A Particular Bank Has Two Loan Modification Programs for Distressed

question 121

Multiple Choice

A particular bank has two loan modification programs for distressed borrowers: Home Affordable Modification Program (HAMP) modifications, where the federal government pays the bank $1,000 for each successful modification, and non-HAMP modifications, where the bank does not receive a bonus from the federal government. To qualify for a HAMP modification, borrowers must meet a set of financial suitability criteria. What type of hypothesis test should we use to test whether borrowers from this particular bank who receive HAMP modifications are more likely to re-default than those who receive non-HAMP modifications?

• A) A hypothesis test for p₁ - p₂.
• B) A hypothesis test for µ₁ - µ₂.
• C) A matched-pairs hypothesis test.
• D) We are unable to conduct a hypothesis test because independent random samples of each group could not be collected.

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Definitions:

Price Reduction

A strategy where the selling price of a product or service is decreased to attract more customers or boost sales.

Used Product

Items that have been previously owned and used by another consumer before being sold again.

FOB Origin Pricing

A pricing term indicating that the buyer assumes shipping costs from the seller's location, and owns the goods in transit.