- CFA Exams
- CFA Level I Exam
- Study Session 2. Quantitative Methods (1)
- Reading 4. Introduction to Linear Regression
- Subject 3. The standard error of estimate and the coefficient of determination

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**CFA Practice Question**

What does it mean if

II. High values of one variable are associated with low values of the other variable.

III. Dependent variable can be perfectly predicted by the independent variable.

IV. All of the variation in the dependent variable can be accounted for by the independent variable.

*p*= -1.00?I. Coefficient of determination equals 1.

II. High values of one variable are associated with low values of the other variable.

III. Dependent variable can be perfectly predicted by the independent variable.

IV. All of the variation in the dependent variable can be accounted for by the independent variable.

A. I, II and III

B. II, III and IV

C. I, II, III and IV

**Explanation:**All the above are properties or explanations of the coefficient of correlation being equal to -1.0.

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**User Contributed Comments**
2

User |
Comment |
---|---|

danlan |
II is true, since we know y=kx+b, and k<0 (because of -1 as correlation coefficient) |

pires100 |
completely forgot that p is the POPULATION correlation coefficient and r is the SAMPLE correlation coefficient. Honestly had no idea what this question was asking. |