Explanation:
Classification
According to the Microsoft Azure AI Fundamentals (AI-900) official study guide and the Microsoft Learn module "Describe features of common AI workloads", classification is a supervised machine learning technique used when the goal is to predict which category or class an item belongs to. In supervised learning, the model is trained with labeled data-data that already contains known outcomes. The system learns patterns and relationships between input features and their corresponding labels so it can predict future classifications accurately.
In the scenario provided - "A banking system that predicts whether a loan will be repaid" - the model's output is a binary decision, meaning there are two possible outcomes:
* The loan will be repaid (positive class)
* The loan will not be repaid (negative class)
This kind of problem involves predicting a discrete value (a label or category), not a continuous numeric output. Therefore, it perfectly fits the classification type of machine learning.
The AI-900 learning materials describe classification as being used in many real-world examples, including:
* Determining whether an email is spam or not spam.
* Predicting whether a customer will churn (leave) or stay.
* Detecting fraudulent transactions.
* Assessing medical test results as positive or negative.
By contrast:
* Regression predicts continuous numeric values, such as predicting house prices, temperatures, or sales revenue. It would not apply here because repayment prediction is not a numeric value but a categorical decision.
* Clustering is an unsupervised learning method that groups similar data points without predefined categories, such as segmenting customers by purchasing behavior.
Thus, based on Microsoft's Responsible AI and AI-900 study guide concepts, a banking system that predicts whether a loan will be repaid uses the Classification type of machine learning.