equities and is meant to reflect the riskreturn characteristics of the large

# Equities and is meant to reflect the riskreturn

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equities and is meant to reflect the risk/return characteristics of the large cap universe. 14. Estimate the linear regression of Y on X . ANSWER: 20, 27.6/20 1.38, 24.8/20 1.24 n X Y 2 2 2 2 158.5 (20)(1.38)(1.24) 124.276 1.083 152.8 (20)(1.38) 114.712 i i i x y nx y b x nx 1 1 b y b x 1.24 (1.083)(1.38) = - 0.2545 The sample least squares regression equation is ˆ 0.2545 1.083 i i y x   15. Interpret the slope of the sample regression line. ANSWER: For a one unit increase in the rate of return of the S&P 500 index, we estimate that the rate of return of the corporation’s stock will increase, on average, by 1.083% 16. Interpret the intercept of the sample regression line. ANSWER: When the percentage rate of return of the S&P 500 index is zero, we estimate that the corporation’s rate of return will be -.0.2545%

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