The accompanying data represent the annual rates of return of two companies\' st

ID: 2948950 • Letter: T

Question

The accompanying data represent the annual rates of return of two companies' stock for the past 12 years.

Find the least-squares regression line treating the rate of Company 1 as the explanatory (x) variable and Company 2 as the response (y) variable.

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Question 2 1 pts

Predict the rate of return of Company 2 if the rate of return of Company 1 is 0.2 (20%).

Round your answer to 3 decimal places.

Question 3 1 pts

Interpret the slope. Choose the best answer of the answers provided.

For each percentage point increase in the rate of return for Company 1, the rate of return of Company 2 will decrease by about 0.03 percentage points, on average.

For each percentage point increase in the rate of return for Company 1, the rate of return of Company 2 will increase by about 0.03 percentage points, on average.

For each percentage point increase in the rate of return for Company 1, the rate of return of Company 2 will increase by about 1.5 percentage points, on average.

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Question 4 1 pts

If appropriate, interpret the y-intercept. Choose the best answer from the choices provided.

It is not appropriate to interpret the y-intercept.

The rate of return for Company 1 will be 1.5027 when there is no change in Company 2.

The rate of return for Company 2 will be 1.5027 when there is no change to Company 1.

The rate of return for Company 2 will be 0.0270 when there is no change to Company 1.

The rate of return for Company 1 will be 0.0270 when there is no change to Company 2.

only need help on 3 and 4 please!!

Year Rate of Return of Company 1 Rate of Return of Company 2 1996 0.203 0.398 1997 0.310 0.510 1998 0.267 0.410 1999 0.195 0.426 2000 -0.101 -0.060 2001 -0130 -0.161 2002 -0.234 -0.377 2003 0.264 0.328 2004 0.090 0.207 2005 0.030 -0.014 2006 0.128 0.113 2007 -0.035 0.027 y-1.5027x + 0.0270

Explanation / Answer

Coefficients

Standard Error

t Stat

P-value

Lower 95%

Upper 95%

Intercept

0.026986

0.023987

1.125023

0.286857

-0.02646

0.080431

X Variable 1

1.502709

0.12749

11.7869

3.46E-07

1.218644

1.786774

Above is the regression output of EXCEL

1. The regression equation is given by

y = 1.5027x + 0.0270

2. If the rate of return of Company 1 is 0.2 then

y = 1.5027*0.2 + 0.0270 = 0.3275

The predicted value of the rate of return of Company 2 is 0.328

3. Slope is interpreted as for each percentage point increase in the rate of return for Company 1, the rate of return of Company 2 will increase by about 1.5 percentage points, on average.

4. The y-intercept is interpreted as the rate of return for Company 2 will be 0.0270 when there is no change to Company 1.

If the beta coefficient is positive, the interpretation is that for every 1-unit increase in the predictor variable, the outcome variable will increase by the beta coefficient value. If the beta coefficient is negative, the interpretation is that for every 1-unit increase in the predictor variable, the outcome variable will decrease by the beta coefficient value.