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The following linear probability model has been estimated by OLS: Pr( y =1) = - 0.05 + 0.01 X1 + 0.0002 X2 Where Y=1 indicates having life insurance, X1 is age (in years) and X2 is monthly income (in thousand dollars). a) Calculate the probability that some one who is 55 years old and has a monthly income of $5000. b) Would it be possible to have Pr(Y=1) < 0 or > 1? If so, for what values of X1 and X2 ?e c) Assume X2 = $5000, and plot Pr(y=1) against X1 on a graph.

The following linear probability model has been estimated by OLS: Pr( y =1) = - 0.05 + 0.01 X1 + 0.0002 X2 Where Y=1 indicates having life insurance, X1 is age (in years) and X2 is monthly income (in thousand dollars). a) Calculate the probability that some one who is 55 years old and has a monthly income of $5000. b) Would it be possible to have Pr(Y=1) < 0 or > 1? If so, for what values of X1 and X2 ?e c) Assume X2 = $5000, and plot Pr(y=1) against X1 on a graph.

MATLAB: An Introduction with Applications
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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The following linear probability model has been estimated by OLS: Pr( y =1) = - 0.05 + 0.01 X1 + 0.0002 X2 - Where Y=1 indicates having life insurance, X1 is age (in years) and X2 is monthly income (in thousand dollars). a) Calculate the probability that some one who is 55 years old and has a monthly income of $5000. b) Would it be possible to have Pr(Y=1) < 0 or > 1? If so, for what values of X1 and X2 ?e c) Assume X2 = $5000, and plot Pr(y=1) against X1 on a graph. %3D
Transcribed Image Text:The following linear probability model has been estimated by OLS: Pr( y =1) = - 0.05 + 0.01 X1 + 0.0002 X2 - Where Y=1 indicates having life insurance, X1 is age (in years) and X2 is monthly income (in thousand dollars). a) Calculate the probability that some one who is 55 years old and has a monthly income of $5000. b) Would it be possible to have Pr(Y=1) < 0 or > 1? If so, for what values of X1 and X2 ?e c) Assume X2 = $5000, and plot Pr(y=1) against X1 on a graph. %3D
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