Suppose the following linear probability model Y = 0.708 + 0.201M, n=1,989, R2=.049. (0.018) (0.020) Where y=1 if...

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Suppose the following linear probability model
Y = 0.708 + 0.201M, n=1,989, R²=.049.
(0.018) (0.020)
Where y=1 if mortgage approved, M=1 if men, etc.
1. What is the probability of mortgage approval for a typical maleapplicant?
2. What is the probability of mortgage approval for a typicalfemale applicant?
3. Is the discrimination based on gender significant?
4. What are the problems of this model?
5. What other variables do you think should be added in the model?And if the variables were to be added, what happens to thecoefficient of M?

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Solution Given data Y 0708 0201 M 0018 0020 1 What is the probability of mortgage approval for a typical male applicant Probability of mortgage approval 0708 0201 1 Actually Y 0708 0201 M and also M 1 male applicant The probability of mortgage approval for a typical male applicant 0909 2 What is the probability of mortgage approval for a typical female applicant Probability of mortgage See Answer

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