# Question

According to the Mortgage Bankers Association, 10% of all home mortgage loans in California were in foreclosure in the fourth quarter of 2011. Assuming this rate holds, if you randomly pick 30 California home mortgage loans, how likely is it that

a. At least six of them would be in foreclosure?

b. No more than two of them would be in foreclosure?

c. Suppose Farmer’s Bank of California has decided that it cannot afford more than a 1% chance that more than three of its new home mortgage loans will end up in foreclosure. Using a 10% foreclosure rate, what is the maximum number of home mortgage loans that Farmer’s should make?

a. At least six of them would be in foreclosure?

b. No more than two of them would be in foreclosure?

c. Suppose Farmer’s Bank of California has decided that it cannot afford more than a 1% chance that more than three of its new home mortgage loans will end up in foreclosure. Using a 10% foreclosure rate, what is the maximum number of home mortgage loans that Farmer’s should make?

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