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:

Vision

The ability to see; the sense by which light emitted or reflected by objects in the environment is received and interpreted by the eyes and brain.

Hearing

The sense involving the perception of sound, enabling individuals to receive and interpret auditory information from their environment.

Bed-sharing

The practice where babies and young children sleep in the same bed as one or more parents, as opposed to sleeping in a separate space.

A-not-B Error

A cognitive error observed in infants during the sensorimotor stage, where they reach for an object at a location where it was previously found (A) rather than its new location (B).