There are two types of consumer credit: installment credit and noninstallment credit. In the following table, categorize each given item as installment credit or noninstallment credit: Installment Credit Noninstallment Credit This type of credit may consist of open-ended credit (also called revolving credit), which is credit extended in advance of any transaction, so that borrowers do not need to reapply each time they need to use the credit. A personal line of credit is a form of open-ended credit in which the lender allows the borrower to access a prearranged revolving line of credit. This simplest form of this type of credit is a single-payment loan in which the original amount borrowed plus interest is due at the end of an agreed-on time period. Service credit is credit granted to consumers by public utilities, physicians, dentists, and other service providers that do not require full payment when services are rendered. This type of credit is also called closed-end credit. With this type of credit, the borrower must repay the amount owed plus interest in a specific number of equal payments. One form of this type of credit is a credit card (or charge card), which is a plastic card identifying the holder as a participant in the lender's charge account plan. This type of credit usually has a credit limit, which is the maximum outstanding debt that will be allowed on the credit account.
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- A personal line of credit is a form of open-ended credit in which the lender allows the borrower to access a prearranged revolving line of credit. This simplest form of this type of credit is a single-payment loan in which the original amount borrowed plus Show more…
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6) A consumer protection organization looks at the relationship between individuals' FICO Credit Score and the interest rates they secure for 36-month auto loans. They randomly select 6 individuals and observe their FICO credit score and interest rate (APR) they were able to secure on their most recent 36-month auto loan from the loan application. The following scatterplot shows the relationship (with the regression line fit to it): The regression line was calculated and is given by: APR = 61.369 - 0.076 (FICO Credit Score) a.) Estimate the correlation coefficient. b.) Interpret the slope and intercept of the regression line. c.) In this scenario, is declaring causation reasonable? That is, is it reasonable to say that someone can lower their APR on a 36-month car loan by increasing their FICO credit score? d.) The consumer group considers using this regression to predict the APR on a 36-month auto loan of consumers with a credit score of 400 or below. Would this be a reasonable idea? e.) Predict the interest rate for a person with a FICO credit score of 690.
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Consider the June $8,2009,$ USA Today article titled "Credit card delinquencies rise." Credit card delinquencies rise The delinquency rate for bank-issued credit cards rose $11 \%$ in the first three months of the year, according to credit-reporting agency TransUnion. The delinquency rate jumped to $1.32 \%$ this year, from $1.19 \%$ in the first three months of $2008,$ TransUnion said. The statistic measures the percentage of card holders who are three months or more past due on their payments for MasterCard, Visa, American Express and Discover cards. The average total debt on bank cards also rose, jumping to $\$ 5,776$ from $\$ 5,548$ last year. Balances typically rise in the first quarter, as holiday spending comes due, said Ezra Becker, director of consulting and strategy in TransUnion's financial services group. But retail sales results showed holiday spending took a steep drop. That likely means higher balances reflect consumers using credit cards to pay for necessities, he said. a. What is the population? b. Name at least 3 variables that must have been used. c. Classify all the variables of the study as either attribute or numerical.
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On a peer-to-peer (P2P) lending website, borrowers complete an approval scoring form that lenders use to assess creditworthiness. Lenders generally believe that borrowers who score at least 70 do not default on loans. Consequently, borrowers are rated A if their overall score is at least 70, otherwise they are rated B. A reasonably large sample of real borrower data was collected: among those that did not default on their loans, initial approval scores were normally distributed with a mean of 76.7 and a standard deviation of 8. among those that defaulted on their loans, initial approval scores were normally distributed with a mean of 63.1 and a standard deviation of 10.6. Report each answer as a decimal (not percent) accurate to at least 4 decimal places. Answers from software or from rounded z-scores (to 2 decimal places) are accepted. What proportion of borrowers that: a) defaulted were initially rated A? b) did not default were initially rated B? c) defaulted were miscategorized initially? d) did not default were miscategorized initially? Among those that defaulted, what is the probability that a borrower: a) scored above 84.8? b) scored below 64.3 or above 93.2? c) was rated B and scored above 56.3? d) was rated A and scored below 84.8? e) was rated A given scored above 63.1? f) scored below 63.1 given rated B?
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