SCM 651 - Business Analytics Homework 4 and Loan Analysis Universal Bank

Assignment Task

Background

Using the Universal Bank data, determine the factors that influence whether a customer takes out a loan.

Outline

1. Perform a logit and probit analysis of the variables that affect whether a customer takes out a loan. Consider only main effects (main variables, no moderating effects). Which variables are significant? How do the significant variables influence the likelihood of taking out a loan? Copy screen snapshots of your analysis in R to your report. 

2. Add moderating effects (interactions of variables). Which interactions make sense conceptually? Which interactions are statistically significant? How do you interpret the coefficients on these variables? Copy screen snapshots of your analysis in R to your report. 

3. Create a final regression model with the variables that you feel are important (both main effects and interaction terms). Use the moderating effect that was significant and its two individual main effects. Create a spreadsheet prediction of the model. Perform a sensitivity analysis as seen earlier in the semester. Which variables have the greatest influence on the customers’ loan behavior (combined main effects and interaction effects)? Copy screen snapshots of your analysis in R to your report.

4. Perform a neural network analysis of the variables in part 3 above. Copy screen snapshots of your final neural network model in R to your report.

5. Create a prediction model of the neural network in part 4. Using the prediction model, perform a sensitivity analysis for the neural network model like the logit and probit sensitivity analysis. 

Justify your answers. Provide a snapshot of output from your analysis in your final paper.

Universal Bank Data Fields

ID - unique identifier

Personal Loan -did the customer accept the personal load offered (1=Yes, 0=No)

Age - customer’s age

Experience - number of years of profession experience

Income - annual income of the customer ($000)

Zip code - home address zip code

Family - family size of customer

CCAvg - average spending on credit cards per month ($000)

Education - education level (1) undergraduate, (2) graduate, (3) advanced/professional

Mortgage - value of house mortgage ($000)

Securities - does the customer have a securities account with the bank? (1=Yes, 0=No)

CDAccount - does the customer have a certificate of deposit with the bank? (1=Yes, 0=No)

Online - does the customer use internet banking facilities? (1=Yes, 0=No)

CreditCard - does the customer use a credit card issued by Universal Bank? (1=Yes, 0=No)

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