A Linear Regression Was Done to Estimate the Relation Between

question 32

Multiple Choice

A linear regression was done to estimate the relation between Sprint's stock returns and the market's return. The intercept of the line was found to be 0.23 and the slope was 1.47. Which of the following statements is true regarding Sprint's stock?

• A) Sprint's beta is 0.23.
• B) Sprint's beta is 1.47.
• C) The risk-free rate is 1.47%.
• D) The standard deviation of Sprint's excess returns is 23%.

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Definitions:

Lend Reserves

The practice by financial institutions of providing loans out of their reserves, often influencing the money supply in the economy.

Money Supply

All monetary resources that are accessible in an economy at a particular timeframe, including but not limited to cash, coins, and the deposits in checking and savings accounts.

U.S. Government Securities

Financial instruments issued by the U.S. Department of the Treasury, including bonds, notes, and bills, used to fund federal government activities.

Excess Reserves

Funds held by banks over and above the legally mandated reserve requirement.