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Which of the following statements are true:
1. A high score according to Altman's Z-Score methodology indicates a lower default risk
2. A high score according to the Probit or Logit models indicates a higher default risk
3. A high score according to Altman's Z-Score methodology indicates a higher default risk
4. A high score according to the Probit or Logit models indicates a lower default risk
Suggested Answer: D
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A high score under the probit and logit models indicates a higher default risk, while under Altman's methodology it indicates a lower default risk. Therefore Choice 'd' is the correct answer.
23 comments · newest first
SU
Sunshine
10 months ago
I thought high scores in both models meant lower risk?
RO
Rodolfo
10 months ago
Totally agree, that's a classic rule.
KI
Kina
10 months ago
Wait, isn't a high Probit score bad?
FR
Franklyn
10 months ago
Just to clarify, high Z-Score = good, right?
CO
Colene
11 months ago
Altman's Z-Score high means lower default risk!
RI
Rikki
11 months ago
I feel like I might mix up the Z-Score and the other models. I hope I remember that a high Z-Score means lower risk for sure.
LA
Lai
11 months ago
I practiced a similar question, and I think statement 2 is correct because higher scores in those models usually indicate higher risk, right?
LO
Lourdes
11 months ago
I'm a bit confused about the Probit and Logit models. I thought a higher score meant lower risk, but I can't recall for sure.
FR
Francisca
12 months ago
I remember that Altman's Z-Score is supposed to indicate lower default risk with higher scores, so I think statement 1 is true.
DI
Dick
12 months ago
I'm pretty confident on this one. A high Altman's Z-Score means lower default risk, and a high Probit/Logit score means higher default risk. So the correct answer is C - 1 and 4.
SO
Solange
12 months ago
Wait, I'm a bit confused. Didn't we learn that a high Altman's Z-Score means higher default risk? I'm not entirely sure about the Probit/Logit models though. Let me re-read the question carefully.
RO
Rolf
1 year ago
Okay, I think I've got this. A high Altman's Z-Score indicates lower default risk, while a high Probit/Logit score indicates higher default risk. So the answer must be B - 2 and 3.
MA
Marya
1 year ago
Hmm, this one seems a bit tricky. I'll need to carefully review the definitions of Altman's Z-Score and the Probit/Logit models to make sure I understand the relationship between the scores and default risk.
GE
Georgene
1 year ago
Haha, I can already see the exam invigilator shaking their head at these answers. 'Clearly, none of you have actually read the material!' *rolls eyes*
ME
Melissa
1 year ago
I'm pretty sure it's C. A high Z-Score means lower default risk, and a high Probit/Logit means lower default risk. Gotta love these financial models, always keeping us on our toes!
AL
Alonso
1 year ago
Wait, wait, wait... Isn't it the other way around? I thought a high Z-Score was good, and a high Probit/Logit was bad. Oh, the confusion!
DE
Destiny
9 months ago
I believe it’s C) 1 and 4. High Z-Score is good!
OD
Odelia
9 months ago
Exactly! So, what’s the right answer here?
KE
Kerry
9 months ago
Yeah, it’s confusing! High Probit/Logit is bad, right?
SH
Shenika
10 months ago
I thought high Z-Score means lower risk too!
VA
Vanda
1 year ago
Hmm, I think the correct answer is B. A high score according to Altman's Z-Score means higher default risk, and a high score in Probit or Logit models means higher default risk too. Simple as that!
CA
Carmela
1 year ago
I disagree, I believe the answer is B) 2 and 3.
RO
Ronny
1 year ago
I think the answer is A) 3 and 4.