An Investment Analyst Wants to Examine the Relationship Between a Mutual

question 67

Essay

An investment analyst wants to examine the relationship between a mutual fund's return,its turnover rate,and its expense ratio.She randomly selects 10 mutual funds and estimates: ,where Return is the average five-year return (in %),Turnover is the annual holdings turnover (in %),Expense is the annual expense ratio (in %),and is the random error component.A portion of the regression results is shown in the accompanying table. a.Predict the return for a mutual fund that has an annual holdings turnover of 60% and an annual expense ratio of 1.5%.
b.Interpret the slope coefficient attached to Expense.
c.Calculate the standard error of the estimate.If the sample mean for Return is 34.7%,what can you infer about the model's predictive power.
d.Calculate and interpret the coefficient of determination.

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