Discriminate Analysis and Altman’s Z-Score

Discriminate Analysis and Altman’s Z-Score

Write full and complete answers to questions 21, 22, 23 and 24 on page 318 in your textbook. Show your work on any numerical calculations that are required as well as explain all steps used to solve any problems.

Length: 4 pages not including title and reference pages

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21. Describe how a linear discriminant analysis model works. Identify and discuss the criticisms which have been made regarding the use of this type of model to make credit risk evaluations.
Discriminant analysis model works by creating one or more linear combinations of predictors, coming up with a new latent variable for each function. These types of features are specifically called discriminant functions.

(1,204 words)