Suppose a Linear Probability Model You Have Developed Finds There

question 13

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 = .28 (debt ratio) + .51 (profit margin)
You know a particular firm has a debt ratio of 46 percent and a probability of default of 18 percent. Calculate the firm's profit margin.

• A) 11.93%
• B) 13.27%
• C) 10.04%
• D) 12.81%

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Definitions:

Muscle Cells

Specialized cells that contract and relax to produce movement in the body.

Autonomic Nervous System

Part of the peripheral nervous system that controls bodily functions not consciously directed, such as breathing, the heartbeat, and digestive processes.

Involuntary Muscles

Muscles that operate without conscious control, responsible for movements in the heart, digestive system, and other bodily functions.

Myelin Sheath

A layer of fatty tissue encasing the fibers of many neurons, which enhances the speed and efficiency of electrical signals traveling along the nerve cells.