LendWise is building a loan-loss forecasting model. Before using a portfolio default-rate assumption of 2.0% in the model, the risk team wants to test whether recent observed performance is consistent with that assumption.
You are given a random sample of recently issued loans and whether each loan defaulted within 12 months. Determine whether the historical assumption that the true default rate is 2.0% is still reasonable.
| Metric | Value |
|---|---|
| Sample size | 2,500 loans |
| Observed defaults | 68 |
| Observed default rate | 2.72% |
| Assumed default rate in model | 2.00% |
| Significance level | 5% |
Assume the sample is representative and large enough for a normal approximation to the binomial.