The chief loan officer of La Crosse Home Mortgage Company summarized the housing

Question

The chief loan officer of La Crosse Home Mortgage Company summarized the housing loans extended by the company in 2014 according to type and term of the loan. Her list shows that 70% of the loans were fixed-rate mortgages (F), 20% were adjustable-rate mortgages (A), and 10% belong to some other category (O) (mostly second trust-deed loans and home equity loans). Of the fixed-rate mortgages, 70% were 30-year loans, and 30% were 15-year loans; of the adjustable-rate mortgages, 35% were 30-year loans and 65% were 15-year loans; finally, of the other loans extended, 30% were 20-year loans, 60% were 10-year loans, and 10% were for a term of 5 years or less. What is the probability that a home loan extended by La Crosse has an adjustable rate and is for a term of 15 years?What is the probability that a home loan extended by La Crosse is for a term of 15 years?

Explanation / Answer

a) P(A)=0.30 of those the probability of it being 15 years is .6.
multiply the 2: .3*.6=.18

b)P(F)=0.65 of those the probability of it being 15 years is .25
multiply the 2: 0.65*0.25=.1625
add that to A
0.18+0.1625=.3425

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.