Use the churn data set at the book series website for the following exercises. Make sure that the correlated variables have been accounted for.

Perform a cost/benefit analysis for the default CART model from exercise 1 as follows. Assign a cost or benefit in dollar terms for each combination of false and true positives and negatives, similar to Table 14.4. Then, using the contingency table, find the overall anticipated cost.

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Outcome Classification Actual Cost Rationale Value True negative True positive False negative False positive ≤50,000 >50,000 ≤50,000 >50,000 <50,000 $0 No money gained or lost >50,000 $300 >50,000 $0 Anticipated average interest revenue from loans No money gained or lost ≤50,000 $500 Cost of loan default averaged over all loans to ≤50,000 group