22. Arlie is now a bank loan officer who estimates the probability of default for people making loan applications. The outcome is the true probability of default. If the estimated probability of default is too high (greater than or equal to 5%) no loan is granted. If the estimated probability of default is less than 5%, a loan is granted. A, B, C, D, E, F, and G are applicants for loans. As seen in the outcome distribution below, A, B, C, D, and should receive loans because each has a low risk of default (less than 5%) and are an appropriate loan grantees because they are qualified. F and G should be rejected because each has a high risk of default (greater than 5%) and would be a high risk loan. For each situation, draw an Arlie frequency distribution in the space provided. (Partial credit will be given for correct frequency distributions.) Then, in each case, underline the consequence(s): a) one or more high risk loans, b) one or more people who should receive a loan" do not get a loan, and/or one or more applicants "people who should receive a loan" actually get one? No justification of your choices is required. (You can use any one, two, or three of the consequences in your answer.) (12 points) 1) The mean of the loan officer's judgments is far higher than the outcome mean, but the standard deviation of judgments is the same as the outcome standard deviation and the achievement index is 1.00. OUTCOME A B C D E F G 0% Grant Loan 5% Reject Loan Application Arlie Underline all that apply from the following consequences? a) one or more high risk loans are granted. b) one or more "applicants who should receive a loan" do not get a loan. c) one or more "applicants who should receive a loan" get a loan. ii) The judgment standard deviation is too large relative to the outcome standard deviation, but the outcome and judgment means are the same and the achievement index is -1.00. OUTCOME ABCDEFG 0% Grant Loan 5% Reject Loan Application Arlie Underline all that apply from the following consequences? a) one or more high risk loans are granted. b) one or more "applicants who should receive a loan" do not get a loan. c) one or more "applicants who should receive a loan" get a loan.. iii) The achievement index is 0.00, the judgment mean is far lower than the outcome mean, and the judgment standard deviation is far less than the outcome standard deviation. OUTCOME A B C D E F G 0% Grant Loan 5% Reject Loan Application Arlie Underline all that apply from the following consequences? a) one or more high risk loans are granted. b) one or more "applicants who should receive a loan" do not get a loan. c) one or more "applicants who should receive a loan" get a loan. 2b. Do you agree with the following statements (indicate yes or no). The briefly justify your answer. (8 points) D) My linear judgmental predictability is 92. To be more accurate, I should be more random in my decisions. ii) My standard deviation was 9.77. It was very close to the outcome standard deviation of 9.33. This means that I should reduce each of my judgments by 0.44 2c. A judge has the following results for a lens model analysis: Sum of absolute differences between outcome and judgment=0 Outcome mean=151.08 Judgment Mean=151.08 Outcome Std Deviation=46.65 Judgment Std Deviation-46.65 Achievement Index -1.00 Linear Achievement Index=0.316 Non Linear Achievement Index =0.674 In the analysis, the judge notes that the nonlinear achievement index (.674) is greater than 10 and attributes this result only to luck. Do you agree with this assessment? If you don't, which one of the other three explanations (cheating, using a cue not included in the analysis, or using one or more cues in a nonlinear fashion) is most plausible? If you list more than one, only the first will be graded. Briefly justify your answers. (4 points) 22. Arlie is now a bank loan officer who estimates the probability of default for people making loan applications. The outcome is the true probability of default. If the estimated probability of default is too high (greater than or equal to 5%) no loan is granted. If the estimated probability of default is less than 5%, a loan is granted. A, B, C, D, E, F, and G are applicants for loans. As seen in the outcome distribution below, A, B, C, D, and should receive loans because each has a low risk of default (less than 5%) and are an appropriate loan grantees because they are qualified. F and G should be rejected because each has a high risk of default (greater than 5%) and would be a high risk loan. For each situation, draw an Arlie frequency distribution in the space provided. (Partial credit will be given for correct frequency distributions.) Then, in each case, underline the consequence(s): a) one or more high risk loans, b) one or more people who should receive a loan" do not get a loan, and/or one or more applicants "people who should receive a loan" actually get one? No justification of your choices is required. (You can use any one, two, or three of the consequences in your answer.) (12 points) 1) The mean of the loan officer's judgments is far higher than the outcome mean, but the standard deviation of judgments is the same as the outcome standard deviation and the achievement index is 1.00. OUTCOME A B C D E F G 0% Grant Loan 5% Reject Loan Application Arlie Underline all that apply from the following consequences? a) one or more high risk loans are granted. b) one or more "applicants who should receive a loan" do not get a loan. c) one or more "applicants who should receive a loan" get a loan. ii) The judgment standard deviation is too large relative to the outcome standard deviation, but the outcome and judgment means are the same and the achievement index is -1.00. OUTCOME ABCDEFG 0% Grant Loan 5% Reject Loan Application Arlie Underline all that apply from the following consequences? a) one or more high risk loans are granted. b) one or more "applicants who should receive a loan" do not get a loan. c) one or more "applicants who should receive a loan" get a loan.. iii) The achievement index is 0.00, the judgment mean is far lower than the outcome mean, and the judgment standard deviation is far less than the outcome standard deviation. OUTCOME A B C D E F G 0% Grant Loan 5% Reject Loan Application Arlie Underline all that apply from the following consequences? a) one or more high risk loans are granted. b) one or more "applicants who should receive a loan" do not get a loan. c) one or more "applicants who should receive a loan" get a loan. 2b. Do you agree with the following statements (indicate yes or no). The briefly justify your answer. (8 points) D) My linear judgmental predictability is 92. To be more accurate, I should be more random in my decisions. ii) My standard deviation was 9.77. It was very close to the outcome standard deviation of 9.33. This means that I should reduce each of my judgments by 0.44 2c. A judge has the following results for a lens model analysis: Sum of absolute differences between outcome and judgment=0 Outcome mean=151.08 Judgment Mean=151.08 Outcome Std Deviation=46.65 Judgment Std Deviation-46.65 Achievement Index -1.00 Linear Achievement Index=0.316 Non Linear Achievement Index =0.674 In the analysis, the judge notes that the nonlinear achievement index (.674) is greater than 10 and attributes this result only to luck. Do you agree with this assessment? If you don't, which one of the other three explanations (cheating, using a cue not included in the analysis, or using one or more cues in a nonlinear fashion) is most plausible? If you list more than one, only the first will be graded. Briefly justify your answers. (4 points)