Project 1 Quiz Study GuideThe purpose of the project 1 quiz is to assess your level of understanding of all the major aspects of the project. The quiz is to be done individually and is closed note, closed book, and closed computer. You will have about 50 minutes to do the quiz, but it may not take you that long to complete. Below you will find a list of skills and ideas that you should possess as a result of completing project 1:Computer Skills (see slides 70-105 of your electronic text for detailed information)You should be able to do each of the following:- Use Excel functions like DCOUNT, DMAX, DAVERAGE to analyze a set of records/data in database. With each of these functions, you should recognizeo what is a valid input for the functiono the dialogue box that appearso how to indicate the input fieldso what fields to leave blank (i.e. in DCOUNT)Mathematical IdeasYou should be able to do each of the following:- Interpret the probability of an event in a certain experiment as the fraction of times that eventoccurs for a large number of trials of that experiment.- Express events AND their probabilities using:o Setso Venn Diagramo In words- Apply the appropriate properties of probability to determine the probability of an event or combination of eventso For a certain event E, the 10 EPo If S is the sample space (i.e. the set of all possible outcomes in a certain experiment), then 1SPo FEPFPEPFEP for any two events E and F If E and F are mutually exclusive events (i.e. they both cannot happen at the same time) then 0 FEPand this means that FPEPFEP o EPEPC1o CCCFEPFEPFEP 1o CCCFEPFEPFEP 1- Use random variables to express the probability of eventso X is the random variable that describes the outcome of an experiment numerically.o X = x is the value that the random variable takes ono P(X = x) is the probability that the random variable takes on that valueo 1k AllFor kxXP- Compute the expected value of a random variableo The expected value of X, denoted E(X), is the sum of all values of X, weighted by their respective probabilities. That is: k allFor kxXPxXE If the experiment is repeated a large number of times, and the value of X is noted for each trial, then the average of these observed values will approach E(X).o Interpret the expected value of a random variable in real-world terms as it relates to the loan workout project.o Use the expected value to make important decisions like attempting a workout or foreclosing on the loan as it relates to the loan workout project.- Compute conditional probabilitieso FPFEPFEP| where 0FPo EPEFPFPFEPFEP || o FEP | is NOT always the same as EFP |- Recognize and Distinguish Mutually Exclusive Events and Independent EventsProbabilities Verbal DescriptionMutually Exclusive 0 BAPBoth events cannot happenIndependent BPAPBAPAPBAP|The occurrence of B does not affect the occurrence of A- E and F are independent given H if HFPHEPHFEP ||| - Bayes’ Theoremo EPFPFEPEFPkkk|| o If there are k ways for the event E to occur via several events kFFF ,,,21 and those events are mutually exclusive, then kFEPFPFEPFPFEPEP |||2211 o kkkkkkkFPFEPFPFEPFPFEPFPFEPEPFPFEPEFP||||||2211Project IdeasYou should be able to do each of the following with respect to the loan workout project:- Distinguish between a commercial loan and a consumer loan- Explain the two assumptions of the project AND apply those assumption to compute relevantprobabilitieso Similar populations of borrowerso Borrower characteristics don’t affect each other even when a loan workout is successful or unsuccessful- Recognize and explain the meaning of a borrower’so Loan amounto Foreclosure amounto Default amount- Compute probabilities similar to those of the loan workout project using proper mathematicalnotation given a small set of loan records AND:o Explain their numerical values in real-world terms - Compute expected values similar to those of the loan workout project using proper mathematical notation give a small set of loan records ANDo Explain their numerical values in real-world termso Use the numerical value to justify a course of action for an attempted loan workout Foreclosure or Workout- Explain the relevance of Bayes’ Theorem as it relates to theo Project’s loan recordso The assumptions of the projecto The information for a given a
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