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The equation below estimates the effect of race on the probability of mortgage denial, holding constant the payment-to-income ratio. Pr (deny = 1|P/I ratio, black)
The equation below estimates the effect of race on the probability of mortgage denial, holding constant the payment-to-income ratio. Pr (deny = 1|P/I ratio, black) = (@( - 2.21 + 2.73P/I ratio + 0,75black) (0.16) (0.45) (0.085) A black mortgage applicant has a P/I ratio of 0.39. What is the predicted probability that his application will be denied? The predicted probability that his application will be denied is 34.64 %. (Express your response as a percentage and round to two decimal places) Suppose that the applicant reduced this ratio to 0.31. What effect would this have on his predicted probability of being denied a mortgage? The predicted probability of being denied a mortgage would decrease by 7.67 percentage points. (Round your response to two decimal places) K A white mortgage applicant has a P/I ratio of 0.36. What is the predicted probability that his application will be denied? The predicted probability that his application will be denied is%. (Express your response as a percentage and round to two decimal places) ryStep 1 Given that, Pr(deny=1|P/I ratio, black)=q(-2.21+2.73P/| ratio+0.75black) where, (p is the cumulative normal function Pr(deny) is the probability that a loan is denied The value of black is normally 1 for the black mortgage and zero for white mortgage Step 2 Probability of application being denied for a white mortgage with P/I ratio of 0.36 is Pr(deny)=(-2.21+2.73P/I ratio+0.75black) =(-2.21+2.73X0.36+0.75>
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