Answer-first summary for fast verification
Answer: 4.4%
## Explanation To calculate the predicted earnings growth for the current quarter, we use the regression equation: \[ \text{EarnGrowth}_t = \text{Intercept} + \beta_1 \times \text{EarnGrowth}_{t-1} + \beta_4 \times \text{EarnGrowth}_{t-4} \] Given: - Intercept = 0.025 - β₁ (EarnGrowth_{t-1}) = -0.320 - β₄ (EarnGrowth_{t-4}) = 0.850 - EarnGrowth_{t-1} = 2% = 0.02 - EarnGrowth_{t-4} = 3% = 0.03 Calculation: \[ \text{Predicted EarnGrowth}_t = 0.025 + (-0.320 \times 0.02) + (0.850 \times 0.03) \] \[ = 0.025 + (-0.0064) + 0.0255 \] \[ = 0.025 - 0.0064 + 0.0255 \] \[ = 0.0441 \] \[ = 4.41\% \] This is closest to **4.4%** (Option B).
Author: LeetQuiz Editorial Team
Ultimate access to all questions.
The coefficient estimates and t-statistics are as follows:
| Coefficient | t-Statistic |
|---|---|
| Intercept | 0.025 |
| EarnGrowth_{t-1} | -0.320 |
| EarnGrowth_{t-4} | 0.850 |
If the earnings growth was 2% in the most recent quarter and 3% four quarters ago, the predicted earnings growth for the current quarter is closest to:
A
3.2%
B
4.4%
C
5.1%
No comments yet.