5. Suppose that you deleted several of the observations that had small residual values. If you re-estimated the regression equation using this reduced sample, what would likely happen to the standard error of the estimate and the R2?

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Kenneth McCoin, CFA, is a fairly tough interviewer. Last year, he handed each job applicant a sheet of paper with the information in the following table, and he then asked several ques- tions about regression analysis. Some of McCoin's questions, along with a sample of the answers he received to each, are given below. McCoin told the applicants that the indepen- dent variable is the ratio of net income to sales for restaurants with a market cap of more than $100 million and the dependent variable is the ratio of cash flow from operations to sales for those restaurants. Which of the choices provided is the best answer to each of McCoin's questions? Regression Statistics Multiple R 0.8623 R 0.7436 Standard error 0.0213 Observations 24 ANOVA df SS MSS F Significance F Regression 0.029 0.029000 63.81 0 Residual 22 0.010 0.000455 Total 23 0.040 Coefficients Standard 1-Statistic p-Value Error Intercept 0.077 0.007 11.328 0 Slope 0.826 0.103 7.988. 0