Question 1

A financial institution is implementing an AI model that uses proxies for loan approval decisions. Which of the following is a potential risk associated with using proxies?

Options :

A : Proxies might result in simplified metrics that don’t align with the actual objective.

B : Proxies require extensive computational resources.

C : Proxies ensure a direct alignment with the model’s intended objective.

D : Proxies make the model fully explainable to external auditors.

Answer: A

Question 2

Which of the following scenarios represents a binary classification problem?

Options :

A : Predicting the probability of different stock prices

B : Forecasting next month’s sales in dollars

C : Determining if a transaction is fraudulent or legitimate

D : Grouping customers into three income tiers

Answer: C

Question 3

Which term best describes a dataset that includes a mix of organized, structured financial data and unstructured text data from customer reviews?

Options :

A : Structured data

B : Unstructured data

C : Semi-structured data

D : Binary data

Answer: C

Question 4

A hedge fund uses a multi-arm bandit approach to decide between various trading strategies daily, aiming to maximize returns. Why is the multi-arm bandit model suitable for this application?

Options :

A : Each trading strategy-s performance is independent from day to day.

B : The model can predict future stock prices accurately.

C : It allows the fund to always choose the best strategy immediately.

D : It considers the interdependence of trading strategies over time.

Answer: A

Question 5

The CEO is concerned about the societal impact of a new AI-driven social media algorithm that recommends content. From a practical ethics viewpoint, what approach should the company take?

Options :

A : Design the algorithm to prioritize user engagement above all

B : Incorporate stakeholder feedback to align the algorithm with societal values

C : Allow the algorithm to operate without restrictions to maximize revenue

D : Use only deontological principles in its design for strict ethical compliance

Answer: B

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