If the Correlation Between the Two Independent Variables of a Regression

question 24

Multiple Choice

If the correlation between the two independent variables of a regression analysis is 0.11,and each independent variable is highly correlated to the dependent variable,what does this indicate?

• A)Multicollinearity between these two independent variables.
• B)A negative relationship is not possible.
• C)Only one of the two independent variables will explain a high percent of the variation.
• D)An effective regression equation.

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Definitions:

Residual Income

Income that remains after all costs and expenses, including a charge for capital, have been deducted.

Return On Investment

A measure used to evaluate the efficiency or profitability of an investment, calculated by dividing the net profit of the investment by its initial cost.

Cost Of Capital

Cost of capital represents the return rate that a company must achieve to maintain its market value, affecting its ability to invest in new projects or assets.

Profit-Based Measure

A financial metric used to evaluate the profitability of a business, project, or investment, such as net profit margin.