# Question: An analyst believes that the only important determinant of banks

An analyst believes that the only important determinant of banks' returns on assets (Y) is the ratio of loans to deposits (X). For a random sample of 20 banks, the sample regression line

y = 0.97 + 0.47x

was obtained with coefficient of determination 0.720.

a. Find the sample correlation between returns on assets and the ratio of loans to deposits.

b. Test against a two-sided alternative at the 5% significance level the null hypothesis of no linear association between the returns and the ratio.

y = 0.97 + 0.47x

was obtained with coefficient of determination 0.720.

a. Find the sample correlation between returns on assets and the ratio of loans to deposits.

b. Test against a two-sided alternative at the 5% significance level the null hypothesis of no linear association between the returns and the ratio.

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