Repeat Exercise 11.6 using the logit model in Equation (11.10). Are the logit and probit results similar? Explain.
Exercise 11.6
Use the estimated probit model in Equation (11.8) to answer the following questions:
a. A black mortgage applicant has a P/I ratio of 0.35. What is the probability that his application will be denied?
b. Suppose that the applicant reduced this ratio to 0.30. What effect would this have on his probability of being denied a mortgage?
c. Repeat (a) and (b) for a white applicant.
d. Does the marginal effect of the P/I ratio on the probability of mortgage denial depend on race? Explain.