Question 1. Credit Evaluation (2 point) 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= 5 5*(D/A) - 2*LTV +0.5(Income/10,000) + 1.5*(if Revenue Insurance = 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 +(7-%. 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 your work for partial credit. Applicant Name John Smith D/A 0.5 Income 80.000 Loan Amount 90,000 Value of Project 120,000 Revenue Insurance? Yes LTV Accept or reject loan? Question 1. Credit Evaluation (2 point) 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= 5 5*(D/A) - 2*LTV +0.5(Income/10,000) + 1.5*(if Revenue Insurance = 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 +(7-%. 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 your work for partial credit. Applicant Name John Smith D/A 0.5 Income 80.000 Loan Amount 90,000 Value of Project 120,000 Revenue Insurance? Yes LTV Accept or reject loan