On the Basis of Regression Equation P = a

question 71

Multiple Choice

On the basis of regression equation P = a + b × S + e,we can decompose the variability of the dollar value of the asset,VAR(P) ,into two separate components: VAR(P) = b² × VAR(S) + VAR(e) .The second term in the right-hand side of the equation,VAR(e) represents

• A)the part of the variability of the dollar value of the asset that is related to random changes in the exchange rate.
• B)the residual part of the dollar value variability that is independent of exchange rate movements.
• C)the part of the variability of the dollar value of the asset that is related to random changes in the exchange rate,as well as the residual part of the dollar value variability that is independent of exchange rate movements.
• D)none of the options

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Definitions:

Expected Utility

A theory in economics that calculates the anticipated utility resulting from different outcomes in risky or uncertain situations.

Utility

(Of a consumer) a measure of the satisfaction derived from consumption of goods and services.

Probability

The measurement of the likelihood of a specific event or outcome occurring.

Insurance Premium

The amount of money that an individual or business must pay for an insurance policy.