HBC203 TMA02: Debt Repayment Strategies – Snowball vs Avalanche

Question 1 (100 Marks)

Debt is a persistent problem, especially among low-income families in Singapore who struggle most with the rising costs of living and unexpected expenses. To pay for such expenses, they often accumulate unsecured debts such as credit card bills, personal loans and borrowing from licensed moneylenders. Effective debt management is essential as debt has negative consequences beyond one’s finances. A local study by researchers from NUS and SUSS (Ong et al., 2019) has shown that chronic debt impairs one’s decision-making ability and traps them in a vicious poverty cycle.

Suppose you are a volunteer with a social service agency that helps low-income families to manage their debt. Some of the agency’s services include financial literacy workshops, hosting monthly support group sessions where participants offer mutual encouragement and share coping strategies, and working out a debt repayment plan with families. You have been tasked to help the agency to better understand the families that it has served by examining the effectiveness of two common debt repayment strategies that are used: Snowball Method and Avalanche Method.

Note:

• Snowball method – pay off the debt with the smallest outstanding loan amount first
• Avalanche method – pay off the debt with the highest interest rate first

Your volunteer manager sends you a dataset (HBC203_TMA02 Dataset.csv.) that contains information about the families that the agency has served in the past six years.

(For Mac users: Please use a web browser other than Safari to download the .csv file from Canvas. Otherwise, you may be unable to open the downloaded file.) Table 1 provides a brief description of each variable in the dataset.

Table 1

He also sends you three Research Questions (RQs) that he would like you to address based on the dataset:

RQ1. Did families with more dependents have more unpaid debt?

RQ2. Did families with lower average monthly household income tend to choose the Snowball method or the Avalanche method?

RQ3. Which debt repayment strategy (Snowball method or Avalanche method) helped families to fully repay their debt more quickly?

PART 1 (80 Marks)

For each Research Question (RQ), answer parts a) to e). Present your answer to each RQ separately and in sequence (i.e., RQ1, followed by RQ2 and so on).

(a) Identify the independent and dependent variables.

(b) Identify the most appropriate statistical test and explain why it is the most appropriate. Assume that all assumptions of the statistical test you identified are met and there are no concerns about small sample size.

(c) Using Jamovi, conduct the statistical test that you identified in b) to analyse the given dataset to address the researchers’ objective. Show the Jamovi output by copying and pasting ALL the output that is necessary to interpret the results in your answer.

Note:

• The identified statistical test must be taught in HBC203.
• Use an alpha level of .05_two-tailed to determine statistical significance.
• To copy the output, either take a screenshot of the output (preferred) or right click on the respective table(s) and select Copy from the dropdown menu.

(d) Report the results in APA format and interpret the results in relation to the agency’s objective.

(e) Discuss whether your findings are expected or unexpected.

• If your findings are expected, use other studies to show how the findings are similar. If your findings are unexpected, explain why they differ from other studies.
• Use at least one academic paper (i.e., journal article) per Research Question to support your explanations. Include the references (in APA style) as an appendix at the end of your submission.

PART 2 (20 Marks)

Besides the 3 RQs that the volunteer manager has asked you to address in PART 1, propose two more Research Questions that would be useful to answer. You may propose Research Questions that require the collection of additional variables that are not in the given dataset.

(f) For each Research Question that you propose:

• Use at least one academic paper (i.e., journal article) to explain the significance of the Research Question.
• If additional variables need to be collected, specify what they are and how they can be collected.
• Then, identify the most appropriate statistical test and explain why it is the most appropriate. The identified statistical test must be taught in HBC203. (You do not need to perform the analyses or run the statistical test.)

Other Statistics Answers: Expert Answers on Above Questions on Debt Repayment

RQ1: Did families with more dependents have more unpaid debt?

a: The independent variable is the number of dependent and the dependent variable is the total debt amount.
b) the most appropriate statistical test is Pearson correlation and it is highly appropriate because it is continuous versus continuous.
c) the analysis of the given dataset is performed using Jamovi and the interpretation is carried out as follows.
d) the analysis of the output indicates that the P value is significant which indicates that families with more dependents have higher debt.

RQ2: Did families with lower average monthly income tend to choose Snowball or Avalanche?

a) the independent variable is household income whereas the dependent variable is Debt strategy.
b) the most significant statistical test is the chi square test of independence and it is suitable in cases involving category versus category analysis.
c) The chi square test is performed in Jamovi which shows the following output.
d) the findings indicate that the lower average monthly income groups prefer Snowball for psychological wins compared to high average income groups which prefer Avalanche.

RQ 3: Which strategy helped families repay debt faster?

a: The Independent variable is the strategy which can be Snowball/Avalanche and the dependent variable is the time period to repay debt.
b) the best suitable test is independent samples t-test and it is suitable because it is applicable to category variables and continuous variables as involved in the given analysis.
c) the t-test is performed using Jamovi and the output is as follows.
d) the results shows t, df and p are significant which indicates that Avalanche is faster because of higher interest targeting, and Snowball is considered appropriate in behavioural situations.

Two additional research questions

The two additional research questions can be:
Does the payment repayment time reduce from attending financial literacy workshops? It is significant because education helps in improving the financial management and thereby in repayment of debt early.
Does the total debt initially influence the time required for full repayment?
It is significant because higher debt often prolongs repayment.

Want a Full Worked Out Answer with References?

The post Debt Repayment Strategies: Snowball vs Avalanche appeared first on Assignment Help Singapore.