The accounts of 2,500 credit card customers out of a sample of 35,000 that were reviewed...

 

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The accounts of 2,500 credit card customers out of a sample of 35,000 that were reviewed did not perform satisfactorily. The credit scores assigned to these applicants when originally assessed had a mean of 70 and standard deviation of 8. The scores of the remaining customers had a mean of 85 and a standard deviation of 12. Assuming these distributions are approximately normal, if the cut-off score was revised upward to 80. (1) Complete the following table: Mean credit score Standard deviation of credit score Probability of receiving credit (%) Probability of being denied credit (%) Creditworthiness High 85 12 Low 70 8 (ii) The original default rate on the sample of 35,000 card holders was extremely high at 7.14%. What impact would be setting the cut-off at 80 have on the default rate? Show calculations. The accounts of 2,500 credit card customers out of a sample of 35,000 that were reviewed did not perform satisfactorily. The credit scores assigned to these applicants when originally assessed had a mean of 70 and standard deviation of 8. The scores of the remaining customers had a mean of 85 and a standard deviation of 12. Assuming these distributions are approximately normal, if the cut-off score was revised upward to 80. (1) Complete the following table: Mean credit score Standard deviation of credit score Probability of receiving credit (%) Probability of being denied credit (%) Creditworthiness High 85 12 Low 70 8 (ii) The original default rate on the sample of 35,000 card holders was extremely high at 7.14%. What impact would be setting the cut-off at 80 have on the default rate? Show calculations.

Answer rating: 100% (QA)

Credit Card Default Rate Analysis i Completing the Table Creditworthiness Mean credit score Standard ... View the full answer