CAIIB · Advanced Bank Management · Module A — Statistics
CAIIB ABM Unit 4 — Correlation and Regression: Free MCQs with Explanations
By Swarnakshi Jha (ex-banker) · Updated 29 October 2026 · Paper I of the December 2026 cycle (Sunday 6 December 2026)
This is the free practice page for CAIIB ABM Unit 4 — Correlation and Regression (Module A — Statistics). The CAIIB Mock Centre holds 139 questions on this unit alone, every one with a why-right / why-wrong explanation; below are the facts examiners keep returning to, five practice questions with explanations, and the traps that cost marks.
ABM · Module A139 MCQs in the Mock Centre5 free belowPaper on 6 December
Key facts examiners test from this unit
Two variables and the scatter diagram — correlation asks "how strongly are they related?"; regression asks "how much y for a given x?"; the scatter diagram shows both at a glance.
The coefficient of correlation — r = cov ÷ (σx σy), a unit-free number from −1 to +1 measuring a linear relationship.
Regression: the line of best fit — least squares gives ŷ = a + bx with b = cov ÷ σx² and a = ȳ − b x̄; the line passes through (x̄, ȳ).
5 free practice questions — tap an option
Five practice questions from this unit. Answers lock on the first tap, exactly as in the exam, and an explanation opens underneath. The Mock Centre has all 139 questions on this unit, from easy to tough, with caselets and key-in numericals, why every other option is wrong and the exam tip — and tracks your score and revision dates.
Question 1 of 5
On a scatter diagram, where is the dependent variable usually plotted?
Why (c): The independent variable x goes along the horizontal axis and the dependent variable y, the one to be predicted, up the vertical axis. (a) is wrong: The choice of axis depends on the roles of the variables, not on the size of the numbers. (b) is wrong: The horizontal axis carries the independent variable. (d) is wrong: A scatter diagram plots both variables together as points.
Question 2 of 5
For the three values 2, 3 and 5, what are Σx² and (Σx)²?
Why (c): Σx² = 4 + 9 + 25 = 38 (square first, then add); (Σx)² = 10² = 100 (add first, then square). (a) is wrong: Squaring before and after adding give different results. (b) is wrong: It swaps the two quantities. (d) is wrong: 10 is Σx, not Σx².
Question 3 of 5
In the regression equation y = a + bx, what are b and a called?
Why (d): The textbook calls b the slope of the line (its sign shows the direction) and a the y-intercept, the point where the line crosses the y-axis. (a) is wrong: The standard error and covariance are separate measures. (b) is wrong: It swaps the two terms. (c) is wrong: B equals r only in special cases (equal standard deviations), and a is not ȳ unless b = 0 or x̄ = 0.
Question 4 of 5
Interpolation means estimating y for a value of x:
Why (b): Interpolation stays within the observed range of x, where the fitted line is supported by data; it is the safest use of a regression line. (a) is wrong: Estimating outside the range is extrapolation. (c) is wrong: X = 0 gives the intercept and may itself be an extrapolation. (d) is wrong: The mean of y is not a value of x.
Question 5 of 5
In what units is the standard error of estimate expressed?
Why (d): Se is built from the differences y − ŷ, so it is in the units of y: ₹ crore of imports in Example 4.4. (a) is wrong: Pure numbers are r and r²; Se has units. (b) is wrong: The errors are measured in y, not x. (c) is wrong: Units of x times units of y belong to the covariance.
0 of 5 answered.
Traps in this unit
A U-shape read as "no relationship".
Steep line taken as strong: strength is closeness, not slope.
"Dependent" read as "caused by".
Practise all 139 questions on Unit 4. The free CAIIB demo opens Units 1–2 of every paper with full explanations; the ABM Online Mock Centre unlocks all 4,600+ ABM questions, the full-length papers with caselets and key-ins, module mocks and Smart Revision for 18 months (₹1,499).
Independent study aid — not affiliated with, endorsed by, or sponsored by the Indian Institute of Banking & Finance (IIBF). Exam pattern, dates, fees and passing criteria are set by IIBF — always confirm the current rules at iibf.org.in. CAIIB content follows rules and developments up to IIBF's cut-off of 30 June 2026 (where a rule changed later, the update box says so); verify from official sources before relying on them in practice.