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:

Race

refers to the categorization of humans based on shared physical or social qualities into groups generally viewed as distinct by society, often influencing individuals' social and economic experiences.

Native Americans

The indigenous peoples of the United States, including both American Indian and Alaska Native groups.

Heterogeneous Cultures

Cultures composed of diverse and varied elements, including different traditions, languages, practices, and beliefs, contributing to a rich and multifaceted society.

Panethnicity

A term that groups together various ethnic identities under a single category, often for political or social reasons.