Financial Risk Manager Part 1
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Using data from a pool of mortgage borrowers, a credit risk analyst performed an ordinary least squares regression of annual savings (in GBP) against annual household income (in GBP) and obtained the following relationship:
Annual Savings = 0.24 × Household Income − 25.66, R² = 0.50
Assuming that all coefficients are statistically significant, which interpretation of this result is correct?
A
For this sample data, the average error term is GBP -25.66.
B
For a household with no income, annual savings is GBP 0.
C
For an increase of GBP 1,000 in income, expected annual savings will increase by GBP 240.
D
For a decrease of GBP 2,000 in income, expected annual savings will increase by GBP 480.