The Following Is an Example of a Credit Scoring Model

question 67

Multiple Choice

The following is an example of a credit scoring model to estimate the probability of debt rescheduling for country I: P_i = 0.25 DSR_i + 0.17 IR_i - 0.03 INVR_i + 0.84 VAREX_i + 0.93 MG_i
Where P_iis the probability of rescheduling country I's debt; DSR is the country's 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 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.

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Definitions:

FICA Tax Rate

The combined rate for Social Security and Medicare taxes in the United States, paid by both employees and employers.

Payroll Deduction

Amounts withheld from an employee's salary by an employer for taxes, benefits, and other legally permitted or voluntary deductions.

Regular Hourly Wage

This is the standard amount of money paid to an employee for each hour of work, excluding overtime rates or bonuses.

Net Pay

The amount of an employee's earnings after all deductions, such as taxes and retirement contributions, have been withheld.