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In the context of bankruptcy prediction models your textbook calls the Type I error the more costly kind of an error It is because it causes a lender to Not give loan to a firm that is going to

In the context of bankruptcy prediction models, your textbook calls the Type I error the more costly kind of an error. It is because it causes a lender to:

   

Not give loan to a firm that is going to stay healthy, incorrectly fearing that it will go bankrupt.

   

Give loan to a firm that is going to bankrupt, incorrectly thinking that it will not.

   

Not do business with firms that cannot be judged by the model.

   

Assume that all firms are equally likely to go bankrupt.

 

Aug 31 2020 View more View Less

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