The Following Is an Example of a Credit Scoring Model

question 58

Multiple Choice

The following is an example of a credit scoring model to estimate the probability of debt rescheduling for country I: P_i= 0.25DSR_i+ 0.17IR_i- 0.03 INVR_i+ 0.84VAREX_i+ 0.93 MG_i
Where P_i is the probability of rescheduling country I's debt; DSR is the country's total debt service ratio; IR is the country's import ratio; INVR is the country's investment ratio; VAREX is the country's variance of export revenue; and MG is the country's rate of growth of the domestic money supply.
What is an important determinant of rescheduling probability if inflation is a prime concern?

• A)The total debt service ratio.
• B)The import ratio.
• C)The investment ratio.
• D)The variance of export revenue.
• E)The rate of growth of the domestic money supply.

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Definitions:

Price Ceiling

A government-imposed limit on the price charged for a product, intended to protect consumers from high prices.

Marginal Cost

The additional cost incurred in producing one more unit of a good or service.

Comparative Advantage

Comparative advantage occurs when a country, individual, or company can produce a good or service at a lower opportunity cost than others.

Geegaws

Decorative trinkets or gadgets, often considered unnecessary or frivolous.