The following table gives the annual return, the safety rating (0= riskiest, 10= safer), and the annual expense ratio for 20 foreign funds (Mutual Funds, March 2000).
A) Develop an estimated regression equation relating the annual return to the safety rationing and the annual expense ratio.
B) Estimate the annual return for a firm that has a safety rating of 7.5 and annual expense ratio of 2.
See the attached file for the full table.
The solution describes the fitting of a multiple regression model to a given data set.