Reference no: EM131381620
Second loan. Exercise 15 describes the loan score method a bank uses to decide which applicants it will lend money. Only if the total points awarded for various aspects of an applicant's financial condition fail to add up to a minimum cutoff score set by the bank will the loan be denied.
a) In this context, what is meant by the power of the test?
b) What could the bank do to increase the power?
c) What's the disadvantage of doing that?
Exercise 15
Loans. Before lending someone money, banks must decide whether they believe the applicant will repay the loan. One strategy used is a point system. Loan officers assess information about the applicant, totaling points they award for the person's income level, credit history, current debt burden, and so on. The higher the point total, the more convinced the bank is that it's safe to make the loan. Any applicant with a lower point total than a certain cutoff score is denied a loan. We can think of this decision as a hypothesis test. Since the bank makes its profit from the interest collected on repaid loans, their null hypothesis is that the applicant will repay the loan and therefore should get the money. Only if the person's score falls below the minimum cutoff will the bank reject the null and deny the loan. This system is reasonably reliable, but, of course, sometimes there are mistakes.
a) When a person defaults on a loan, which type of error did the bank make?
b) Which kind of error is it when the bank misses an opportunity to make a loan to someone who would have repaid it?
c) Suppose the bank decides to lower the cutoff score from 250 points to 200. Is that analogous to choosing a higher or lower value of for a hypothesis test? Explain.
d) What impact does this change in the cutoff value have on the chance of each type of error?
How would this affect the power of the test
: Stop signs. Highway safety engineers test new road signs, hoping that increased reflectivity will make them more visible to drivers. Volunteers drive through a test course with several of the new- and old-style signs and rate which kind shows up t..
|
Difference between a threat and attack
: Discuss the difference between a threat and attack. Describe how a vulnerability may be converted into an attack (provide an example in your explanation)
|
Particular computer system
: There could be problems getting this application to function perfectly on any particular computer system. That would be a good topic for the discussion threads; how well the screen saver works on your computer.
|
Run a regression analysis of the data
: Run a regression analysis of the data and determine whether there is a linear relationship between inflation and total return on stocks for the periods under study.
|
What could the bank do to increase the power
: Only if the total points awarded for various aspects of an applicant's financial condition fail to add up to a minimum cutoff score set by the bank will the loan be denied.
|
Draw market demand and supply curves
: In this assignment, hospitals are the firms, and two types of labor are being supplied: physicians (PHs) and physician assistants (PAs). Draw market demand and supply curves for physicians and physician assistants indicating a market clearing price..
|
Perception of the hacker changed over recent years
: How has the perception of the hacker changed over recent years? (Lone wolf vs organized hacking groups) What is the profile of a hacker today?
|
What are the various types of malware
: What are the various types of malware? How do worms differ from viruses? Do Trojan horses carry viruses or worms? ( 160 word minimum, give example of atleast one worm and virus and differences)
|
What could you do to increase the filter’s power
: Some filters allow the user (that's you) to adjust the cutoff. Suppose your filter has a default cutoff of 50 points, but you reset it to 60. Is that analogous to choosing a higher or lower value of for a hypothesis test? Explain.
|