Returns on common stocks in the United States and overseas appear to be growing more closely correlated as various countries' economies become more interdependent. Suppose that the following population regression line connects the total annual returns $($in percent$)$ on two indexes of stock prices:

Mean overseas return$=0\mathrm{.}30+0\mathrm{.}12\backslash$times U$.$S$.$ Return

Mean overseas return

$=$

$$

$0\mathrm{.}30$

$+$

$0\mathrm{.}12$

$\backslash$times

U$.$S$.$ Return

$($a$)$ What is $0$

$$

$0$

in this line? Give your answer to two decimal places.

$0$

$$

$0$

$=$

What does the value for $0$

$$

$0$

say about overseas returns when the U$.$S$.$ market is flat $(0\%$ return$)?$

$($

$0$

$\%$

return$)?$

When the U$.$S$.$ market is flat,

the mean overseas return is predicted to be reduced by $0\mathrm{.}30.$

$0\mathrm{.}30$

$.$

the mean overseas return is predicted to be $0\mathrm{.}12.$

$0\mathrm{.}12$

$.$

the mean overseas return is predicted to be flat.

the mean overseas return is predicted to be $0\mathrm{.}30.$

$$

$0\mathrm{.}30$

$.$

$($b$)$ What is $1$

$$

$1$

in this line? Provide your answer with precision to two decimal places.

$1$

$$

$1$

$=$

What does the value for $1$

$$

$1$

say about the relationship between U$.$S$.$ and overseas returns?

For each unit increase in the mean overseas return, the U$.$S$.$ return will increase by $0\mathrm{.}12.$

by

$0\mathrm{.}12$

$.$

For each unit increase in the U$.$S$.$ return, the mean overseas return will decrease by $0\mathrm{.}18.$

by

$0\mathrm{.}18$

$.$

For each unit increase in U$.$S$.$ return, the mean overseas return will increase by $0\mathrm{.}12.$

by

$0\mathrm{.}12$

$.$

For each unit increase in U$.$S$.$ return, the mean overseas return will decrease by $0\mathrm{.}12.$

by

$0\mathrm{.}12$

$.$

For each decrease of $0\mathrm{.}30$

$0\mathrm{.}30$

in the mean overseas return, the U$.$S$.$ return will decrease by one unit.

$($c$)$ We know that overseas returns will vary in years that have the same return on U$.$S$.$ common stocks.

Select the regression model based on the population regression line provided.

Overseas return$=0+1\backslash$times U$.$S$.$ return

Overseas return

$=$

$$

$0$

$+$

$$

$1$

$\backslash$times

U$.$S$.$ return

Overseas return$=1\backslash$times U$.$S$.$ return$+$

Overseas return

$=$

$$

$1$

$\backslash$times

U$.$S$.$ return

$+$

$$

Overseas return$=0+1\backslash$times U$.$S$.$ return$+$

Overseas return

$=$

$$

$0$

$+$

$$

$1$

$\backslash$times

U$.$S$.$ return

$+$

$$

Overseas return$=0+1\backslash$times mean U$.$S$.$ return

Overseas return

$=$

$$

$0$

$+$

$$

$1$

$\backslash$times

mean U$.$S$.$ return

What part of this model allows overseas returns to vary when U$.$S$.$ returns remain the same?

The term $1$

$$

$1$

The terms $0$

$$

$0$

and $$

$$

The term $$

$$

The term $0$

$$

$0$