If a bank wants to discriminate between successful and unsuccessful credit risks for home mortgage loans,it should use:
A)factor analysis
B)multidimensional scaling
C)MANOVA
D)discriminant analysis

Question

Quizplus · Accepted Answer

Discriminant analysis is the best choice for discriminating between successful and unsuccessful credit risks for home mortgage loans as it is a statistical method that helps in identifying the variables that distinguish between the two groups. Discriminant analysis is useful in predicting group membership and can be used in situations where the dependent variable is categorical (successful vs. unsuccessful credit risk) and the independent variables are continuous (e.g. credit score, income, debt-to-income ratio, etc.).

If a Bank Wants to Discriminate Between Successful and Unsuccessful