The Following Is an Example of a Credit Scoring Model

question 36

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.
According to this model, An FI would be most likely to lend to a country with

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

---

Definitions:

Investing Human Capital

The process of improving the workforce's skills and knowledge through education, training, and experience to enhance productivity and economic value.

Present Discounted Value

The current value of a future sum of money or stream of cash flows given a specified rate of return, used in time value of money calculations.

Direct Costs

Expenses that can be directly traced to the production of a specific good or service, such as materials and labor.

Economic Profit

The difference between a firm's total revenue and its total costs, including both explicit and implicit costs, measuring the firm's overall financial performance.