After Estimating a Probit Model for Whether an Individual Purchases

question 31

Multiple Choice

After estimating a probit model for whether an individual purchases a particular product as a function of income, which of the following conditions must hold?

• A) The r-squared will be one.
• B) The intercept will be positive.
• C) The predictions will fall between zero and 1.
• D) The predictions will sum to zero.

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Definitions:

Interest Rates

The cost of borrowing money or the return on investment for savings, typically expressed as a percentage.

Interest Sensitivity

The degree to which the price of a financial asset responds to changes in interest rates.

Coupon

In finance, a coupon refers to the annual interest payment made to bondholders, expressed as a percentage of the bond’s face value.

Callable

A bond or other financial security feature that allows the issuer to buy back the security before its maturity date.