In examining borrower characteristics versus loan delinquency, a bank has collec
ID: 3151796 • Letter: I
Question
In examining borrower characteristics versus loan delinquency, a bank has collected the following information: (1) 15% of the borrowers who have been employed at their present job for less than 3 years are behind in their payments, (2) 5% of the borrowers who have been employed at their present job for at least 3 years are behind in payments, and (3) 80% of the borrowers have been employed at their present job for at least 3 years. Given this information:
a. What is the probability that a randomly selected loan account will be for a person in the same job for at least 3 years who is behind in making payments?
b. What is the probability that a randomly selected loan account will be for a person in the same for less than 3 years or who is behind in making payments?
c. If a loan account is behind, what is the probability that the loan is for a person who has been in the same job for less than 3 years?
Explanation / Answer
a)
Probability is 0.05
b) Probabiity is 0.15
c) Probability is 0.15 / 0.80 = 0.1875