ALEKS EETINBOX REPORT S Review Calculator Assignments Book Gradebook Calen A fin

Question

ALEKS EETINBOX REPORT S Review Calculator Assignments Book Gradebook Calen A financial analyst is examining the relationship between stock prices and earnings per share. She chooses fifteen publidy traded companies at random and records for each the company's current stock price and the company's earnings per share reported for the past 12 months. Her data are given below with x denoting the earnings per share from the previous year, and y denoting the current stock price (both in dollars). Based on these data, she computes the least-squares regression line to be y0.097+0.041x . This line, along with a scatter plot of her data, is shown in Figure 1. Current stock price, y (in dollars) 1.57 0.75 0.91 1.09 0.81 Earnings per share, x (in dollars) 43.41 17.47 21.63 40.86 32.11 3.24 57.11 27.14 37.84 .69 1.06 2.95 1.80 41.05 0.95 16.28 5.22 0.56 Figure 1 02 2 ops lock

Explanation / Answer

1)
For these data, values for earning per share that are greater than the mean of the values for earning per share tend to be paired with the current stock price that are greater than the mean of the current stock price.

This is due to the positive correlation.

2)
Slope is 0.041
Hence there is a corresponding increase of $0.041 in current stock price.

3)
For x=16.28
Predicted y=-0.097+0.041*16.28=0.5705

4)
For x=16.28
Observed y=0.56

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.