Question

5. Probability relationships A mortgage is a loan that the borrower uses to finance the purchase of a home. There are two basic types of mortgage loans: the fixed-rate mortgage and the adjustable-rate mortgage (ARM). For the purposes of this problem, assume that all mortgages are either fixed-rate or adjustable-rate. Apart from the classification of a mortgage as fixed-rate or adjustable-rate, conventional mortgage loans (loans that are not government-insured) are categorized as prime or subprime. A subprime mortgage is made to a borrower who is perceived as a high credit risk. For the purposes of this problem, assume that all conventional mortgages are either prime or subprime. Note: For the rest of this problem, the term "mortgage" refers to a loan that is not government-insured (a conventional mortgage). Consider this experiment: A mortgage is randomly selected and categorized as prime or subprime and as fixed-rate or adjustable-rate. A = the event that the mortgage has an adjustable rate F = the event that the mortgage has a fixed rate P = the event that the mortgage is prime S = the event that the mortgage is subprime Now consider events S and F. Which of the following Venn diagrams most accurately shows how events S and F are related to the sample space? Event S Event F Event S Event F Event F Event S Diagram 1 Diagram 2 Diagram 3 Diagram 1 Diagram 2 Diagram 3 Are events S and F mutually exclusive? No Yes

          5. Probability relationships
A mortgage is a loan that the borrower uses to finance the purchase of a home. There are two basic types of
mortgage loans: the fixed-rate mortgage and the adjustable-rate mortgage (ARM). For the purposes of this problem,
assume that all mortgages are either fixed-rate or adjustable-rate.
Apart from the classification of a mortgage as fixed-rate or adjustable-rate, conventional mortgage loans (loans that
are not government-insured) are categorized as prime or subprime. A subprime mortgage is made to a borrower who
is perceived as a high credit risk. For the purposes of this problem, assume that all conventional mortgages are either
prime or subprime.
Note: For the rest of this problem, the term "mortgage" refers to a loan that is not government-insured (a
conventional mortgage).
Consider this experiment: A mortgage is randomly selected and categorized as prime or subprime and as fixed-rate
or adjustable-rate.
A = the event that the mortgage has an adjustable rate
F = the event that the mortgage has a fixed rate
P = the event that the mortgage is prime
S = the event that the mortgage is subprime
Now consider events S and F. Which of the following Venn diagrams most accurately shows how events S and F are
related to the sample space?
Event S
Event F
Event S
Event F
Event F
Event S
Diagram 1
Diagram 2
Diagram 3
Diagram 1
Diagram 2
Diagram 3
Are events S and F mutually exclusive?
No
Yes

5. Probability relationships
A mortgage is a loan that the borrower uses to finance the purchase of a home. There are two basic types of
mortgage loans: the fixed-rate mortgage and the adjustable-rate mortgage (ARM). For the purposes of this problem,
assume that all mortgages are either fixed-rate or adjustable-rate.
Apart from the classification of a mortgage as fixed-rate or adjustable-rate, conventional mortgage loans (loans that
are not government-insured) are categorized as prime or subprime. A subprime mortgage is made to a borrower who
is perceived as a high credit risk. For the purposes of this problem, assume that all conventional mortgages are either
prime or subprime.
Note: For the rest of this problem, the term "mortgage" refers to a loan that is not government-insured (a
conventional mortgage).
Consider this experiment: A mortgage is randomly selected and categorized as prime or subprime and as fixed-rate
or adjustable-rate.
A = the event that the mortgage has an adjustable rate
F = the event that the mortgage has a fixed rate
P = the event that the mortgage is prime
S = the event that the mortgage is subprime
Now consider events S and F. Which of the following Venn diagrams most accurately shows how events S and F are
related to the sample space?
Event S
Event F
Event S
Event F
Event F
Event S
Diagram 1
Diagram 2
Diagram 3
Diagram 1
Diagram 2
Diagram 3
Are events S and F mutually exclusive?
No
Yes

Added by Ricardo W.

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