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Reading 11- LOS F (Part 2): : Q3

3Which of the following reports the correct value and interpretation of the R2 for this regression? The R2 is:

A)   0.048, indicating that the variability of industry sales explains about 4.8 percent of the variability of company sales.

B)   0.952, indicating the variability of company sales explains about 95.2 percent of the variability of industry sales.

C)   0.048, indicating that the variability of company sales explains about 4.8 percent of the variability of industry sales.

D)   0.952, indicating that the variability of industry sales explains about 95.2 percent of the variability of company sales.

The correct answer was D)

The R2 = (SST - SSE)/SST = (12,500 - 600.50)/12,500 = 0.952

The interpretation of this R2 is that 95.2% of the variation in company XYZ's sales is explained by the variation in tissue industry sales.

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