine if the sample size for the test is large enough to warrant approximating the sample proportion's distribution with a normal distribution. (5 marks) b. Use this information to determine if less than 75% of new mortgages had a loan amount at least 5% above the original mortgage balance. Use a test statistic approach with a = 0.025