- CFA Exams
- CFA Level I Exam
- Study Session 2. Quantitative Methods (1)
- Reading 4. Introduction to Linear Regression
- Subject 6. The predicted value of the dependent variable

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**CFA Practice Question**

The results of the regressions using 200 observations on a variable Y against X are as follows:

R square = 49%

The regression equation can be expressed as:

A. Y = 8.1 + 3.6 X + error

B. X = 8.1 + 3.6 Y + error

C. Y = 3.6 + 8.1 X + error

**Explanation:**Note that Y is regressed against X, implying that Y is the dependent (left-hand side) variable and X is the independent (right-hand side) variable. The intercept in a regression equals the constant term and the slope coefficient is the multiplier on the independent variable.

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