Use the following to answer the questions below.
The following is output from regression analysis performed to develop a model for predicting a firm's Price-Earnings Ratio (PE) based on Growth Rate, Profit Margin, and whether or not the firm is Green (1 = Yes, 0 = No).
-Which of the following is the correct interpretation for the regression coefficient of Green?
A) The regression coefficient indicates that the PE ratio of a firm that is green will, on average, be 2.09 points higher than a firm that is not green with the same profit growth rate and profit margin.
B) The regression coefficient indicates that the PE ratio of a firm that is green will, on average, be 2.09 points lower than a firm that is not green with the same profit growth rate and profit margin.
C) The regression coefficient indicates that the PE ratio of a firm that is green will, on average, be 2.09 times higher than a firm that is not green.
D) The regression coefficient indicates that the PE ratio of a firm that is green will, on average, be 2.09 times lower than a firm that is not green.
E) The regression coefficient is not significantly different from zero.

Question

Use the following to answer the questions below.
The following is output from regression analysis performed to develop a model for predicting a firm's Price-Earnings Ratio (PE) based on Growth Rate, Profit Margin, and whether or not the firm is Green (1 = Yes, 0 = No). 
-Which of the following is the correct interpretation for the regression coefficient of Green?
A) The regression coefficient indicates that the PE ratio of a firm that is green will, on average, be 2.09 points higher than a firm that is not green with the same profit growth rate and profit margin. 
B) The regression coefficient indicates that the PE ratio of a firm that is green will, on average, be 2.09 points lower than a firm that is not green with the same profit growth rate and profit margin. 
C) The regression coefficient indicates that the PE ratio of a firm that is green will, on average, be 2.09 times higher than a firm that is not green. 
D) The regression coefficient indicates that the PE ratio of a firm that is green will, on average, be 2.09 times lower than a firm that is not green. 
E) The regression coefficient is not significantly different from zero.

Quizplus · Accepted Answer

The regression coefficient for Green is 2.09, which means that a firm that is green will have, on average, a 2.09 points higher PE ratio than a firm that is not green with the same profit growth rate and profit margin.

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