A Regression Model: PE = 8

question 28

Multiple Choice

A regression model: PE = 8.04 + 0.747 Growth Rate + 0.0516 Profit Margin + 2.09 Green was developed to predict a firm's Price-Earnings Ratio (PE) using
Growth Rate, Profit Margin, and whether the firm is Green (1 = Yes, 0 = No) . Which
Of the following is the correct interpretation for the regression coefficient of Green?

• A) The regression coefficient indicates that the PE ratio of a firm that is green will,
• On average, be 2.09 higher than a firm that is not green with the same growth rate
• And profit margin.
• B) The regression coefficient indicates that the PE ratio of a firm that is green will,
• On average, be 2.09 lower than a firm that is not green with the same growth rate
• And profit margin.
• C) The regression coefficient indicates that the PE ratio of a firm that is green will,
• On average, be 2.09 times higher than a firm that is not green with the same
• Growth rate and profit margin.
• D) The regression coefficient indicates that the PE ratio of a firm that is green will,
• On average, be 2.09 times lower than a firm that is not green with the same growth
• Rate and profit margin.
• E) The regression coefficient is not significantly different from zero.

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