CFA Practice Question

There are 208 practice questions for this study session.

CFA Practice Question

Reg Reshin, a CFA candidate, has recently concluded that weekend beverage sales are linearly related to average hourly wages. The regression has an intercept of 10 liters, a correlation coefficient of 0.55, and an R(squared)of 0.30. If the average hourly wage is predicted to be $20, what would be the associated prediction of weekend beverage sales in liters?
A. 11 liters.
B. 16 liters.
C. Cannot be calculated from the information provided.
Explanation: What is needed to answer the question is the slope, which is not provided.

User Contributed Comments 11

User Comment
sohappy Isn't correlation coefficient the slope?
humphrey slope = Cov(X,Y)/sx square correlation coefficient (ro) = Cov(X,Y)/sx * sy
lwang014 "Correlation" is the slope (ie. Beta)
vivi2005 is humphrey right? I just cannot find such equation in notes...
Mutizwa not too sure about the divisor in humphrey's formula above. the divisor should the variance of X i.e Var X, but this is not vailable in this question.
lwang014 The divisor should be the "variance of market" in order to calculate the beta
armanaziz humphrey right as he says sx square which means variance of x.

lwang014 wrong, correlation is r not beta.
Carol1 Slope is Coefficient, and the corelation coeeficient is the relationship between coefficient.
Dinosaur the correlation coefficient is r^2
steved333 coefficient of determination is r^2. correlation coefficient is r. correlation coefficient can be negative, but determination cannot. you square the r to see what percentage of the variance in y is explained by x. but percentages cannot be negative in this context. see?
dimitris13 slope coefficient (b1) = Cov(X,Y)/s^2x
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