Suppose a Linear Probability Model You Have Developed Finds There

question 58

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 = 0.15 (debt ratio) + 0.1 (profit margin)
A firm you are thinking of lending to has a debt ratio of 57 percent and a profit margin of 7.15 percent. Calculate the firm's expected probability of default, or bankruptcy.

• A) 9.27 percent
• B) 8.49 percent
• C) 7.83 percent
• D) 6.91 percent

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Statutes in some U.S. states that prohibit union security agreements, allowing employees to choose whether or not to join or financially support a union.

Industrial Relations School

A perspective or academic discipline focusing on the study of employment relationships, labor laws, and collective bargaining processes.

Taft-Hartley Act

A 1947 US federal law that restricts the activities and power of labor unions, formally known as the Labor Management Relations Act.

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The imposition of rules by government, backed by the use of penalties that are intended to modify the economic behavior of individuals and firms in the private sector.