In July 2010, Lender Processing Services reported that homeowners were defaulting in record numbers; 12.4% of mortgages were delinquent or in foreclosure. Suppose a large bank holds 1731 adjustable-rate mortgages.
a) Can you apply the Central Limit Theorem to describe the sampling distribution model for the sample proportion of foreclosures?
b) Sketch and clearly label the sampling model, based on the 68-95-99.7 Rule.
c) How many of these homeowners might the bank expect will default on their mortgages?