Investment analysts generally believe the interest rate on bonds is related to the prime interest rate for loans.
a) Use the following data in MS Excel to construct a scatter graph and then fit a regression line to the data. Report the regression formula and the r-squared values from the chart (right click on the data points, select Add Trend line, and select options to show these metrics).
b) Do you think the bond rate can be predicted by the prime interest rate? Justify your answer using the relevant metrics.
Prime interest rate Bond rate
5.00% 28.00%
12.00% 48.00%
9.00% 32.00%
1.50% 4.00%
0.40% 7.00%
11.00% 36.00%
6.00% 28.00%
2.00% 10.50%