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What Are the Assumptions Made by the Regression Model in Estimating

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Essay

What are the assumptions made by the regression model in estimating the parameters and in significance testing?


Definitions:

Present Value

The equivalent value today of cash flows or a sum of money anticipated in the future, using a predetermined return rate.

Annuity

A financial product that pays out a fixed stream of payments to an individual, primarily used as an income stream for retirees.

Interest Rate

Interest rate is the percentage charged by a lender to a borrower for the use of assets, adjusting for the cost of credit or the return on investment.

Lump Sum

A single payment made at a particular time, as opposed to several smaller installments.

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