QA quiz 4: how is 7.2% calculated?

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Ronry FRM, believed that there is a relationship between the percentage change in a firm’s number of sales staff and the percentage change in the firm’s total sales during a perticular period.
He did a regression analysis with sample size of 50 firms, which resulted in a slope of 0.82, an intercept of +0.02, and an R2 value of 0.70.
Based on the obeservation, if a firm makes no changes in the number of sales staff, what may be the percentage change in the firm’s sales during the period based on the regression model?
Select one:
a. 2%
b. 0.72%
c. 0.82%
d. 7.2%

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Posted by Paul (Questions: 11, Answers: 0)
Asked on February 15, 2016 2:08 am
Category: FRM Part I
Private answer

The equation for expected value of % change in firm’s sales = 0.02 + 0.70*(%change in sales staff).
As the %change is sales staff is 0 (same number as before), the answer for expected value is 0.02 or 2%.

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Posted by rajatbatra (Questions: 0, Answers: 5)
Answered on February 21, 2016 1:35 am
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