Credit Evaluation

The company you work for has developed a new credit scoring model to be used to make acceptance and pricing decisions for all of their loan applicants. The credit score ( S) is calculated as: S=55(D/A)2LTV+0.5(Income/10,000)+1.5(ifRevenueInsurance=yes) where: D/A= debt-to-asset ratio LTV = loan-to-value (loan amount/value of project) Revenue Insurance =1 if the applicant has revenue insurance, 0 otherwise You accept the loan if S>5. If the loan is accepted, you offer the following interest rate (r): r= Prime Rate +(7S)%. The current Prime Rate =6.5%. Given the credit scoring model outlined above, would you accept the following loan application and if so at what interest rate? Show vour work for partial credit. The company you work for has developed a new credit scoring model to be used to make acceptance and pricing decisions for all of their loan applicants. The credit score ( S) is calculated as: S=55(D/A)2LTV+0.5(Income/10,000)+1.5(ifRevenueInsurance=yes) where: D/A= debt-to-asset ratio LTV = loan-to-value (loan amount/value of project) Revenue Insurance =1 if the applicant has revenue insurance, 0 otherwise You accept the loan if S>5. If the loan is accepted, you offer the following interest rate (r): r= Prime Rate +(7S)%. The current Prime Rate =6.5%. Given the credit scoring model outlined above, would you accept the following loan application and if so at what interest rate? Show vour work for partial credit