Exhibit 17

question 26

Essay

Exhibit 17.9.A bank manager is interested in assigning a rating to the holders of credit cards issued by her bank.The rating is based on the probability of defaulting on credit cards and is as follows. To estimate this probability,she decided to use the logistic model: ,
where,
y = a binary response variable with value 1 corresponding to a default,and 0 to a no default,
x₁ = the ratio of the credit card balance to the credit card limit (in percent),
x₂ = the ratio of the total debt to the annual income (in percent).
Using Minitab on the sample data,she arrived at the following estimates: Note: The p-values of the corresponding tests are shown in parentheses below the estimated coefficients.
Refer to Exhibits 17.9.If only applicants with excellent and good ratings are qualified for a loan,find a linear relation between their balance ratio and their debt ratio that must be satisfied to be qualified.

Know the symmetry properties of the F-distribution.

Apply the concept of F-distribution in constructing confidence intervals and calculating p-values.

Recognize when alternative statistical tests (z-test, t-test) are not appropriate for comparing variances.

Understand the properties and use of the F-distribution in statistical analysis.

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Definitions:

Prejudice

Prejudice is a preconceived opinion that is not based on reason or actual experience, often involving discriminatory thoughts or beliefs towards different groups of people.

Unconscious

The unconscious consists of the processes in the mind that occur automatically and are not available to introspection, including thought processes, memories, interests, and motivations.

Social Traps

Situations in which individuals or groups pursue self-interest leading to a result that is damaging to themselves or society as a whole.

Frustration

A feeling of anger, annoyance, or upset due to being unable to change or achieve something.