Answer:
The standard deviation for the number of delinquent mortgages in the sample is 1.08.
Step-by-step explanation:
For each mortgage, there are only two possible outcomes. Either it is delinquent, or it is not. The probability of a mortgage being delinquent is independent of other mortgages. So we use the binomial probability distribution to solve this question.
Binomial probability distribution
Probability of exactly x sucesses on n repeated trials, with p probability.
The standard deviation of the binomial distribution is:
[tex]\sqrt{V(X)} = \sqrt{np(1-p)}[/tex]
21% of U.S. mortgages were delinquent last year.
This means that [tex]p = 0.21[/tex]
A random sample of seven mortgages was selected.
This means that [tex]n = 7[/tex]
What is the standard deviation of this distribution
[tex]\sqrt{V(X)} = \sqrt{7*0.21*0.79} = 1.08[/tex]
The standard deviation for the number of delinquent mortgages in the sample is 1.08.
