Truck Speed vs Gas Mileage: An economist wanted to analyze the relationship between the speed of a car (x) and its gas mileage (y). As an experiment a car is operated at several different speeds and for each speed the gas mileage is measured. These data are shown below.
-A scatter diagram includes the following data points:
Two regression models are proposed: (1) 
, and (2) 
. Using the least squares method, which of these regression models provides the better fit to the data? Why?
Definitions:
Capital Asset Pricing Model
A model that describes the relationship between systematic risk and expected return for assets, particularly stocks, for pricing risky securities.
Portfolio Risk
The degree of uncertainty of returns on a portfolio due to the possibility of changes in the value of its investments.
Well-diversified Portfolio
An investment portfolio constructed to spread risk across various asset classes and investment vehicles to minimize potential losses.
Risk Aversion
The reluctance of a person or entity to take risks.
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