First Question

You now have enough information to begin forming a loan investment strategy. Consider the variables int_rate, grade (A, C), and term (36, 60 months).

• How would you allocate your loan portfolio across these three dimensions? There is no right answer to this question, but you should support your investment strategy with your analysis.
• One important aspect to consider is your risk tolerance. Would you focus on the safest loans or the riskiest loans? Or would you diversify your portfolio by spreading your investment across different categories?

Second Question

The data includes a wide range of information about the borrower. These variables include annual income, whether the income has been verified, type of employment, length of employment, home ownership, state of residence, debt-to-income ratio, outstanding debt, public records, secondary co-signers, and other information. For this last step of the analysis, you should provide some ideas for how these borrower characteristics could be used to sharpen your investment strategy.

• Would you prefer any of these borrower types over others based on the risk and return tradeoff? You can approach this by comparing int_rate and loan_status (charged off and fully paid) across different borrower types.
• For instance, would you want to rely on income verification or not? Would you prefer co-signed loans or not? Is higher outstanding debt a positive or negative? Select a few dimensions to consider and use these dimensions to provide additional discussion about your proposed investment strategy.