Which of the following statements is incorrect?
A) While linear probability models divide firms into high or low bankruptcy risk classes, logit models and linear discriminant models produce a value for the expected probability of bankruptcy.
B) The logit model overcomes a weakness of the linear probability model by restricting the estimated range of bankruptcy probabilities to lie between 0 and 1.
C) All three credit scoring models use past data, such as financial ratios, as inputs to explain repayment experiences on old debt.
D) All of the statements are correct.

Question

Quizplus · Accepted Answer

Linear discriminant models do not produce a value for the expected probability of bankruptcy; they classify firms into categories based on a linear combination of predictor variables.

Which of the Following Statements Is Incorrect