Reading 12: Multiple Regression and Issues in Regression A errors, standard, equation, following, class

mayanfang1

Q1. Consider the following estimated regression equation, with standard errors of the coefficients as indicated:

Sales_i = 10.0 + 1.25 R&D_i + 1.0 ADV_i − 2.0 COMP_i + 8.0 CAP_i

where the standard error for R&D is 0.45, the standard error for ADV is 2.2, the standard error for COMP 0.63, and the standard error for CAP is 2.5.

Sales are in millions of dollars. An analyst is given the following predictions on the independent variables: R&D = 5, ADV = 4, COMP = 10, and CAP = 40.

The predicted level of sales is closest to:

A)     $320.25 million.

B)     $310.25 million.

C)     $360.25 million.

Q2. Consider the following estimated regression equation, with calculated t-statistics of the estimates as indicated:

AUTOt = 10.0 + 1.25 PIt + 1.0 TEENt – 2.0 INSt

with a PI calculated t-statstic of 0.45, a TEEN calculated t-statstic of 2.2, and an INS calculated t-statstic of 0.63.

The equation was estimated over 40 companies. The predicted value of AUTO if PI is 4, TEEN is 0.30, and INS = 0.6 is closest to:

A)    14.10.

B)    14.90.

C)    17.50.

mayanfang1

答案和详解如下：

Q1. Consider the following estimated regression equation, with standard errors of the coefficients as indicated:

Sales_i = 10.0 + 1.25 R&D_i + 1.0 ADV_i − 2.0 COMP_i + 8.0 CAP_i

where the standard error for R&D is 0.45, the standard error for ADV is 2.2, the standard error for COMP 0.63, and the standard error for CAP is 2.5.

Sales are in millions of dollars. An analyst is given the following predictions on the independent variables: R&D = 5, ADV = 4, COMP = 10, and CAP = 40.

The predicted level of sales is closest to:

A)     $320.25 million.

B)     $310.25 million.

C)     $360.25 million.

Correct answer is A)

Predicted sales	= $10 + 1.25 (5) + 1.0 (4) −2.0 (10) + 8 (40)
	= 10 + 6.25 + 4 − 20 + 320 = $320.25

Q2. Consider the following estimated regression equation, with calculated t-statistics of the estimates as indicated:

AUTOt = 10.0 + 1.25 PIt + 1.0 TEENt – 2.0 INSt

with a PI calculated t-statstic of 0.45, a TEEN calculated t-statstic of 2.2, and an INS calculated t-statstic of 0.63.

The equation was estimated over 40 companies. The predicted value of AUTO if PI is 4, TEEN is 0.30, and INS = 0.6 is closest to:

A)    14.10.

B)    14.90.

C)    17.50.

Correct answer is A)

Predicted AUTO	= 10 + 1.25 (4) + 1.0 (0.30) – 2.0 (0.6)
	= 10 + 5 + 0.3 – 1.2
	= 14.10

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