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PRMIA 8010 Exam - Topic 2 Question 75 Discussion

Which of the following statements are true:1. A high score according to Altman's Z-Score methodology indicates a lower default risk2. A high score according to the Probit or Logit models indicates a higher default risk3. A high score according to Altman's Z-Score methodology indicates a higher default risk4. A high score according to the Probit or Logit models indicates a lower default risk
D) 1 and 2
A) 3 and 4
B) 2 and 3
C) 1 and 4

PRMIA 8010 Exam - Topic 2 Question 75 Discussion

Actual exam question for PRMIA's 8010 exam
Question #: 75
Topic #: 2
[All 8010 Questions]

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

Show Suggested Answer Hide Answer
Suggested Answer: D

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.


by Refugia at Jul 30, 2025, 03:47 AM

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Sunshine
7 months ago
I thought high scores in both models meant lower risk?
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Rodolfo
7 months ago
Totally agree, that's a classic rule.
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Kina
7 months ago
Wait, isn't a high Probit score bad?
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Franklyn
7 months ago
Just to clarify, high Z-Score = good, right?
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Colene
8 months ago
Altman's Z-Score high means lower default risk!
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Rikki
8 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.
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Lai
8 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?
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Lourdes
8 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.
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Francisca
9 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.
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Dick
9 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.
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Solange
9 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.
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Rolf
9 months 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.
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Marya
9 months 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.
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Georgene
10 months 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*
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Melissa
10 months 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!
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Alonso
10 months 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!
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Destiny
6 months ago
I believe it’s C) 1 and 4. High Z-Score is good!
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Odelia
6 months ago
Exactly! So, what’s the right answer here?
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Kerry
6 months ago
Yeah, it’s confusing! High Probit/Logit is bad, right?
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Shenika
7 months ago
I thought high Z-Score means lower risk too!
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Vanda
11 months 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!
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Carmela
11 months ago
I disagree, I believe the answer is B) 2 and 3.
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Ronny
11 months ago
I think the answer is A) 3 and 4.
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