1.Suppose the estimated linear probability model looked as follows: Z = 0.3X 1 + 0.1X 2 +...

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1.Suppose the estimated linear probability model looked as follows: Z = 0.3X 1 + 0.1X 2 + error, where:

X 1 = Debt − equity ratio and X 2 = Total assets − working capital ratio Suppose, for a prospective borrower, X 1 = 1.5 and X 2 = 3. What is the projected probability of default for the borrower?

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