The change in ROE for a change in GO from 5 percent to 6 percent is closest to:

A. 1.8 percent.

B. 4.0 percent.

C. 5.8 percent.

An analyst has estimated a model that regresses a company’s return on equity (ROE) against its growth opportunities (GO), defined as the company’s three-year compounded annual growth rate in sales, over 20 years, and produces the following estimated simple linear regression:

ROE_i = 4 + 1.8 GO_i + ε_i.

Both variables are stated in percentages, so a GO observation of 5 percent is included as 5.