please explain the answer. thank you. 25. Consider the following model: y = .x ,
ID: 3315122 • Letter: P
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please explain the answer. thank you.
25. Consider the following model: y = .x , where y is the daily rate of return of a stock, and x is the daily rate of return of the stock market as a whole, measured by the daily rate of return of Standard & Poor's (S&P;) 500 Composite Index. Using a random sample of n = 12 days from 2007, the least squares lines shown in the table below were obtained for four firms. The estimated standard error of ß1 Estimated Standard Error of Estimated Market Model y .0010 + 1.40x y=.0005-121x y=.0010 + 1.62x Co mpany A Company B Company C .06 1.34 nv = .0013 + .76x Calculate the test statistic for determining whether the market model is useful for predicting daily rate of return of Company A's stock. a) 46.7 b) 161.6 c) 1.40 ±0.067 26. Continuing from the previous question, For which of the three stocks, Companies B, C, or D, is there evidence (at = .05) of a positive linear relationship between y and x? a) Company C only b) Company D only c) Companies B and C only d) Companies B and D only 27. An academic advisor wants to predict the typical starting salary of a graduate at a top business school using the GMAT score of the school as a predictor variable. A simple linear regression of SALARY versus GMAT using 25 data points is estimated with a correlation coefficient of 0.81 and r-0.66. Based on this information: a) There appears to be a negative correlation between SALARY and GMAT b) we estimate SALARY to increase 81% for every 1-point increase in GMAT c) 66% of the sample variation in SALARY can be explained by using GMAT in a straight-line model. d) We can predict SALARY correctly 81% of the time using GMAT in a straight-line model. 28. What is the relationship between diamond price and carat size? 307 diamonds were sampled and a straight line relationship was hypothesized between y = diamond price (in dollars) and x = size of the diamond (in carats). A simple linear regression is estimated. The model was then used to create 95% confidence and prediction intervals for y and for E(Y) when the carat size of the diamond was 1 carat. The results are shown here 95% confidence interval for E(Y): ($9091.60, $9509.40) 95% prediction interval for Y: ($7091.50, $11,510.00) Which of the following interpretations is correct if you want to use the model to estimate E(Y) for all 1Explanation / Answer
Q25) test Statistic = 1.40/0.03 = 46.7
Option A is Correct
Q26) Correct Option will be Company D only as test statistic of 0.76/0.15 = 5.07, will yield low p value
Q27) Option C is Correct
Q28) Option D is Correct
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