1. Results from regressing the spread between Corporate AAA bonds and the Treasury 10-year note on GDP are provided in the attached file.
a) Test the hypothesis:
Ho: Intercept = 0; Ha: Intercept =/= 0
Ho: Slope = 0; Ha: Slope =/= 0
b) Calculate the correlation between the regression residuals t and (t - 1).
c) Test the hypothesis:
Ho: positive serial correlation = 0
Ha: positive serial correlation =/= 0
2. Following are results of a linear trend model on log-normal stock prices (see attached file for prices).
a) State the log-linear equation.
b) Estimate the stock price for the next quarter.
c) Identify one error that could invalidate the model.
This solution is comprised of a detailed explanation for testing the coefficients of regression. The detailed solution is provided for testing of interceptor, slope in regression analysis. Durbin Watson test statistics value is calculated in order to decide the existence of serial correlation and also the prediction value and valid conclusion is provided in the solution.