- CFA Exams
- CFA Exam: Level II 2021
- Study Session 2. Quantitative Methods (1)
- Reading 5. Multiple Regression
- Subject 1. Multiple linear regression

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**CFA Practice Question**

The following model was fitted to a sample of supermarkets to explain profit levels:

Y-hat

X

X

Y-hat

_{t}= 132.3 + 0.031 X_{1t}+ 0.089 X_{2t}+ e_{t}where

Y-hat

_{t}= profits in thousands of dollarsX

_{1t}= food sales in tens of thousands of dollars.X

_{2t}= nonfood sales in tens of thousands of dollar.For a $30,000 increase in food sales, by how much would the predicted value of the dependent variable change?

Correct Answer: 0.093

The regression coefficient for X

_{1}(food sales) is 0.031. If X_{1}increases by three units ($30,000), then Y-hat_{t}will increase by 0.093.###
**User Contributed Comments**
2

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

danlan2 |
in sales in tens of thousands, $30000 is converted to 3 in X_{1t} |

cfastudypl |
thanks danlan2. 0.031*3 = 0.093. |