If the Determining Function for the Likelihood of a Mortgage

question 13

Multiple Choice

If the determining function for the likelihood of a mortgage application receiving a loan is given by, Loan Successful = 0.60 + 0.01 Credit Score. What would be the causal effect of increasing your credit score by 10 points?

• A) Your expected probability of getting a loan would be 0.60 + 0.01(10) = 0.61.
• B) Your expected probability of getting a loan would be 0.60
• C) Your expected probability of getting a loan would increase by 0.01(10) = 0.10
• D) Your expected probability of getting a loan would increase by 10.

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Definitions:

Recognition Criteria

The conditions that must be met for a particular item to be included on the financial statements, ensuring transactions are recorded in the correct accounting period.

FASB

The Financial Accounting Standards Board, an independent nonprofit organization responsible for establishing accounting and financial reporting standards in the United States.

Recognition Criteria

The conditions that must be met for a particular item to be recognized in the financial statements, according to accounting standards.

Revenue Recognition

The accounting principle that dictates the specific conditions under which income becomes recognized as revenue in the financial statements.