14. Mortgages. In early 2007 the Mortgage Lenders
Chapter 18, Problem 14(choose chapter or problem)
14. Mortgages. In early 2007 the Mortgage Lenders Associationreported that homeowners, hit hard by rising interestrates on adjustable-rate mortgages, were defaultingin record numbers. The foreclosure rate of 1.6% meantthat millions of families were losing their homes. Supposea large bank holds 1731 adjustable-rate mortgages.a) Can you apply the Central Limit Theorem to describethe sampling distribution model for the sample proportionof foreclosures? Check the conditions anddiscuss any assumptions you need to make.b) Sketch and clearly label the sampling model, based onthe 689599.7 Rule.c) How many of these homeowners might the bankexpect will default on their mortgages? Explain.
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