Regression analysis-random selection

Reference no: EM1395722

The expense ratio of a mutual fund measures the percentage of the fund's assets used to pay for annual administrative overhead. Funds with higher ratios spend more of the fund's return to operate the fund. A random selection of 16 stock mutual funds last year revealed the following data:

Expense Ratio, X

0.62

1.21

1.03

0.67

0.40

1.12

0.78

0.47

0.85

0.92

0.57

0.95

0.20

1.00

1.15

1.03

Total Return, Y

34.3

33.0

31.4

31.8

32.9

27.6

30.3

31.9

33.8

27.9

32.6

24.3

34.3

31.7

29.9

34.7

-Construct a scatter plot of the data. Clearly label each axis.

-Take the scatter plot created earlier and draw the least squares line on it.

-Find the equation for the least squares line of best fit.

-State the values of the regression coefficients (intercept and slope) and interpret what they mean. Does expense hurt or help the fund's return?

-Based on your regression analysis of the data, when is the average total return for a mutual fund with an expense ratio of 0.75%?

Reference no: EM1395722

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