Consider the Regression Equation = B₀ + B₁x

question 106

Multiple Choice

Consider the regression equation = b₀ + b₁x + b₂d with a dummy variable d.If d increases from 0 to 1,the change in the intercept is given by:

• A) b₀
• B) b₀ + b₁
• C) b₂
• D) b₀ + b₂

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Definitions:

Required Rates of Return

The minimum annual percentage earnings needed from an investment to compensate for its risk, serving as a benchmark for evaluating potential investments.

Standard Deviations

A statistical measure of the dispersion or variability of a set of data points or investment returns from their average value.

Expected Return

The weighted average of the probable returns of an investment, calculated based on past performance or statistical analyses.

Market Risk Premium

The additional return expected from holding a risky market portfolio over a risk-free asset.