Suppose a Linear Probability Model You Have Developed Finds There

question 42

Multiple Choice

Suppose a linear probability model you have developed finds there are two factors influencing the past bankruptcy behavior of firms: the debt ratio and the profit margin. Based on past bankruptcy experience, the linear probability model is estimated as:
PD_i = 0.25 (debt ratio) + 0.12 (profit margin)
A firm you are thinking of lending to has a debt ratio of 62 percent and a profit margin of 14 percent. Calculate the firm's expected probability of default, or bankruptcy.

• A) 17.18 percent
• B) 2.604 percent
• C) 14.99 percent
• D) 19.09 percent

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Definitions:

Electrolytes

Minerals in the body's fluids, including sodium, potassium, and calcium, that are vital for various bodily functions including muscle contractions and nerve signaling.

BUN

Blood Urea Nitrogen, a test measuring urea nitrogen in the blood to assess kidney function.

Capillary Blood

A second explanation: A small sample of blood collected from a capillary, often used for quick diagnostic tests and screenings.

Screening Test

An initial examination or testing designed to identify individuals who may have specific health problems or diseases, often before symptoms develop.