Exhibit 13-12
in a Laboratory Experiment, Data Were Gathered on the Life

question 43

Multiple Choice

Exhibit 13-12
In a laboratory experiment, data were gathered on the life span Y in months) of 33 rats, units of daily protein intake X1) , and whether or not agent X2 a proposed life extending agent) was added to the rats diet X2 = 0 if agent X2 was not added, and X2 = 1 if agent was added.) From the results of the experiment, the following regression model was developed.
$\hat { Y }$ =36+0.8X1 - 1.7X2
Also provided are SSR = 60 and SST = 180.
-Refer to Exhibit 13-12. From the above function, it can be said that the life expectancy of rats that were given agent X2 is

• A) 1.7 months more than those who did not take agent X2
• B) 1.7 months less than those who did not take agent X2
• C) 0.8 months less than those who did not take agent X2
• D) 0.8 months more than those who did not take agent X2

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Definitions:

Continuous Compounding

The mathematical limit reached when an investment's interest is calculated and added back to the principal at an infinite number of intervals.

Put-Call Parity

A principle in options pricing that defines the relationship between the price of European put and call options with the same strike price and expiration.

Implied Standard Deviation

An estimate of future volatility derived from the market price of an option and other known variables using option-pricing models.

Intrinsic Value

The actual, fundamental worth of an asset, based on underlying perceptions of its true value including all aspects of the business, in terms of both tangible and intangible factors.