The Vice President of Equity Investments for your firm hypothesizes that only net income is relevant to predicting ROA. Conduct an appropriate test to evaluate if the variables efficiency ratio and total risk based capital belong in this model. Assume a level of significance of one percent. (

Looking at the full model determine is the independent variable, Net Income, highly correlated with the other independent variables? Explain.

A Breusch Pagan statistic of 5.9 with a degree of freedom of 2 was calculated for the full model. Does this indicate a problem with the model? Conduct an appropriate test using an alpha of 5%.

SUMMARY OUTPUT Regression Statistics Multiple R 0.685669608 R Square 0.470142811 Full Model Adjusted R Square Standard Error 0.235584675 Observations 198 ANOVA df S MS F Significance F Regression 3 9.553593743 3.184531248 57.37879771 1.34745E-26 Residual 194 10.76702696 0.055500139 Total 197 20.32062071 Coefficients Standard Error t Stat P-value VIF Intercept 1.594045443 0.163519796 9.748333137 1.58457E-18 Net Income 1.22071E-05 3.50322E-06 3.484549254 0.000609383 1.12143 Efficiency Ratio -0.015282909 0.001759234 -8.687250374 1.53408E-15 1.19472 Total Risk Based Capital 0.022671698 0.004675071 4.849486971 253323E-06 1.09988 SUMMARY OUTPUT Regression Statistics Multiple R 0.317333614 arenbs y 0.100700623 Reduced Model Adjusted R Square 0.0961 12361 Standard Error 0.305346253 Observations 198 ANOVA df S MS F Significance F Regression 2046299159 2046299159 21.94744325 5.23106E-06 Residual 196 18.27432155 0.093236334 Total 197 20.32062071 Coefficients Standard Error t Stat P-value VIF Intercept 0.935229026 0.038300303 24.4183195 233679E-61 Net Income 2.00872E-05 4.28773E-06 4.684809841 5.23106E-06