Suppose That a Bank Wishes to Predict Whether or Not

question 68

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. Of these 40 Silver card holders, what is the proportion that did not upgrade?

• A) .5535
• B) .5250
• C) .4750
• D) .1179
• E) .1000

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Definitions:

Marginal Costs

The additional cost incurred by producing one additional unit of a product or service.

Variable Costs

Costs that vary directly with the level of production, such as materials and labor, in contrast to fixed costs which remain constant regardless of production level.

Homogeneous Products

Goods that are identical in quality and features, making them interchangeable in the eyes of consumers.

Indistinguishable

Incapable of being identified as different or distinct, often used in contexts where two or more items appear exactly alike.