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Before making an unsecured loan to an individual, a bank orders a report on the applicant's credit history. To justify making the loan, the bank
Before making an unsecured loan to an individual, a bank orders a report on the applicant's credit
history. To justify making the loan, the bank must find the applicant's credit record to be
satisfactory because an applicant's default chance affects the bank's profit. Assuming that a bank's
fundamental objective is to maximize profit, which of the following influence diagram labels best
describe the bank's loan decision? Support your answer.
a I: Make Loan?, II: Profit, III: Credit Report, IV: Default
b I: Default, II: Credit Report, III: Profit, IV: Make Loan?
c I: Default, II: Make Loan?, III: Profit, IV: Credit Report
d I: Credit Report, II: Default, III: Make Loan?, IV: Profit
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