For borrowers with good credit scores, the mean debt for revolving and installme

Question

For borrowers with good credit scores, the mean debt for revolving and installment accounts is $15,015 (BusinessWeek, March 20, 2006). Assume the standard deviation is $3,380 and that debt amounts are normally distributed.

b.What is the probability that the debt for a randomly selected borrower with good credit is less than $10,000 (to 4 decimals)?


c. What is the probability that the debt for a randomly selected borrower with good credit is between $12,000 and $18,000 (to 4 decimals)?


d. What is the probability that the debt for a randomly selected borrower with good credit is no more than $14,000 (to 4 decimals)?

Explanation / Answer

Z-score = ( value - mean ) / sdev = ( 18000 - 15015 ) / 3380 = .8831 On a normal distribution table, that corresponds to .8106, so there is a 1 - .8106 = .1894 chance of a higher value, or 18.94%

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