- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 10. Simple Linear Regression
- Subject 6. Functional Forms for Simple Linear Regression

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**CFA Practice Question**

Suppose the following estimated regression illustrates the relationship between an individual's wage (Y) and her years of eduction (X): lnY

_{i}= 1.79 + 0.08 X

_{i}For an additional year of education, an individual's wage should increase by ___ percent.

A. 8

B. 8.3

C. 8.5

**Explanation:**e

^{0.08}- 1 = 0.083

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**User Contributed Comments**
2

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

garazzo |
can someone explain please |

Leonce |
Questions quite badly written but got a result : ln(Y1)=1.79+0.08Xi ln(Y2)=1.79+0.08(Xi+1) ln(Y2)-ln(Y1)=ln(Y2/Y1)=0.08 Y2/Y1=E(0.08) (Y2-Y1)/(Y1)=E(0.08)-1 (Y2-Y1)/Y1 being our change |