The Credit Risk Department of a major bank estimates the default rate on loans u

a) mean of p =0.01 b) c) sample size =n= 1100 std deviation of proportion=p=(p*(1-p)/n)= 0.0030

ID: 3056538 • Letter: T

Question

The Credit Risk Department of a major bank estimates the default rate on loans under

$10,000

to be

. The bank will make

1100

loans that are under

$10,000

next month.

(a)Find the mean of

, where

is the proportion of defaults on the

1100

loans under

$10,000

to be made next month. (B) Find the standard deviation of

.(c) Compute an approximation for

Pp0.02

, which is the probability that

or fewer of next month's loans under

$10,000

will be defaulted on. Round your answer to four decimal places.

mean of p =0.01

sample size =n= 1100 std deviation of proportion=p=(p*(1-p)/n)= 0.0030

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