A Linear Probability Model You Have Developed Finds There Are

question 64

Multiple Choice

A linear probability model you have developed finds there are two factors influencing the past bankruptcy behavior of firms: the equity multiplier and the total asset turnover ratio. Based on past bankruptcy experience, the linear probability model is estimated as: PD_i = .02 (equity multiplier) + .06 (total asset turnover)
A firm has an equity multiplier of 1.1 times and a probability of default of 6.2 percent. Calculate the firm's total asset turnover ratio.

• A) 0.53 times
• B) 0.67 times
• C) 1.2 times
• D) 0.84 times

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Definitions:

P-Value

A measure in statistics that helps determine the significance of results, indicating the probability of observing the given results if the null hypothesis is true.

Disapproval Rating

A metric, often used in politics and public opinion polling, indicating the percentage of respondents who are dissatisfied with a person or policy.

Political Ad

A form of advertising aimed specifically at influencing the decision-making processes of a political landscape, often used during election campaigns.

P-Value

A statistical measure that helps scientists determine the significance of their research results.