Question: Diet Partners charges its clients a small management fee plus a percentage of gains whenever portfolio returns are positive. Cleo Smith believes that strong incentives

Diet Partners charges its clients a small management fee plus a percentage of gains whenever returns are positive. Cleo Smith believes that strong incentives for managers produce superior returns for clients. In order to demonstrate this, Smith runs a regression with the Diet Partners' return (in percent) as the dependent variable and its management fee (in percent) as the independent variable. The estimated regression for a 60-month period is
RETURN = - 3.021 + 7.062 (FEE)
...............(- 7.28)........ (14.95)
The calculated t-values are given in parentheses below the intercept and slope coefficients.
The coefficient of determination for the regression model is 0.794.
A. What is the predicted RETURN if FEE is 0 percent? If FEE is 1 percent?
B. Using a two-tailed test, is the relationship between RETURN and FEE significant at the 5 percent level?
C. Would Smith be justified in concluding that high fees are good for clients?

Step by Step Solution

★★★★★

3.36 Rating (162 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

A If FEE 0 RETURN 3021 70620 3021 If FEE 1 RETURN 3021 70621 4041 B The calculated tvalue for the co... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

1455-M-S-L-R(9624).docx

120 KBs Word File

Students Have Also Explored These Related Statistics Questions!

Nutri-Jenny is a weight-management center. It produces a wide variety of frozen entrées for consumption by its clients. The entrées are strictly monitored for nutritional content to...

A researcher interested in the effectiveness of organized diet groups on weight loss weighed five clients after several weeks on the program. The weight-loss scores (in pounds) we as follows:...

A diet center claims that it has the most effective weight loss program in the region. Its advertisements say, Participants in our program lose more than 5 pounds within a month. Six clients of this...

Question 1 - Using information in the question 5 from below please answer - researchers typically specify the alternative hypothesis to align with the expected outcome from the test, so rejection of...

Assignment: Lecture08 Simple Linear Regression 1. Industry automobile sales should be related to consumer sentiment. The following table provides a regression analysis in which sales of automobiles...

Diet Partners charges its clients a small management fee plus a percentage of gains whenever portfolio returns are positive. Cleo Smith believes that strong incentives for portfolio managers produce...

please write a brief interpretation of the slope coefficient in this model Diet Partners charges its clients a small management fee plus a percentage of gains when- ever portfolio returns are...

Diet Partners charges its clients a small management fee plus a percentage of gains when- ever portfolio returns are positive. cleo Smith believes that strong incentives for portfolio managers...

Diet Partners charges its clients a small management fee plus a percentage of gains when- ever portfolio returns are positive. Cleo Smith believes that strong incentives for portfolio managers...

I need help to answer these questions below that are based on the case "Larry Puglia and the T. Rowe Price Blue Chip Growth Fund" 1. How well has the Blue Chip Growth Fund performed in recent years?...

For the function k , find the y intercept. 5. 3 2. -1 -2 -3 -4 -5 -54 -3 -2 -1 0 1 23 4 5

Parent Ltd acquired 55% of the shares of Subsidiary Ltd in the beginning of the year for $550,000. All identifiable assets and liabilities of Subsidiary Ltd are recorded at fair value on this date...

in october market analysts predict that the price of platium, a precious. metal will fall in november. What happens in the platium market in october, holding everything constant

c. Telling Santa what you want for Christmas makes sense in terms of utility maximization.

1. Consider the following raw data, which is the result of selecting a random sample of 20 condominium sales in a particular development. The sale prices are given in thousands of dollars ($1,000s)....

A contract dispute between the National Football League and the Players Association arose regarding the retirement system. The NFL agreed to a settlement only if it could be shown convincingly that...

Bill Smith is the Worthington Township manager. When citizens request a traffic light, the staff assesses the traffic flow at the requested intersection. Township policy requires the installation of...

Jim Short's Company makes clothing for schools. Sales in 2010 were $4,000,000. Assets were as follows: Cash($100,000), Accounts receivables($800,000) Inventory($400,000) Net equipment($500,000) Total...

Valerie would like to invest a certain amount of money for three years and considers investing in a one-year bond that pays 3 percent. Valerie would then like to buy a second one-year bond that is...

Question #1. Miss Bunz deposited $5,000 into a tax-free account that was earning 2.75% compounded monthly.One year later, she made a second deposit into the account of $3,500.How much will she have...