View All num of num See all Photos Capital One www.capitalone.com Engaged Employer Overview Reviews Salaries Interviews Jobs Photos Benefits 1.9k Reviews 4.7k Salaries 1.6k Interviews 2.1k Jobs Follow Add Interview Follow Add Interview Interview Question IT Development Program Interview(Student Candidate) Richmond, VA Capital One 1 million card applications. $1 per application cost to do employment verification. 96% pass verification and get a card. 4% fail and do not get cards. Given average profits on cardholders in good standing, and average losses on accounts that default, find the % of denied cardholders that would have to default in order to justify the $1 per application verification cost . Tags: See more , See less 8 Answer Add Tags Answer Interview Answer 8 Answers ▲ 0 ▼ Anymore info given? I think you'd either need to know the percentage of cardholders in good standing, or the percentage of cardholders in bad standing. Sean on Apr 8, 2012 ▲ 0 ▼ This appears to be a trick question that makes you think they want to know the break-even point. However: how can someone default on a credit card that they were "denied" and never issued? Brian on Apr 10, 2012 ▲ 2 ▼ Its hypothetical - IF they were given the card and IF they defaulted on it... how many of them would have to default in order for the losses from their accounts to justify the $1/application cost of rejecting them. Anonymous on Apr 16, 2012 ▲ 3 ▼ I had the same case and you can ask for more info like percent in good standing etc. mike on Sep 15, 2012 ▲ 0 ▼ Am I wrong to think that the 96% is not relevant? I think it should be (1-p)(Avg Profit)-(p)(Avg Loss) = 1M. Solve for p that justifies spending $1M to deny 4% of applications. This is of course assuming that the 96% are profitable in the net. Dave on Feb 23, 2014 ▲ 1 ▼ So, they pay $1M dollars to verify. Assume $1M is only justified if they save >= $1M by verifying.Given:- 40,000 people are denied (4% of the applications)- the number people that need to default to lose $1M in defaults is: 1M/(avg-losses-per-default)Then:(1M/avg-loss-per-default)/40,000 is the percentage of the defaulters needed to cost $1,000,000 in defaults.I'd ask for a definition of 'justify' to verify the assumption above. Jim on Mar 3, 2015 ▲ 0 ▼ I think if we know the % of good and % of bad customers we can calculate the total Profit asP=(% good of 960000 )*(AVg. Rev from good) - (% bad of 960000 )*(AVg. loss from bad) - 1M (from background check)Assuming the average loss per denied customer is same as the average loss from bad customer and lets call it x.The % of denied would be = 100*(P/Avg Loss)/400000 Anonymous on Apr 23, 2015 ▲ 0 ▼ I think if we know the % of good and % of bad customers we can calculate the total Profit asP=(% good of 960000 )*(AVg. Rev from good) - (% bad of 960000 )*(AVg. loss from bad) - 1M (from background check)Assuming the average loss per denied customer is same as the average loss from bad customer and lets call it x.The % of denied would be = 100*(P/x)/400000 Anonymous on Apr 23, 2015 Interviews > IT Development Program > Capital One Add Answers or Comments To comment on this, Sign In or Sign Up.