- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 1. Basics of Multiple Regression and Underlying Assumptions
- Subject 2. A Multiple Linear Regression Example
CFA Practice Question
The following model was fitted to a sample of supermarkets to explain profit levels:
Y-hatt = profits in thousands of dollars
X1t = food sales in tens of thousands of dollars.
X2t = nonfood sales in tens of thousands of dollar.
Y-hatt = 132.3 + 0.031 X1t + 0.089 X2t + et
where
Y-hatt = profits in thousands of dollars
X1t = food sales in tens of thousands of dollars.
X2t = nonfood sales in tens of thousands of dollar.
For a $30,000 increase in food sales, by how much would the predicted value of the dependent variable change?
Correct Answer: 0.093
The regression coefficient for X1 (food sales) is 0.031. If X1 increases by three units ($30,000), then Y-hatt will increase by 0.093.
User Contributed Comments 2
| User | Comment |
|---|---|
| danlan2 | in sales in tens of thousands, $30000 is converted to 3 in X_{1t} |
| cfastudypl | thanks danlan2. 0.031*3 = 0.093. |