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

AUTO_t = 10.0 + 1.25 PI_t + 1.0 TEEN_t – 2.0 INS_t

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)   17.50.

C)   5.10.

D)   14.90.

2.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)   $310.25 million.

B)   $360.25 million.

C)   $300.25 million.

D)   $320.25 million.

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

AUTO_t = 10.0 + 1.25 PI_t + 1.0 TEEN_t – 2.0 INS_t

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)   17.50.

C)   5.10.

D)   14.90.

The correct answer was A)

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

2.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)   $310.25 million.

B)   $360.25 million.

C)   $300.25 million.

D)   $320.25 million.

The correct answer was D)

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