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A financial analyst is examining the relationship between stock prices and earnings per share. She chooses sixteen publicly traded companies at random and records for each the company's current stock price and the company's earnings per share reported for the past 12 months. Her data are given below, with x denoting the earnings per share from the previous year, and y denoting the current stock price (both in dollars). Based on these data, she computes the least- squares regression line to be y=-0.199+0.044x. This line, along with a scatter plot of her data, is shown below. Earnings per share, x (in dollars) Current stock price, y (in dollars) 28.15 1.12 41.11 1.13 52.82 2.64 30.08 0.84 17.33 0.73 38.57 1.10 59.04 2.32 44.31 1.62 57.46 ** 2.74 x 48.62 1.77 30.02 1.31 20.16 0.77 32.32 1.52 Earnings per share (in dollars) 14.41 0.54 37.75 1.30 41.64 1.75 Send data to calculator Based on the analyst's data and regression line, answer the following. (a) From the regression equation, what is the predicted current stock price (in dollars) when the earnings per share is 14.41 dollars? Round your answer to two or more decimal places. ? 0 (b) What was the observed current stock price (in dollars) when the earnings per share was 14.41 dollars? Current stock price (In dollars) 05+ X

A financial analyst is examining the relationship between stock prices and earnings per share. She chooses sixteen publicly traded companies at random and records for each the company's current stock price and the company's earnings per share reported for the past 12 months. Her data are given below, with x denoting the earnings per share from the previous year, and y denoting the current stock price (both in dollars). Based on these data, she computes the least- squares regression line to be y=-0.199+0.044x. This line, along with a scatter plot of her data, is shown below. Earnings per share, x (in dollars) Current stock price, y (in dollars) 28.15 1.12 41.11 1.13 52.82 2.64 30.08 0.84 17.33 0.73 38.57 1.10 59.04 2.32 44.31 1.62 57.46 ** 2.74 x 48.62 1.77 30.02 1.31 20.16 0.77 32.32 1.52 Earnings per share (in dollars) 14.41 0.54 37.75 1.30 41.64 1.75 Send data to calculator Based on the analyst's data and regression line, answer the following. (a) From the regression equation, what is the predicted current stock price (in dollars) when the earnings per share is 14.41 dollars? Round your answer to two or more decimal places. ? 0 (b) What was the observed current stock price (in dollars) when the earnings per share was 14.41 dollars? Current stock price (In dollars) 05+ X

Linear Algebra: A Modern Introduction
Linear Algebra: A Modern Introduction
4th Edition
ISBN:9781285463247
Author:David Poole
Publisher:David Poole
Chapter7: Distance And Approximation
Section7.3: Least Squares Approximation
Problem 31EQ
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A financial analyst is examining the relationship between stock prices and earnings per share. She chooses sixteen publicly traded companies at random and records for each the company's current stock price and the company's earnings per share reported for the past 12 months. Her data are given below, with x denoting the earnings per share from the previous year, and y denoting the current stock price (both in dollars). Based on these data, she computes the least- squares regression line to be y = -0.199+0.044x. This line, along with a scatter plot of her data, is shown below. Earnings per share, x (in dollars) Current stock price, y (in dollars) 28.15 1.12 41.11 1.13 52.82 2.64 30.08 0.84 17.33 0.73 + + 38.57 1.10 59.04 2.32 44.31 1.62 57.46 2.74 + 48.62 1.77 30.02 1.31 20.16 0.77 32.32 1.52 Earnings per share 14.41 0.54 (in dollars) 37.75 1.30 41.64 1.75 Send data to calculator V Based on the analyst's data and regression line, answer the following. (a) From the regression equation, what is the predicted current stock price (in dollars) when the earnings per share is 14.41 dollars? Round your answer to two or more decimal places. 0 (b) What was the observed current stock price (in dollars) when the earnings per share was 14.41 dollars? 0 Current stock price (In dollars) +++ + ++ + + X S ?
Transcribed Image Text:A financial analyst is examining the relationship between stock prices and earnings per share. She chooses sixteen publicly traded companies at random and records for each the company's current stock price and the company's earnings per share reported for the past 12 months. Her data are given below, with x denoting the earnings per share from the previous year, and y denoting the current stock price (both in dollars). Based on these data, she computes the least- squares regression line to be y = -0.199+0.044x. This line, along with a scatter plot of her data, is shown below. Earnings per share, x (in dollars) Current stock price, y (in dollars) 28.15 1.12 41.11 1.13 52.82 2.64 30.08 0.84 17.33 0.73 + + 38.57 1.10 59.04 2.32 44.31 1.62 57.46 2.74 + 48.62 1.77 30.02 1.31 20.16 0.77 32.32 1.52 Earnings per share 14.41 0.54 (in dollars) 37.75 1.30 41.64 1.75 Send data to calculator V Based on the analyst's data and regression line, answer the following. (a) From the regression equation, what is the predicted current stock price (in dollars) when the earnings per share is 14.41 dollars? Round your answer to two or more decimal places. 0 (b) What was the observed current stock price (in dollars) when the earnings per share was 14.41 dollars? 0 Current stock price (In dollars) +++ + ++ + + X S ?
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