CMA Intermediate · Financial Management and Business Data Analytics · Data Analysis and Modelling
A analyst's regression of a company's quarterly profit on sales gives a slope of 0.12 with a standard error of 0.04. Using the t-statistic (coefficient divided by its standard error), what is the t-value for the slope?
The t-value is 3.00. It is calculated by dividing the estimated slope of 0.12 by its standard error of 0.04. Inverting the ratio gives 0.33, which is incorrect. A t-value of 3 suggests the slope is significantly different from zero.
- A3.00Correct
- B0.33
- C0.48
- D4.80
Explanation
t = coefficient ÷ standard error = 0.12 ÷ 0.04 = 3.00. The value 0.33 results from inverting the ratio. The value 0.48 results from multiplying 0.12 by 0.04 and not scaling, which is wrong operation.
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