- 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
CFA Practice Question
Given the following regression equation:
Growth in Sales = 6.253 + 0.7 GDP growth rate
Which of the following statements would be false?
A. Growth rate in sales is the dependent variable and the GDP rate is the independent variable.
B. If there is a recession, sales would only grow at 6.253%.
C. The regression coefficient is 0.7.
Explanation: If there was a recession, GDP growth rate would likely be a negative figure; thus it would be incorrect to assume that sales would grow at a rate indicated by its y-intercept.
User Contributed Comments 2
| User | Comment |
|---|---|
| jlai1990 | This is incorrect. A regression would imply a negative GDP growth rate and thus growth in sales is less that 6.253% |
| jsc298 | keyword here is false... |