aianjie

 

6、An analyst is regressing fund returns against the return on the Wilshire 5000 to determine whether beta is equal to 1.0. The analyst is trying to determine whether the number of observations should be increased. Which of the following is a reason why the test will have higher power if the number of observations is increased? The:

A) estimate of beta will be farther away from 1.0.

B) standard error of the regression will be lower.

C) mean squared error of the regression will be lower.

D) constant of the regression will be closer to zero.

aianjie

 

The correct answer is B

A larger number of observations will decrease the standard error of the regression which will increase the size of the test statistic if beta is different than 1.0.

aianjie

 

7、A sample of 200 monthly observations is used to run a simple linear regression:  Returns = b0 + b1Leverage + u.   The t-value for the regression coefficient of leverage is calculated as t = – 1.09.  A 5 percent level of significance is used to test whether leverage has a significant influence on returns.  The correct decision is to:

A) do not reject the null hypothesis and conclude that leverage does not significantly explain returns.

B) reject the null hypothesis and conclude that leverage does not significantly explain returns. 

C) do not reject the null hypothesis and conclude that leverage significantly explains returns. 

D) reject the null hypothesis and conclude that leverage significantly explains returns. 

aianjie

 

The correct answer is A

Do not reject the null since |–1.09|<1.96(critical t-value).

aianjie

 

8、An analyst has been assigned the task of evaluating revenue growth for an online education provider company that specializes in training adult students. She has gathered information about student ages, number of courses offered to all students each year, years of experience, annual income and type of college degrees, if any. A regression of annual dollar revenue on the number of courses offered each year yields the results shown below.

Coefficient Estimates
Predictor	Coefficient	Standard Error of the Coefficient
Intercept	0.10	0.50
Slope (Number of Courses)	2.20	0.60

Which statement about the slope coefficient is most correct, assuming a 5 percent level of significance and 50 observations?

A)    t-Statistic: 3.67. Slope: Not significantly different from zero.

B)    t-Statistic: 3.67. Slope: Significantly different from zero.

C)   t-Statistic: 0.20. Slope: Not significantly different from zero.

D)   t-Statistic: 0.20. Slope: Significantly different from zero.

aianjie

 

The correct answer is C

The confidence interval is -1.50 ± 2.042 (0.40), or {-2.317 < b1 < -0.683}.

aianjie

 

4、Consider the regression results from the regression of Y against X for 50 observations:

Y = 0.78 + 1.2 X

The standard error of the estimate is 0.40 and the standard error of the coefficient is 0.45.

Which of the following reports the correct value of the t-statistic for the slope and correctly evaluates its statistical significance with 95 percent confidence?

A) t = 2.667; slope is significantly different from zero.

B) t = 3.000; slope is significantly different from zero.

C) t = 1.789; slope is not significantly different from zero.

D) t = 1.200; slope not significantly different from zero.

aianjie

 

The correct answer is A

The test statistic is t = (1.2 – 0) / 0.45 = 2.667. The critical t-values for 48 degrees of freedom are ± 2.011. Therefore, the slope is different from zero.

aianjie

 

5、Consider the regression results from the regression of Y against X for 50 observations:

Y = 0.78 - 1.5 X

The standard error of the estimate is 0.40 and the standard error of the coefficient is 0.45.

Which of the following reports the correct value of the t-statistic for the slope and correctly evaluates H0: b1 ≥ 0 versus Ha: b1 < 0 with 95 percent confidence?

A) t = -3.333; slope is significantly negative.

B) t = 3.750; slope is significantly different from zero.

C) t = -3.750; slope is significantly different from zero.

D) t = 3.333; slope not significantly different from zero.

aianjie

 

The correct answer is A

The test statistic is t = (-1.5 – 0) / 0.45 = -3.333. The critical t-value for 48 degrees of freedom is +/- 1.667. However, in the Schweser Notes you should use the closest degrees of freedom number of 40 df. which is +/-1.684. Therefore, the slope is different from zero. We reject the null in favor of the alternative.