Question

1. A bank has had to repossess 100 homes. Fifty of these repossessed homes are expected to have market values that are less than the outstanding balance on the mortgage. An auditor randomly selects 10 different repossessed homes and records the number of homes which have market values less than the outstanding balance of the mortgage. What is the probability that all of the audited homes will have a market value less than the outstanding balance of the mortgage? (Source: Unknown – 325HM?) This falls under the Binominal Distribution as there are 2 different outcomes offered in the scenario.

I need to enter in Minitab

Answer 1

Let X = Number of audited homes that will have a market value less than the outstanding balance of the mortgage

X follows binomial distribution with parameter n = 10 and p = 50 / 100 = 0.5

We want probability that X = 10.

In MINITAB, go through following step to get answer,

Select 'Calc' > 'Probability Distributions' > 'Binomial...' New window pop up on screen. Refer following screen shot and enter information accordingly.

Minitab output:

Probability Density Function

Binomial with n = 10 and p = 0.5

x P( X = x )
10 0.0009766

Hence, P(X = 10) =  0.0009766