Question

Investment analysts generally believe the interest rate on bonds is inversely related to the prime interest rate for loans; that is, bonds perform well when lending rates are down and perform poorly when interest rates are up. Use the following data to construct a 99% confidence interval for the average bond rate for a prime interest rate of 9%. Use s_ε = 2.045, and the equation of the regression line, y^ = 15.00 -0.718 x. Discuss the meaning of this confidence interval.

Bond Rate 
Prime Interest Rate5%15%12
69
814
377

Do not round the intermediate values. Round your answers to 2 decimal places.

Enter an appropriate value.  ≤ E(y₉) ≤ Enter an appropriate value.  
If the prime interest rate is 9%, we are 99% confident that the average bond rate is between Enter percentages.  % and Enter percentages. %.

Answer 1

3.24 ≤ E(y₉) ≤ 13.24.  
If the prime interest rate is 9%, we are 99% confident that the average bond rate is between 3.24% and 13.83%.