Reading 11- LOS E (Part 2): Q5 following, class, percentage, research, between

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5.Sera Smith, a research analyst, had a hunch that there was a relationship between the percentage change in a firm’s number of salespeople and the percentage change in the firm’s sales during the following period. Smith ran a regression analysis on a sample of 50 firms, which resulted in a slope of 0.72, an intercept of +0.01, and an R-squared value of 0.65. Based on this analysis, if a firm made no changes in the number of sales people, what percentage change in the firm’s sales during the following period does the regression model predict?

A)   +1.00%.

B)   +0.72%.

C)   +0.65%.

D)   +0.10%.

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The correct answer was A)

The slope of the regression represents the linear relationship between the independent variable (the percent change in sales people) and the dependent variable, while the intercept represents the predicted value of the dependent variable if the independent variable is equal to zero. In this case, the percentage change in sales is equal to: 0.72(0) + 0.01 = +0.01.