Question: 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

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 = 0.29(Debt ratio) 0.24(Profit margin). A firm you are thinking of lending to has a debt ratio of 53 percent and a profit margin of 8 percent. Calculate the firms expected probability of default, or bankruptcy. (Round your answer to 2 decimal places.)

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