The Credit Risk Department of a major bank estimates the default rate on loans under $10,000 to be 2%. The bank will make 1600 loans that are under $10,000 next month. (a)Find the mean of p, where is the proportion of defaults on the 1600 loans under $10,000 to be made next month. (b)Find the standard deviation of p. (c)Compute an approximation for P(p less than/equal to 0.015), which is the probability that 1.5% or fewer of next month's loans under $10,000 will be defaulted on.
Contingency Table
A contingency table can be defined as the visual representation of the relationship between two or more categorical variables that can be evaluated and registered. It is a categorical version of the scatterplot, which is used to investigate the linear relationship between two variables. A contingency table is indeed a type of frequency distribution table that displays two variables at the same time.
Binomial Distribution
Binomial is an algebraic expression of the sum or the difference of two terms. Before knowing about binomial distribution, we must know about the binomial theorem.
The Credit Risk Department of a major bank estimates the default rate on loans under $10,000 to be 2%. The bank will make 1600 loans that are under $10,000 next month.
(a)Find the mean of p, where is the proportion of defaults on the 1600 loans under $10,000 to be made next month.
(b)Find the standard deviation of p.
(c)Compute an approximation for P(p less than/equal to 0.015), which is the
Introduction:
Denote π as the true population proportion. It is given that π = 2% = 0.02.
Denote p as the sample proportion, for the sample size, n = 1,600.
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