Based on past experience, a bank believes that 4% of the people who receive loans will not make payments on time. The bank has recently approved 300 loans.What is the likely mean of the proportion of clients in this group who may not make timely payments?
Question
Based on past experience, a bank believes that 4% of the people who receive loans will not make payments on time. The bank has recently approved 300 loans.What is the likely mean of the proportion of clients in this group who may not make timely payments?
Solution
The mean of the proportion of clients who may not make timely payments can be calculated using the formula:
Mean = n * p
where: n = total number of trials (in this case, the total number of loans approved) p = probability of success (in this case, the probability that a client will not make timely payments)
Given in the problem, n = 300 and p = 4% or 0.04.
Substituting these values into the formula gives:
Mean = 300 * 0.04 = 12
So, on average, the bank can expect that 12 out of the 300 loans approved may not make timely payments.
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