We are studying mutual bond funds for the purpose of investing in several funds

| August 30, 2017

Question
We are studying mutual bond funds for the purpose of investing in several funds. For this particular study,
we want to focus on the assets of a fund and its five-year performance. The question is: Can the fiveyear rate of return be estimated based on the assets of the fund? Nine mutual funds were selected at
random, and their assets and rates of return are shown below.
Fund
AARP High Quality Bond
Babson Bond L
Compass Capital Fixed Income
Galaxy Bond Retail
Keystone Custodian B-1

Assets
($ millions)
$622.2
160.4
275.7
433.2
437.9

Return
(%)
10.8
11.3
11.4
9.1
9.2

Fund
MFS Bond A
Nichols Income
T. Rowe Price Short-term
Thompson Income B

Assets
($ millions)
$494.5
158.3
681.0
241.3

b- Compute the coefficient of correlation. (Round your answer to 3 decimal places. Negative amount
1. should be indicated by a minus sign.)
r =

bCompute the coefficient of determination. (Round your answer to 3 decimal places.)
2.
r2 =

c. Give a description of the degree of association between the variables.
There is

association between the variables. ANSWER: VERY LITTLE
(Click to select)

d. Determine the regression equation. Use assets as the independent variable. (Round your answers
to 4 decimal places. Negative amounts should be indicated by a minus sign.)
b=

a=

e. For a fund with $400.0 million in sales, determine the five-year rate of return (in percent). (Round
your answer to 4 decimal places.)
=

The equation should be used with caution. Assets do not account for much of the

variation in the rate of return.

Return
(%)
11.6
9.5
8.2
6.8

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