- 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**

If all the data points in a regression lie exactly on a straight line, which of the following is (are) true?

II. The R-square will equal 100%.

III. The slope coefficient will be 1.

IV. The residual error will be 100%.

I. The observed values of the dependent variable will equal the predicted values.

II. The R-square will equal 100%.

III. The slope coefficient will be 1.

IV. The residual error will be 100%.

A. I and II

B. I, III and IV

C. I, II and III

**Explanation:**Since there is no error in the regression, the R-square equals 1 (100%). The slope coefficient can be any real number, not necessarily 1. The residual error will be zero.

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