For the Model Y = β₀ + β₁x + β₂xd

question 30

Multiple Choice

For the model y = β₀ + β₁x + β₂xd + ε, which of the following are the hypotheses for testing the individual significance of the interaction variable xd?

• A) H₀: xd = 0, H_A: xd ≠ 0
• B) H₀: b₂ = 0, H_A: b₂ ≠ 0
• C) H₀: β₂ = 0, H_A: β₂ ≠ 0
• D) H₀: β₂ ≠ 0, H_A: β₂ = 0

---

Definitions:

Market Price

represents the current price at which an asset or service can be bought or sold in the market.

Bonds

Fixed income instruments that represent a loan made by an investor to a borrower, typically corporate or governmental.

Nominal Return

The amount of profit or loss realized from an investment without adjusting for factors like inflation.

Expected Inflation

The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling, as anticipated by consumers, investors, and economists.