Does a simple linear regression model appear to be


A sample containing years to maturity and (percent) yield for 40 corporate bonds is contained in the DATAfile named CorporateBonds (Barron's, April 2, 2012). Click on the datafile logo to reference the data. (a) Choose a scatter chart below with years to maturity as the independent variable. (i) (ii) (iii) (iv) Does a simple linear regression model appear to be appropriate? Explain. The input in the box below will not be graded, but may be reviewed and considered by your instructor. (b) Develop an estimated quadratic regression equation with years to maturity and squared values of years to maturity as the independent variables. If required, round your answers to four decimal places. For subtractive or negative numbers use a minus sign even if there is a + sign before the blank. (Example: -300) = + x + x2 How much variation in the sample values of yield is explained by this regression model? If required, round your answer to one decimal places. % Test the relationship between each of the independent variables and the dependent variable at a 0.05 level of significance. How would you interpret this model? The input in the box below will not be graded, but may be reviewed and considered by your instructor. (c) Use Excel to create a plot of the linear and quadratic regression lines overlaid on the scatter chart of years to maturity and yield. Choose the correct chart below. (i) (ii) (iii) (iv) Which model does this chart suggest provides a superior fit to the sample data? (d) What other independent variables could you include in your regression model to explain more variation in yield? The input in the box below will not be graded, but may be reviewed and considered by your instructor.

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