aianjie

 

3、The capital asset pricing model is given by: Ri =Rf + Beta ( Rm -Rf) where Rm = expected return on the market, Rf = risk-free market and Ri = expected return on a specific firm. The dependent variable in this model is:

A) Rf.

B) Rm.

C) Rm - Rf.

D) Ri.

aianjie

 

The correct answer is D

The dependent variable is the variable whose variation is explained by the other variables. Here, the variation in ri is explained by the variation in the other variables, rf and rm.

aianjie

 

4、The independent variable in a regression equation is called all of the following EXCEPT:

A) predicted variable.

B) explanatory variable.

C) exogenous variable.

D) predicting variable.

aianjie

 

The correct answer is A

The dependent variable is the predicted variable.

aianjie

 

The correct answer is B

The dependent variable is return on equity. This is what he wants to explain. The variables he uses to do the explaining (i.e., the independent variables) are financial leverage and capital expenditures.

aianjie

 

2、The purpose of regression is to:

A) explain the variation in the dependent variable.

B) explain the variation in the independent variable.

C) get the largest R2 possible.

D) explain the mean of the independent variable.

aianjie

 

The correct answer is A

The goal of a regression is to explain the variation in the dependent variable.