Here\'s a plot showing the interest rate on a 3-month bond from 1950 to 1980, an
ID: 3179910 • Letter: H
Question
Here's a plot showing the interest rate on a 3-month bond from 1950 to 1980, and a regression model fit to the relationship between the Rate (in %) and Years since 1950. Complete parts a through d. a) What is the correlation between rate and year? b) Interpret the slope and intercept. On average, interest rates during this period increased at about % per year, starting from an interest rate of about %. c) What does this model predict for the interest rate in the year 2020? d) Would you expect this prediction to be accurate? Explain. A. Yes R^2 = 78.1% is large enough for the extrapolation to be safe B. Not really. Interest rates are too random to predict for any time. C. Not really. Extrapolating 40 years beyond the end of these data would be dangerous and unlikely to be accurate. D. Yes, 40 years beyond the end of these data is close enough to be a safe estimate.Explanation / Answer
a) correlation r=(R2)1/2 =0.88
b) at about 0.27% per year................... of about 0.05%
c)for 2020 prediction =70*0.27+0.0543=~19%
d)option C is correct