1. The Following data is given for the period 1999-2003 Interest rate Inflation i TT 1999 4.7 4.4 2000 4.6 5.4 2001 6.3 5.7 2002 4.8 4.6 2003 2.9 2.4 a. According to Fisher Equation “a rise in inflation also rises the nominal interest rate by the same amount". Construct a regression model by determining dependent and independent variables according to this theory. b. Obtain residuals of the regression. Calculate variance of the residuals and the standard errors of the parameters (note: use the table above for calculations, just write down the final results here). c. Test significance of the slope parameter (the parameter of the independent variable) at 5% significance level. Is it in line with the proposition? d. Evaluate the overall significance of the model with R² and F test

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