Group 3

Linear Regression and the CAPM Formula

Regression Formula: Regression Equation(y) = a + bx --> This is identical to the CAPM Formula!

Slope(b) = (NXY - (X)(Y)) / (NX - (X))

Intercept(a) = (Y - b(X)) / N

where

x and y are the variables

b = The slope of the regression line

a = The intercept point of the regression line and the y axis.

N = Number of values or elements

X = First Score

Y = Second Score

XY = Sum of the product of first and Second Scores

X = Sum of First Scores

Y = Sum of Second Scores

X = Sum of square First Scores

Question 1. Complete the table to calculate the componets of the Regression Formula.

Solve for X*Y and X*X by using Excel Formulas. (1 point)

Sum of the Values

Question 2. Compute each of the given values from the completed table in Question 1.

Solve for each component using Excel Formulas. (1 point)

X

Y

XY

X²

Question 3. Solve for Slope(b)

Slope(b) = (NXY - (X)(Y)) / (NX - (X))

Use Excel Formulas ( 3 points)

Question 4. Solve for Intercept(a)

(Y - b(X)) / N

Use Excel Formulas ( 3 points)

Question 5. Create the Regression Equation and solve the equation given an X Value of 35.

Regression Equation(y) = a + bx

Use Excel Formulas (2 points)