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A Decision Tree Is Built to Determine Individuals Likely to Default

question 9

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A decision tree is built to determine individuals likely to default on an unsecured loan. The null hypothesis states that an individual will not default on the loan. The decision tree correctly classifies 80% of the instances in a test dataset. Fifteen percent of the mistakes made by the model are type 1 errors. What can be said about the performance of the model?

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Equipment Purchase

The acquisition of physical assets, such as machinery or tools, used in the operation of a business.

Down Payment

An initial upfront payment made when purchasing an item, especially real estate, which is part of the total purchase price.

On Account

A transaction where goods or services are provided with an agreement that payment will be made at a later date.

Advertising Expense

The cost incurred in promoting products or services through various media to attract potential customers.

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