Suppose a Linear Probability Model You Have Developed Finds There

question 23

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 = 0.18 (debt ratio) + 0.35 (profit margin)
You know a particular firm has a debt ratio of 35 percent and a probability of default of 8 percent. Calculate the firm's profit margin.

• A) 4.857 percent
• B) 8.163 percent
• C) 6.53 percent
• D) 8.00 percent

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Definitions:

Lactate Production

Lactate production occurs during anaerobic respiration in muscles, where glucose is converted to lactate in the absence of sufficient oxygen, leading to muscle fatigue.

Venous Tone

The degree of constriction experienced by the veins, influencing the volume of blood held within venous reservoirs and blood pressure.

Medulla Oblongata

The lower portion of the brainstem that regulates vital functions, such as heart rate and breathing.

Vasomotor Center

Area within the medulla oblongata that regulates the diameter of blood vessels by way of the sympathetic nervous system.