Which of the Following Is True of the Correlated Random

question 10

Multiple Choice

Which of the following is true of the correlated random effects approach (CRE) ?

• A)The CRE approach assumes that the unobserved effect is uncorrelated with the observed explanatory variables.
• B)The CRE approach cannot be used if the regression model includes a time-constant explanatory variable.
• C)The CRE approach considers that the unobserved effect is correlated with the average level of explanatory variables.
• D)The CRE estimate equals the random effects estimate.

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Definitions:

Discount

A reduction in the price of goods or services usually to encourage sales or to reward specific groups of customers.

Premium

In finance, a premium refers to the amount by which the price of a financial asset or insurance policy exceeds its intrinsic or face value.

Recorded

The act of entering financial transactions into the accounting records of a company.

Effective-Interest Method

A way of calculating the amortized cost of a bond and of allocating interest expense over the bond's life, reflecting the actual interest rate earned.