- CFA Exams
- CFA Exam: Level II 2021
- 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**

For a data collection of x and y scores, if one data point is (30, 40) and the linear regression equation is y = -1.5x + 70 the residual for x = 30 is ______.

B. 40

C. 15

A. 30

B. 40

C. 15

Correct Answer: C

The residual for x = 30 is the observed value (40) minus the predicted value [y = -1.5(30) + 70 or y = 25]. Now, 40 - 25 = 15. So, the residual at x = 30 is 15.

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**User Contributed Comments**
1

User |
Comment |
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danlan |
residual = real y-calculated y |