Skip to content

CMA Intermediate · Financial Management and Business Data Analytics · Data Analysis and Modelling

In a loan dataset of an NBFC, 8% of the 'Monthly Income' values are blank. The incomes are heavily right-skewed because a few borrowers earn very high amounts. Which imputation is generally more suitable for the blanks?

The median of the available incomes is more suitable. With right-skewed data, a few very high earners pull the mean upward, while the median stays robust to outliers and reflects a typical borrower. Using zero or the maximum would badly distort the distribution.

  1. AMedian of the available incomesCorrect
  2. BArithmetic mean of the available incomes
  3. CThe maximum income recorded
  4. DZero

Explanation

In a right-skewed distribution the mean is pulled upward by extreme high values, so filling with the mean would overstate typical income. The median is resistant to outliers and better represents a typical borrower. Zero would distort the data downward and the maximum upward.

Did you get it right without looking?

One question tells you little. A timed set on Data Analysis and Modelling shows your real accuracy, how long you take and where you lose marks.

Practise Data Analysis and ModellingFree diagnostic mock

More Data Analysis and Modelling questions