Question

A mortgage company classifies its borrowers into three categories: Low Risk, Medium Risk, and High Risk....

A mortgage company classifies its borrowers into three categories: Low Risk, Medium Risk, and High Risk. From experience, the company knows that:

  • 3% of low risk borrowers eventually default on their mortgages.
  • 9% of medium risk borrowers eventually default on their mortgages.
  • 15% of high risk borrowers eventually default on their mortgages.

The mortgages for 136 high risk borrowers are put together into one portfolio. The company determines that they will profit on the portfolio as long as no more than 19% of borrowers with mortgages in the portfolio default. What is the probability that the company makes a profit on the portfolio?

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A mortgage company classifies its borrowers into three categories: Low Risk, Medium Risk, and High Risk....
A mortgage company classifies its borrowers into three categories: Low Risk, Medium Risk, and High Risk. From experience, the company knows that: 2% of low risk borrowers eventually default on their mortgages. 7% of medium risk borrowers eventually default on their mortgages. 13% of high risk borrowers eventually default on their mortgages. The mortgages for 117 high risk borrowers are put together into one portfolio. The company determines that they will profit on the portfolio as long as no more...
Suppose the market for loans is made up of 75% low default risk borrowers and 25%...
Suppose the market for loans is made up of 75% low default risk borrowers and 25% percent high default risk borrowers. A financial intermediary must collect a 3% interest rate on a low-risk loan and 9% interest rate on a high risk loan in order to be profitable. Assume the financial intermediary cannot verify whether a borrower is high-risk or low-risk. However, the intermediary knows that low-risk borrowers are willing to pay a 4% interest rate and high-risk borrowers are...
Multiple Choice 11. Prepayment risk is: A. the risk you will not receive the cash flows...
Multiple Choice 11. Prepayment risk is: A. the risk you will not receive the cash flows on a mortgage-backed security B. the risk that you will receive the cash flows sooner than expected and be forced to invest at a lower rate. C. the risk that you will receive the cash flows later than expected and not be able to invest at current, higher rates. 12. Based on the video Inside the Meltdown, it appeared that the main reason Lehman...
choose correct answer 1)The difference between manufacturer's desire to produce large quantities of a limited variety...
choose correct answer 1)The difference between manufacturer's desire to produce large quantities of a limited variety of items vs. a customer's desire to demand small quantities of numerous items best describes which of the following?        Discrepancy in space        Discrepancy in quantity and assortment        Discrepancy in time        Discrepancy in logistics 2)Developing long-term relationships with key supply chain participants (e.g., consumers, intermediate customers, and suppliers) can be best described as:        Relationship marketing...
Team 5 answer the questions What are 4 key things you learned about the topic from...
Team 5 answer the questions What are 4 key things you learned about the topic from reading their paper? How does the topic relate to you and your current or past job? Critique the paper in terms of the organization and quality. Incentive Systems             In this paper, we will focus primarily on financial rewards that companies use to attract, retain and motivate the brightest and most talented candidates in the labor market. By providing a reward system that...
Everyday investment company Sharesies was launched in February 2017, after conducting research on New Zealanders’ attitudes...
Everyday investment company Sharesies was launched in February 2017, after conducting research on New Zealanders’ attitudes towards investing. Prior to launching the company, the co-founders interviewed over 200 people asking them “If I gave you $50 right now, and you had to do something with it in the next 5 minutes what would you do?” Only 5 out of 200 people chose an option to save or invest the $50. More popular options were bills, online shopping, coffees, vouchers, food,...
Everyday investment company Sharesies was launched in February 2017, after conducting research on New Zealanders’ attitudes...
Everyday investment company Sharesies was launched in February 2017, after conducting research on New Zealanders’ attitudes towards investing. Prior to launching the company, the co-founders interviewed over 200 people asking them “If I gave you $50 right now, and you had to do something with it in the next 5 minutes what would you do?” Only 5 out of 200 people chose an option to save or invest the $50. More popular options were bills, online shopping, coffees, vouchers, food,...
CASE: Sharesies: NZ investment platform Everyday investment company Sharesies was launched in February 2017, after conducting...
CASE: Sharesies: NZ investment platform Everyday investment company Sharesies was launched in February 2017, after conducting research on New Zealanders’ attitudes towards investing. Prior to launching the company, the co-founders interviewed over 200 people asking them “If I gave you $50 right now, and you had to do something with it in the next 5 minutes what would you do?” Only 5 out of 200 people chose an option to save or invest the $50. More popular options were bills,...
Please answer the following Case analysis questions 1-How is New Balance performing compared to its primary...
Please answer the following Case analysis questions 1-How is New Balance performing compared to its primary rivals? How will the acquisition of Reebok by Adidas impact the structure of the athletic shoe industry? Is this likely to be favorable or unfavorable for New Balance? 2- What issues does New Balance management need to address? 3-What recommendations would you make to New Balance Management? What does New Balance need to do to continue to be successful? Should management continue to invest...
Sign In INNOVATION Deep Change: How Operational Innovation Can Transform Your Company by Michael Hammer From...
Sign In INNOVATION Deep Change: How Operational Innovation Can Transform Your Company by Michael Hammer From the April 2004 Issue Save Share 8.95 In 1991, Progressive Insurance, an automobile insurer based in Mayfield Village, Ohio, had approximately $1.3 billion in sales. By 2002, that figure had grown to $9.5 billion. What fashionable strategies did Progressive employ to achieve sevenfold growth in just over a decade? Was it positioned in a high-growth industry? Hardly. Auto insurance is a mature, 100-year-old industry...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT