Suppose that 8% of the loans you authorize as vice president of the consumer loan division of a neighborhood bank will never be repaid. Assume further that you authorized 284 loans last year and that loans go sour independently of one another.
a. How many of these loans, authorized by you, do you expect will never be repaid? What percentage do you expect?
b. Find the usual measure of the level of uncertainty in the number of loans you authorized that will never be repaid. Briefly interpret this number.
c. Find the usual measure of the level of uncertainty in the percentage of loans you authorized that will never be repaid. Briefly interpret this number.