Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A finance executive would like to determine if a relationship exists between the current earnings per share (EPS) of a bank and the following independent

image text in transcribedimage text in transcribedimage text in transcribed
A finance executive would like to determine if a relationship exists between the current earnings per share (EPS) of a bank and the following independent variables below. ROAA measures how effectively assets are utilized, and ROAE measures a firm's profitability. Complete parts a through e below. X1 - Total assets ($ billions) X2 - Previous period's return on average assets (ROAA) X3 - Previous period's EPS X4 - Previous period's return on average equity (ROAE) a) Construct a regression model using all four independent variables. y = (0) + () *1 + () *2 + () *3 + () x4 (Round to three decimal places as needed.) b) Interpret the meaning of the regression coefficients. Select the correct choice below and, if necessary, fill in the answer boxes within your choice. Each additional billion dollars of total assets the current EPS by Each additional percentage point for the previous period's ROAA the current EPS by V Each additional dollar for the previous period's EPS the current EPS by Each additional percentage point for the previous period's ROAE the current EPS by c) Predict the average EPS for a bank that has $4.1 billion in total assets, ROAA = - 0.8%, EPS(previous) = $0.65, and ROAE = - 162%. y = dollars (Round to two decimal places as needed.) d) Construct a 95% confidence interval for the bank described in part c. Interpret the meaning of the interval. The 95% confidence interval is from a lower limit of dollars to an upper limit of dollars. (Round to two decimal places as needed.) Interpret the meaning of the interval. Select the correct choice below and fill in the answer boxes within your choice. (Round to two decimal places as needed.) O A. The average EPS for a bank that has $4.1 billion in total assets, ROAA= - 0.8%, EPS(previous) = $0.65, and ROAE = - 162% between a lower limit of and an upper limit of 95% of the time.Interpret the meaning of the interval. Select the correct choice below and fill in the answer boxes within your choice. (Round to two decimal places as needed.) A. The average EPS for a bank that has $4.1 billion in total assets, ROAA = - 0.8%, EPS(previous) = $0.65, and ROAE = - 162% between a lower limit of and an upper limit of 95% of the time. O B. It can be stated with 95% confidence that the average EPS for a bank that has $4.1 billion in total assets, ROAA = - 0.8%, EPS(previous) = $0.65, and ROAE = - 162% is between a lower limit of and an upper limit of C. It can be stated with 95% confidence that the EPS for a bank that has $4.1 billion in total assets, ROAA = - 0.8%, EPS(previous) = $0.65, and ROAE = - 162% is between a lower limit of and an upper limit of e) Construct a 95% prediction interval for the bank described in part c, that is, a bank that has $4.1 billion in total assets, ROAA = - 0.8%, EPS(previous) = $0.65, and ROAE = - 162%. Interpret the meaning of the interval. The 95% prediction interval is from a lower limit of dollars to an upper limit of |dollars. (Round to two decimal places as needed.) Interpret the meaning of the interval. Select the correct choice below and fill in the answer boxes within your choice. (Round to two decimal places as needed.) O A. The point differential for a particular bank that has $4.1 billion in total assets, ROAA = - 0.8%, EPS(previous) = $0.65, and ROAE = - 162% is between a lower limit of and an upper limit of 95% of the time. B. It can be stated with 95% confidence that the EPS for a particular bank that has $4.1 billion in total assets, ROAA = - 0.8%, EPS(previous) = $0.65, and ROAE = - 162% is between a lower limit of and an upper limit of C. It can be stated with 95% confidence that the average EPS for a bank that has $4.1 billion in total assets, ROAA = - 0.8%, EPS(previous) = $0.65, and ROAE = - 162% is between a lower limit of and an upper limit ofData set for several banks - X Company ($) ($ Billions) RUAA (%) ($) 3.48 (%) 5.118 2.56 1.34 25.81 2 1.51 1.902 1.33 1.42 16.09 2.34 2.259 1.03 0.65 13.01 1.39 1.377 0.83 1.46 13.94 0.26 3.674 0.73 0.36 11.05 0.53 3.782 0.62 0.71 8.74 0.54 1.533 0.52 1.22 8 6.41 0.08 1.019 0.44 0.12 g 2.52 0.43 1.761 0.41 0.43 10 4.97 0.21 2.487 0.28 0.91 11 2.56 0.08 1.225 0.19 0.01 12 1.19 - 0.14 1.635 0.02 0.17 13 0.15 - 0.02 2.419 - 0.03 - 1.11 14 - 0.28 - 0.43 3.092 - 0.25 0.23 15 - 0.19 - 1.62 1.883 - 0.39 - 0.98 - 4.68 16 1.79 1.303 - 0.72 1.06 17 - 10.48 - 1.87 1.132 - 1.17 0.15 18 - 12.23 - 9.56 2.428 - 1.68 - 1.04 19 1.57 - 29.69 1.055 - 2.27 - 0.03 20 - 17.57 - 1.91 3.334 - 2.98 - 2.16 21 - 45.91 - 2.99 1.756 - 4.07 - 7.52 22 - 94.71 - 5.18 1.031 - 6.25 - 1.27 23 - 115.85 - 6.58 1.296 - 11.48 0.11 - 309.25

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_2

Step: 3

blur-text-image_3

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

Simulation

Authors: Sheldon M Ross

6th Edition

0323899617, 9780323899611

More Books

Students also viewed these Mathematics questions

Question

What is a task? What is an event? What is a milestone?

Answered: 1 week ago

Question

What courses do your students assist with teaching this semester?

Answered: 1 week ago

Question

5. How quickly can we manage to collect the information?

Answered: 1 week ago

Question

3. Tactical/strategic information.

Answered: 1 week ago

Question

3. To retrieve information from memory.

Answered: 1 week ago