The accounts of 3,500 credit card customers out of a sample of 45,000 that were reviewed did not perform satisfactorily. The credit scores assigned to these applicants when originally assessed had a mean of 70 and a standard deviation of 8. The scores of the remaining customers had a mean of 85 and a standard deviation of 12. Assuming these distributions are approximately normal if the cut-off score was revised upward to 82.

1. Complete the following table:

	Creditworthiness
	High	Low
Mean credit score	85	70
Standard deviation of credit score	12	8
Probability of receiving credit (%)
Probability of being denied credit (%)

(ii) The original default rate on the sample of 45,000 card holders was extremely high at approximately 7.8%. What impact would setting the cut-off at 82 have on the default rate? Show calculations.

(iii) Based on the credit evaluation process. Do you suggest the revised cutoff to 82 be adopted? Why?