The Following Is an Example of a Credit Scoring Model

question 32

Multiple Choice

The following is an example of a credit scoring model to estimate the probability of debt rescheduling for country I:
Pᵢ= 0.25DSRᵢ+ 0.17IRᵢ- 0.03 INVRᵢ+ 0.84VAREXᵢ+ 0.93 MGᵢ
Where Pi is 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.
-What is an important determinant of rescheduling probability if inflation is a prime concern?

• A)The debt service ratio.
• B)The import ratio.
• C)The investment ratio.
• D)The variance of export revenue.
• E)The rate of growth of the domestic money supply.

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Definitions:

Decreasing Costs

A situation where the expenses of producing a good or service fall over time, typically due to efficiency improvements or economies of scale.

LIFO Method

An inventory valuation method called "Last In, First Out," where the cost of the most recently purchased items is the first to be expensed as cost of goods sold.

Net Income

Refers to the total earnings or profit of a company after subtracting all expenses and costs from its total revenue.

FIFO Method

"First In, First Out," an inventory valuation method where goods first purchased or produced are the first to be sold, affecting cost of goods sold and inventory value.