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Year Stocks Bonds 1985 12.8 100.8 1986 34.6 161.8 1987 28.6 1988 23.8 1989 8.4 1990 17.2 1991 50.6 1992 97 87.1 1993 151.6 1994 133.6 72 1995 140.8...

How is the flow of investors’ money into stock mutual funds related to the flow of moneyinto bond mutual funds? Here are data on the net new money flowing into stock and bondmutual funds in the years 1985 to 2000, in billions of dollars. ‘Net’ means that funds flowingout are subtracted from those flowing in. If more money leaves than arrives, the net flowwill be negative. To eliminate the effect of inflation, all dollar amounts are in ‘real dollars’with constant buying power equal to that of a dollar in the year 2000.(a) Make a scatterplot with cash flow into stock funds as the explanatory variable. Findthe least-squares line for predicting net bond investments from net stock investments.What do the data suggest?(b) Is there statistically significant evidence that there is some straight-line relationshipbetween the flows of cash into bond funds and stock funds? (State hypotheses, give atest statistic with observed value and its P-value, and state your conclusion.)

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