Exhibit 5-14. The foreclosure crisis has been particularly devastating in housin

Question

Exhibit 5-14. The foreclosure crisis has been particularly devastating in housing markets in much of the south and west United States, but even when analysis is restricted to relatively strong housing markets the numbers are staggering. For example, in 2011 an average of three residential properties were auctioned off each weekday in the city of Boston, up from an average of one per week in 2005.

Refer to Exhibit 5-14. What is the probability that no more than two foreclosure auctions occurred on a randomly selected weekday of 2011 in Boston?

Explanation / Answer

we can assumme the distribution as posisson with mean 1

probability that no more than two foreclosure auctions occurred on a randomly selected weekday

= P(0)+P(1)+P(2) = e-1*10/0!+e-1*11/1!+e-1*12/2! =0.91969 = 0.92

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