Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

(4.4) Using data from a pool of mortgage borrowers, a credit risk analyst performed an ordinary (4) least squares regression of annual savings (in

image text in transcribed

(4.4) Using data from a pool of mortgage borrowers, a credit risk analyst performed an ordinary (4) least squares regression of annual savings (in N$) against annual household income (in N$) and obtained the following relationship: Annual Savings 0.24 x Household Income - 825.96, with R2 = 0.80. Assuming all coefficients are statistically significant, which interpretation of this result is correct? A. For this sample data, the average error term is N$ -825.96. B. For a household with no income, annual savings is N$ 0. C. For an increase of N$ 1,000 in income, expected annual savings will increase by N$ 240. D. For a decrease of N$ 2,000 in income, expected annual savings will increase by N$ 480.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Understanding financial statements

Authors: Lyn M. Fraser, Aileen Ormiston

9th Edition

136086241, 978-0136086246

More Books

Students also viewed these Finance questions