It Is Appropriate to Use "Dummy Variables" in Multiple Regression

question 99

Multiple Choice

It is appropriate to use "dummy variables" in multiple regression when

• A) there may be a nonlinear relationship between the independent variables and the dependent variable.
• B) all independent variables are interval or ratio.
• C) some of the independent variables are categorical.
• D) there may be nonnormality in the independent variables.

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Definitions:

Financial Risk

The possibility of losing money on an investment or business venture.

Shareholders

Individuals or entities that own shares of stock in a corporation, giving them rights to dividends and a stake in the company's ownership.

Preferred Shares

Preferred shares represent a class of ownership in a corporation with a fixed dividend and priority over common shares in asset liquidation.

Cost of Equity

The return that investors require for investing in a company's equity, representing the compensation for taking on equity risk.