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Financial Risk Manager Part 1

Financial Risk Manager Part 1

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In a study involving 400 different companies, the relationship between total corporate earnings (YiY_iYi​) and the average tenure of experience for each worker (XiX_iXi​) is modeled using the following regression equation: Yi=β1+β2∗Xi+ϵiY_i = \beta_1 + \beta_2 * X_i + \epsilon_iYi​=β1​+β2​∗Xi​+ϵi​ where iii ranges from 1 to 400. The goal of the research is to test the joint null hypothesis that both β1=0\beta_1 = 0β1​=0 and β2=0\beta_2 = 0β2​=0 at a 95% confidence level. The p-value derived from the t-statistic for β1\beta_1β1​ is 0.07, the p-value for the t-statistic for β2\beta_2β2​ is 0.06, and the p-value from the F-statistic for the overall model is 0.045.

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