Explain what is meant by heteroscedasticity. What effects does heteroscedasticity have on the results of a regression?
What will be an ideal response?
Heteroscedasticity occurs when the variance of the error term is no longer constant. The least squares estimates are no longer the most efficient estimates of the coefficients of the regression models, and the usual procedures for deriving confidence intervals and tests of hypotheses for these coefficients are no longer valid.
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Ivor borrowed $420,000 from Lear Bank. At Lear's request, Ivor entered into an agreement with Ash, Kane, and Queen for them to act as co-sureties on the loan. The agreement between Ivor and the co-sureties provided that the maximum liability of each co-surety was: Ash, $84,000; Kane, $126,000; and Queen, $210,000. After making several payments, Ivor defaulted on the loan. The balance was $280,000. If Queen pays $210,000 and Ivor subsequently pays $70,000, what amounts may Queen recover from Ash and Kane?
A. $0 from Ash and $0 from Kane. B. $42,000 from Ash and $63,000 from Kane. C. $70,000 from Ash and $70,000 from Kane. D. $56,000 from Ash and $84,000 from Kane.
In a business combination, a company assigns the cost, where possible, to the identifiable tangible and intangible assets, with the remainder recorded as goodwill.
a. true b. false