Investment analysts generally believe the interest rate on bonds are inversely related to the interest rate for loans; that is, bonds perform well when lending rates are down and perform poorly when interest rates are up.
Can the bond rate be predicted by the interest rate? Make the Bond rate the Dependent variable and Prime the independent variable.
a) Use the following data to construct a scatter graph and then fit a regression line to the data. Report the regression formula and the squared value from the chart (rightclick on the line, select Add Trendlineand select options to show these metrics).
| Bond rate (%) |
Prime interest rate (%) |
| 5 |
16 |
| 12 |
6 |
| 9 |
8 |
| 15 |
4 |
| 7 |
7 |