Nast Stores has derived the following consumer credit-scoringmodel after years of data collecting and model testing:AccountsReceivable Management | 153 Y = (0.20 × EMPLOYMT) + (0.4 ×HOMEOWNER) + (0.3 × CARDS) EMPLOYMT = 1 if employed full-time, 0.5if employed part-time, and 0 if unemployed HOMEOWNER = 1 ifhomeowner, 0 otherwise CARDS = 1 if presently has 1–5 credit cards,0 otherwise Nast determines that a score of at least 0.70 indicatesa very good credit risk, and it extends credit to theseindividuals.
a. I f Janice is employed part-time, is a homeowner, and has sixcredit cards at present, does the model indicate she should receivecredit?
b. J anice just got a full-time job and closed two of her creditcard accounts. Should she receive credit? Has her creditworthinessincreased or decreased, according to the model?
c. Y our boss mentions that he just returned from atrade-association conference, at which one of the speakersrecommended that length of time at present residence (regardless ofhomeownership status) be included in credit-scoring models. If theweight turns out to be 0.25, how do you think the variable would becoded (i.e., 0 stands for what, 1 stands for what, etc.)?
d. S uggest other variables that Associated might have left outof the model, and tell how you would code them (i.e., 0, 1, 2 areassigned to what conditions or variables?).
