Solution Found!
Interest rates 2014 Here’s a plot showing the federal rate
Chapter 8, Problem 35E(choose chapter or problem)
Interest rates 2014 Here’s a plot showing the federal rate on 3-month Treasury bills from 1950 to 1980, and a regression model fit to the relationship between the Rate (in %) and Years Since 1950 (www.gpoaccess .gov/eop/).
a) What is the correlation between Rate and Year?
b) Interpret the slope and intercept.
c) What does this model predict for the interest rate in the year 2000?
d) Would you expect this prediction to have been accurate? Explain.
Questions & Answers
QUESTION:
Interest rates 2014 Here’s a plot showing the federal rate on 3-month Treasury bills from 1950 to 1980, and a regression model fit to the relationship between the Rate (in %) and Years Since 1950 (www.gpoaccess .gov/eop/).
a) What is the correlation between Rate and Year?
b) Interpret the slope and intercept.
c) What does this model predict for the interest rate in the year 2000?
d) Would you expect this prediction to have been accurate? Explain.
ANSWER:
Step 1 of 4
a) The correlation coefficient has to be positive, because the scatterplot slopes upwards. The correlation is then the positive square root of R-squared:
