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:

Finished Goods Inventory

The stock of completed products that are ready to be sold but have not yet been purchased or distributed to customers.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including the cost of materials and labor.

Raw Material Purchases

The acquisition of the basic inputs or resources that are converted through manufacturing processes into final products.

Factory Overhead

Costs related to the operation of a manufacturing plant which cannot be directly associated with specific units of production, such as utilities, maintenance, and management salaries.