A Bank Manager Is Interested in Assigning a Rating to the Holders

question 35

Essay

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 of 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 %)
x₂ = the ratio of the total debt to the annual income (in %)
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.
What are the conclusions of testing the individual significance of the balance ratio and the debt ratio at the 1% level?

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Definitions:

Single Parent

An individual who assumes the role of sole caregiver and provider for one or more children without the assistance of another parent in the household.

Extended Families

Family groups that extend beyond the nuclear family, including grandparents, aunts, uncles, and other relatives.

Extended Family

A family group that extends beyond the nuclear family, including relatives such as grandparents, aunts, uncles, and cousins.

Single Father

A male parent who is the sole caregiver to his child or children, without the involvement or support of a partner.