In a Multiple Regression Model,the Value of the Coefficient of Determination

question 16

Multiple Choice

In a multiple regression model,the value of the coefficient of determination has to fall between

• A) -1 and +1.
• B) 0 and +1.
• C) -1 and 0.
• D) None of these choices.

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Definitions:

Expected Returns

The projected return on an investment, taking into account both the probability and the impact of known risks.

Risky Securities

Financial instruments that carry a high degree of investment risk due to their significant exposure to market volatility.

Diversifiable Risk

The risk that a borrower will not pay theinterest and/or principal on a loan as it becomes due. Ifthe issuer defaults, investors receive less than the promised return on the bond. Default risk is influenced byboth the financial strength of the issuer and the terms ofthe bond contract, especially whether collateral has beenpledged to secure the bond. The greater the default risk,the higher the bond’s yield to maturity.

Required Rate

The minimum annual percentage return an investment must earn to be considered a viable option.