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During the 1 9 9 0 s , investors made investment decisions based on market performance. As the nature of investing shifted ( more day

During the 1990 s, investors made investment decisions based on market performance. As the nature of investing shifted (more day traders and faster flow of information using technology), the relationship between market performance (Return) in percent and money flowing (Flow) into mutual funds ( $ million) shifted. The least squares linear regression is shown below. Complete parts a through d.(You may assume that the assumptions and conditions for regression are met.)
widehat( Flow )=9316+719 Return
a)Interpret the intercept in the linear model. Choose the correct answer below.
A. The intercept is the actual value of the money Flow if the Return was 0%.
B. The intercept is the predicted value of the Return if the money Flow was $0.
C. The intercept is the predicted value of the money Flow if the Return was 0%.
D. The intercept is the actual value of the Return if the money Flow was $0.
b)Interpret the slope in the linear model. Choose the correct answer below.
A. Fund Return increases by $719 million for every 1% increase in money Flow.
B. Money Flow increases by $719 million for every 1% decrease in fund Return.
C. Money Flow increases by $719 million for every 1% increase in fund Return.
D. Fund Return increases by $719 million for every 1% decrease in money Flow.
c) What is the predicted fund Flow for a month that had a market Return of 0%?
The predicted fund Flow is $ million.
d) If during this month, the recorded fund Flow was $5 billion, what is the residual using this linear model? Did the model provide an underestimate or overestimate for this month?
for this month.
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