Interest rate in Ranga’s application

by | Nov 6, 2021 | Homework Help

You are a bank manager. Ranga has approached your bank for a million dollar loan. The bank can charge 10% interest from Ranga for this loan. The bank will buy government bonds at 4% interest rate in case Ranga’s application is rejected. You think there is 10% chance that Ranga would default on his loan based on your knowledge about Ranga. At a cost of about $1000, the bank can investigate and figure out Ranga’s complete credit history. Based on the past performance, you know that the credit reports give a favorable credit rating 80% of the time when the customer honors loan commitments; and unfavorable credit rating 20% of the time even when the customer honors loan commitments. The credit reports give a favorable credit rating 25% of the time and an unfavorable credit rating 75% of the time when the customer does not honor loan commitments.Draw the decision Tree and Derive Optimal decisionCompute Expected Value of Perfect InformationCompute expected Value of Sample Information

Plagiarism-free and delivered on time!

We are passionate about delivering quality essays.

Our writers know how to write on any topic and subject area while meeting all of your specific requirements.

Unlike most other services, we will do a free revision if you need us to make corrections even after delivery.