Credit scorecards are used by banks and financial institutions to determine whether applicants will receive loans. The scorecard is the product of a statistical technique that converts questions about income, residence, and other variables into a score. The higher the score, the higher the probability is that the applicant will repay.
A small bank that heretofore did not use a scorecard wanted to determine whether a score-card would be advantageous. The bank manager took a random sample of 300 loans that were granted and scored each on a scorecard borrowed from a similar bank. This scorecard is based on the responses supplied by the applicants to questions such as age, marital status, and household income. The scores of those who repaid and the scores of those who defaulted were recorded.
a. Use EXCEL to calculate the lower confidence limit (LCL) and upper confidence limit (UCL) at 95% confidence for the mean score of those who repaid.
b. Use EXCEL to calculate the lower confidence limit (LCL) and upper confidence limit (UCL) at 95% confidence for the mean score of those who defaulted.
Notes:
1. Use AVERAGE function to find means. For example, you may use the following statement to find mean for part (a)
= AVERAGE (A2:A221)
2. Use STDEV function to find standard deviations. You may use the following statement to find standard deviation for part (a)
= STDEV (A2:A221)
3. Use NORMSINV function to find ZA:
= NORMSINV (1-A)
You will need these to find confidence limits.
4. Computer projects are individual efforts, and not team projects.