Below gives the data concerning (1) the dependent variable Default which equals 1 if a customer defaults on their loan and 0 if they do not; (2) the independent variable Price of Home, which is the price of the home (in tens) and (3) the independent variable First Purchase which equals 0 if the customer has owned a home before and 1 if this is their first home. Interpret the confusion matrix.
A) The misclassification rate for defaulters is .08 and the misclassification for non-defaulters is .1290.
B) The misclassification rate for defaulters is .08 and the misclassification for non-defaulters is .1482.
C) The misclassification rate for defaulters is .1290 and the misclassification for non-defaulters is .1111.
D) The misclassification rate for defaulters is .1482 and the misclassification for non-defaulters is .0870.

Question

Below gives the data concerning (1) the dependent variable Default which equals 1 if a customer defaults on their loan and 0 if they do not; (2) the independent variable Price of Home, which is the price of the home (in tens) and (3) the independent variable First Purchase which equals 0 if the customer has owned a home before and 1 if this is their first home. Interpret the confusion matrix.   
A) The misclassification rate for defaulters is .08 and the misclassification for non-defaulters is .1290. 
B) The misclassification rate for defaulters is .08 and the misclassification for non-defaulters is .1482. 
C) The misclassification rate for defaulters is .1290 and the misclassification for non-defaulters is .1111. 
D) The misclassification rate for defaulters is .1482 and the misclassification for non-defaulters is .0870.

Quizplus · Accepted Answer

The misclassification rate for defaulters is 2/25 = .08. The misclassification rate for non-defaulters is 4/31 = .1290.

Below Gives the Data Concerning (1) the Dependent Variable Default