Which of the Following Credit Decisions Appears Correct for a Customer

question 69

Multiple Choice

Which of the following credit decisions appears correct for a customer that intends to order $1,000 of goods annually that have a 20% profit margin if the probability of default is 20% and the discount rate is 10%?

• A)Reject because expected loss equals $320
• B)Reject because expected profit equals $0
• C)Accept because expected profit equals $1,440
• D)Accept because expected profit equals $3,200

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Definitions:

Ratio Schedule

A type of reinforcement schedule in operant conditioning where a response is reinforced after a specified number of responses.

Continuous Reinforcement

A method in behavioral psychology where a desired behavior is reinforced every time it occurs, leading to faster learning.

Partial Reinforcement

A conditioning strategy where a behavior is reinforced only some of the time, often making the learned behavior more resistant to extinction.

Unconditioned Response

A natural, unlearned reaction to an unconditioned stimulus, such as salivation when food is presented, inherent in classical conditioning.