A sample containing years to maturity and yield (%) for 40 corporate bonds is contained in the data file named CorporateBonds (Barron’s, April 2, 2012).
a. Develop a scatter diagram of the data using x = years to maturity as the independent variable. Does a simple linear regression model appear to be appropriate?
b. Develop an estimated regression equation with x = years to maturity and x 2 as the independent variables.
c. As an alternative to fitting a second-order model, fit a model using the natural logarithm of price as the independent variable; that is, y^ = b 0 + b 1 ln(x). Does the estimated regression using the natural logarithm of x provide a better fit than the estimated regression developed in part (b)? Explain.
Is no other aditional information the problem is coming from the book as it is.