Question 3

I need help with this question and need to know how to do solving in Excel. The questions is Investment analysts generally believe the interest rate on bonds is related to the prime interest rate for loans.

a) Use the following data to construct a scatter graph and then fit a regression line to the data. Report the regression formula and the r-squared value from the chart (right click on the data points, select Add Trend line and select Options to show these metrics).

b) Do you think the bond rate can be predicted by the prime interest rate? Justify your answer using the relevant metrics.

Prime interest rate

Bond rate

0.05

0.28

0.12

0.38

0.09

0.22

0.015

0.14

0.004

0.05

0.11

0.44

0.06

0.28

0.02

0.105

I need to know how to explain the solution as to reference the metrics and proper terminology and figures and charts.