The expense ratio of a mutual fund measures the percentage of the fund's assets used to pay
Question:
The expense ratio of a mutual fund measures the percentage of the fund's assets used to pay for annual administrative overhead. Funds with higher ratios spend more of the fund's return to operate the fund. A random selection of 16 stock mutual funds last year revealed the following data:
Expense Ratio, X | Total Return, Y |
0.62 1.21 1.03 0.67 0.40 1.12 0.78 0.47 0.75 0.92 0.57 0.95 0.20 1.00 1.25 1.03 | 34.3 33.0 31.4 30.8 32.9 27.6 30.3 31.9 33.8 27.9 32.6 24.3 36.3 31.7 29.9 34.7 |
Construct a scatter plot of the data.
Draw the least-squares line on the scatter plot.
Find the equation for the least-squares line of best fit.
Interpret the regression coefficients. Does expense hurt or help the fund❝s return?
Predict the total return for a stock fund with an expense ratio of 0.81%. What can you conclude?
Financial Markets and Institutions
ISBN: 978-0077861667
6th edition
Authors: Anthony Saunders , Marcia Cornett