A Professor Runs a Regression to See How Students' Exam

question 73

Multiple Choice

A professor runs a regression to see how students' exam scores (Y) are related to their homework
Grades (X) . The R2 of the regression is 21%. What does R2 tell us?

• A) 21% of the variation in the exam scores is explained by the regression analysis.
• B) 21% of students have their grades accurately predicted by the regression equation.
• C) none of these
• D) 21% of each student's exam grade will be determined by their homework grade.
• E) Exam scores are not related to homework grades since 21% is greater than 5%.

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Definitions:

Future Cash Inflows

The projection of money expected to be received by a business or investment in the future.

Rate of Return

The gain or loss of an investment over a specified period, expressed as a percentage of the investment's initial cost.

Net Present Value

A calculation that compares the present value of a project’s cash inflows with the present value of its cash outflows, used in capital budgeting to assess profitability.

Payback Period

The length of time required to recoup the initial investment in a project, ignoring the time value of money.