The following graph plots the fitted probabilities of default (y axis) depending on the credit balance (x axis) with the linear probability model(left) and the logistic model (right). Which alternative is NOT correct50010001500200025005001000150020002500BalanceBalanceO a. There will always be a balance level such that the probability of default according to the linear probability model is above 100%O b. The logit model supposes that the error term of the latent variable follows a logistic distributionO C. The linear probability model estimates probabilities of default below 0%Od.The probability of default lower than 50% is a frequent feature of linear probability modelse.The logistic model estimates probabilities between 0% and 100%0080 90 YO 0Probability of DefaultR'O 90 o zo o'oProbability of Default

Therefore hence option (c) is not correct.

Answered: The following graph plots the fitted…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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Eee303 5c

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