We are studying mutual bond funds for the purpose of investing in several funds. For this particular study, we want to focus on the assets of a fund and its five-year performance. The question is: Can the five-year rate of return be estimated based on the assets of the fund? Nine mutual funds were selected at random, and their assets and rates of return are shown below.
a. Draw a scatter diagram.
b. Compute the correlation coefficient.
c. Write a brief report of your findings for parts (a) and (b).
d. Determine the regression equation. Use assets as the independent variable.
e. For a fund with $400.0 million in sales, determine the five-year rate of return (inpercent).
Solution:
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