Please help with the below problem. I don\'t understand how to solve. Please sho
ID: 2766616 • Letter: P
Question
Please help with the below problem. I don't understand how to solve. Please show work and steps so I will understand.
Apply cluster analysis to the numerical data in the excel file credit approval decisions. Analyze the clusters and determine if cluster analysis would be a useful classification method for approving or rejecting loan application.
Modified Credit Approval Decisions
Homeowner Credit Score Years of Credit History Revolving Balance Revolving Utilization Decision
1 725 20 $11,320 25% 1
1 573 9 $7,200 70% 0
1 677 11 $20,000 55% 1
0 625 15 $12,800 65% 0
0 527 12 $5,700 75% 0
1 795 22 $9,000 12% 1
0 733 7 $35,200 20% 1
0 620 5 $22,800 62% 0
1 591 17 $16,500 50% 0
1 660 24 $9,200 35% 1
1 700 19 $22,000 18% 1
1 500 16 $12,500 83% 0
1 565 6 $7,700 70% 0
0 620 3 $37,400 87% 0
1 774 13 $6,100 7% 1
1 802 10 $10,500 5% 1
0 640 7 $17,300 59% 0
0 523 14 $27,000 79% 0
1 811 20 $13,400 3% 1
0 763 2 $11,200 70% 0
0 555 4 $2,500 100% 0
0 617 9 $8,400 34% 0
1 642 13 $16,000 25% 1
0 688 3 $3,300 11% 1
1 649 12 $7,500 5% 1
1 695 15 $20,300 22% 1
1 701 9 $11,700 15% 1
0 635 7 $29,100 85% 0
0 507 2 $2,000 100% 0
1 677 12 $7,600 9% 1
0 485 5 $1,000 80% 0
0 582 3 $8,500 65% 0
1 699 17 $12,800 27% 1
1 703 22 $10,000 20% 1
0 585 18 $31,000 78% 0
1 620 8 $16,200 55% 0
1 695 16 $9,700 11% 1
1 774 13 $6,100 7% 1
1 802 10 $10,500 5% 1
0 640 7 $17,300 59% 0
0 536 14 $27,000 79% 0
1 801 20 $13,400 3% 1
0 760 2 $11,200 70% 0
0 567 4 $2,200 95% 0
0 600 10 $12,050 81% 0
1 702 11 $11,700 15% 1
1 636 8 $29,100 85% 0
0 509 3 $2,000 100% 0
0 595 18 $29,000 78% 0
1 733 15 $13,000 24% 1
New Data to Classify
Homeowner Credit Score Years of Credit History Revolving Balance Revolving Utilization Decision
1 700 8 $21,000 15%
0 520 1 $4,000 90%
1 650 10 $8,500.00 25%
0 602 7 $16,300.00 70%
0 549 2 $2,500.00 90%
1 742 15 $16,700.00 18%
Explanation / Answer
After sorting above observations based on revolving utilisation, we would receive few observation having high revolving utilisation have decision as "1" & few observation with low revolving utilisation have decision as "0". Following are such observation:
After sorting such observation based on credit score, we come to following rule that:
If any observation has Revolving Utilisation < 56 % & Credit Score > 620, Decision is Yes i.e. "1". Other wise decision is No i.e. "0".
Applying above rule to new data, following are decision to be taken:
Homeowner Credit Score Years of Credit History Revolving Balance Revolving Utilization Decision