Question

In a news story distributed by the Washington Post, Lew Sichelman reports that a substantial fraction of mortgage loans that go into default within the first year of the mortgage were approved on the basis of falsified applications. For instance, loan applicants often exaggerate their income or fail to declare debts. Suppose that a random sample of 1,000 mortgage loans that were defaulted within the first year reveals that 410 of these loans were approved on the basis of falsified applications.
a. Find a point estimate of and a 95 percent confidence interval for p, the proportion of all first-year defaults that are approved on the basis of falsified applications.
b. Based on your interval, what is a reasonable estimate of the minimum percentage of all first-year defaults that are approved on the basis of falsified applications?


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  • CreatedMay 28, 2015
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