Thirty Employed Single Individuals Were Randomly Selected to Examine the Relationship

question 3

Essay

Thirty employed single individuals were randomly selected to examine the relationship between their age (Age)and their credit card debt (Debt)expressed as a percentage of their annual income.Three polynomial models were applied and the following table summarizes Excel's regression results. Suppose the restriction β₃ = 0 is imposed on the cubic regression model Debt = β₀+ β₁Age + β₂Age²+ β₃Age³+ ε.What regression equation is obtained under this restriction?

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Definitions:

Interest Rate Parity

A financial theory which suggests that the difference in interest rates between two countries is equal to the expected change in exchange rates between their currencies.

Arbitragers

Traders who buy and sell assets, such as stocks or commodities, in different markets or forms to profit from differing prices for the same asset.

Risk-Free Profits

Profits made from an investment that is considered to have no risk of financial loss.

Swap Market

The swap market is a financial market where parties exchange streams of cash flows or other financial instruments for a set period, often to manage risk or obtain better loan terms.