Were fixed-rate mortgages (F), 30% were adjustable-rate mortgages (A) and 10% be

Question

Were fixed-rate mortgages (F), 30% were adjustable-rate mortgages (A) and 10% belong category (0) (mostly second trust-deed loans and home equity loans), of the fixed-rate 75% where 30-year loans, and 25% where 15-year loan; of the rate mortgages, 35% where 30-year loans and 65% were 15-year loans; finally, of the other loans extended, 25% 20-year loans, 60% were 10-year loans, and 15% were for a term of s years or less. (a) Draw a tree diagram representing these data. (b) What is the probability that a home loan extended by La Crosse has an adjustable rate and is for a term of 15 years? (c) What is the probability that a home loan extended by La Crosse is for a term of 15 years?

Explanation / Answer

(b)(for A )30% * (for 15 year)65% = 0.3*0.65 = 0.195

(c)(for A )30% *(for 15 year)65% +(for F )60%*(for 15 year)25% = 0.3*0.65 + 0.6*0.25 = 0.345

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