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CMA Intermediate · Financial Management and Business Data Analytics · Introduction to Data Science for Business Decision-making

A Mumbai brokerage builds a model to flag fraudulent trades. It is trained on 8,000 trades and its performance is tested on a separate set of 2,000 trades kept aside. The 2,000 trades represent what share of the total data, and what is the purpose of the set?

The test set is 20% of the data, because 2,000 out of 10,000 total trades are held back. Its purpose is to evaluate how well the trained model performs on unseen data, which shows whether it generalises beyond the training set.

  1. A20%; to evaluate the model on unseen dataCorrect
  2. B25%; to evaluate the model on unseen data
  3. C20%; to teach the model the patterns
  4. D80%; to evaluate the model on unseen data

Explanation

Total = 8,000 + 2,000 = 10,000, so test share = 2,000/10,000 = 20%. A test set is held out to assess generalisation on unseen data, not to train. 25% wrongly divides by the training size only.

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