Suppose That a Bank Wishes to Predict Whether or Not

question 58

Multiple Choice

Suppose that a bank wishes to predict whether or not an existing holder of its Silver credit card will upgrade, for an annual fee, to its Platinum credit card. To do this, the bank carries out a pilot study that randomly selects 40 of its existing Silver card holders and offers each Silver card holder an upgrade to its Platinum card. Here, the response variable Upgrade equals 1 if the Silver card holder decided to upgrade and 0 otherwise. Moreover, the predictor variable Purchases is last year's purchases (in thousands of dollars) by the Silver card holder, and the predictor variable PlatProfile equals 1 if the Silver card holder conforms to the bank's Platinum profile and 0 otherwise. Below is the classification tree they derived from the data collected in the study. Assume they classify those with an upgrade probability estimate of at least .5 as upgraders. Based on this classification tree, a member of the study sample who made $28,520 in purchases last year and conformed to the bank's Platinum profile but did not upgrade to the Platinum card would be…

• A) accurately classified as an upgrader.
• B) accurately classified as a non-upgrader.
• C) inaccurately classified as an upgrader.
• D) inaccurately classified as a non-upgrader.

Attain proficiency in conducting information interviews to gain company insights.

Grasp the concept of networking and the significance of personal connections in hiring processes.

Understand the etiquettes and the impact of following up after informational interviews.

Identify free and beneficial resources for job search tips.

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Definitions:

Allowance for Doubtful Accounts

A contra-asset account used to estimate the portion of a company's accounts receivable that may not be collectible.

Gross Accounts Receivable

The total amount owed by customers to a business for goods or services provided without deducting any allowance for doubtful accounts.

Contra-Revenue Account

An account that decreases the gross amount of revenue reported on the financial statements, such as sales returns, discounts, and allowances.

Bad Debts Expense

An expense reported on the income statement, representing the amount of accounts receivable that is not expected to be collected.