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An FI manager has calculated the following values and weights to assess the credit risk and likelihood of having to reschedule a loan. From the
An FI manager has calculated the following values and weights to assess the credit risk and likelihood of having to reschedule a loan. From the Z score calculated using these weights and values, is the manager likely to approve the loan? Validation tests of the Z score model indicated that scores below 0.500 are likely to be nonreschedulers, while scores above 0.700 indicate a likelihood of rescheduling. Scores between 0.500 and 0.700 do not predict well.
\begin{tabular}{lcc} \hline Variable & Country Value & Weight \\ TDSR & 1.25 & 0.05 \\ IR & 1.60 & 0.10 \\ INVR & 0.60 & 0.35 \\ VARE & 0.15 & 0.35 \\ MG & 0.02 & 0.15 \\ \hline \end{tabular}Step by Step Solution
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