CAS Exam MAS-I Fall 2019, Question 25
Study guide: Exam MAS-I
A bank uses a logistic model to estimate the probability of clients defaulting on a loan, and it comes up with the following parameter estimates:
i |
Variable | \beta_i |
|---|---|---|
| 0 | Intercept | -1.6790 |
| 1 | Income (in 000's) | -0.0294 |
| 2 | Student [Yes] | -0.3870 |
| 3 | Number of credit cards | 0.7710 |
The following four clients applied for loans from the bank:
| Client | Income | Student | # of credit cards |
|---|---|---|---|
| 1 | 25,000 | Y | 1 |
| 2 | 10,000 | Y | 3 |
| 3 | 20,000 | N | 0 |
| 4 | 75,000 | N | 3 |
The bank will reject any loan if the probability of default is greater than 10%.
Calculate the number of clients whose loan requests are rejected.
- A) 0
- B) 1
- C) 2
- D) 3
- E) 4
Answer this question and see the worked solution