Compute an approximation for p

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The Credit Risk Department of a major bank estimates the default rate on loans under $10,000 to be 2%. The bank will make 1600 loans that are under $10,000 next month.

a. Find the mean of ^p, where ^p is the proportion of defaults on the 1600 loans under $10,000 to be made next month.

b. Find the standard deviation of ^p.

c. Compute an approximation for P(^p≥ 0.025, which is the probability that 2.5% or more of next month's loans under $10,000 will be defaulted on.

Round your answer to four decimal places.

Reference no: EM132643314

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