(a)
The average of the bank standard indicator and the percentage change in net worth for the recent eight quarters and analyze if the averages behave rationally.
Introduction:
Prime mortgage loans refer to the amount given as loans to the individuals who have a greater possibility of default at the time of repayment. Net worth of households refers to the total worth of the assets of a household or an organization, deducting from it all its liabilities or the payments to be made.
(b)
The correlation coefficient from the two sets of data from 3rd quarter of 2007 to the current data available. Also, examine the relationship between the net worth of households and bank mortgage lending standard and check of the efforts to reduce asymmetric information.
Introduction:
Correlation coefficient refers toa measure used to analyze the linear interdependence between any two variables or the data sets. The value of correlation coefficient lies between -1 to +1.
Asymmetric information arises wherein among the two parties involved in an economic transaction one party has more knowledge or information than the other market. It mainly arises when the seller of a product has more information than its buyer.
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