Exhibit 9-2 a Customer Has Approached a Local Credit Union for a for a $20,000

question 14

Essay

Exhibit 9-2
A customer has approached a local credit union for a $20,000 1-year loan at a 10% interest rate. If the credit union does not approve the loan application, the $20,000 will be invested in bonds that earn a 6% annual return. Without additional information, the credit union believes that there is a 5% chance that this customer will default on the loan, assuming that the loan is approved. If the customer defaults on the loan, the credit union will lose the $20,000.
-Refer to Exhibit 9-2.What should the credit union do
What is their expected profit

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Definitions:

Cognitive Declines

The gradual reduction in cognitive capabilities, including memory, thinking, and problem-solving skills, often associated with aging or neurological conditions.

Brain Plasticity

The capacity of the brain to change and adapt in structure and function in response to learning and experience.

Information Processing Bias

A cognitive bias that affects the way individuals perceive, interpret, and remember information.

Negative Information

Information that is unfavorable or detrimental, which can significantly influence perceptions, decisions, and behaviors.