Suppose That You Lend Me $100 for a Year, and That

question 1

Multiple Choice

Suppose that you lend me $100 for a year, and that I agree to pay you $110 at that time (principal plus interest) . Over the intervening year, however, the average price of goods in the economy rises by 3 percent. The real rate of return that you will earn on your loan to me is therefore equal to

• A) 3 percent.
• B) 7 percent.
• C) 10 percent.
• D) 13 percent.
• E) greater than 13 percent.

Interpret the \(R^2\) value correctly in the context of regression analysis.

Know the assumptions and conditions necessary for regression analysis.

Interpret the correlation coefficient (\(r\)) and its relationship to \(R^2\).

Understand that multiple factors can influence the results of a regression analysis beyond the variables considered.

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