invic

Paul Frank is an analyst for the retail industry. He is examining the role of television viewing by teenagers on the sales of accessory stores. He gathered data and estimated the following regression of sales (in millions of dollars) on the number of hours watched by teenagers (in hours per week):

Salest = 1.05 + 1.6 TVt

Which of the following is the most accurate interpretation of the estimated results? If TV watching:

A) goes up by one hour per week, sales of accessories increase by $1.60.

B) goes up by one hour per week, sales of accessories increase by $1.6 million.

C) changes, no change in sales is expected.

---

The interpretation of the slope coefficient is the change in the dependent variable (sales in millions of dollars) for a given one-unit change in the independent variable (TV hours per week). The intercept of 1.05 means that 1.05 million dollars worth of accessories is expected to be sold even if TV watching is zero.

invic

In the estimated regression equation Y = 0.78 - 1.5 X, which of the following is least accurate when interpreting the slope coefficient?

A) If the value of X is zero, the value of Y will be -1.5.

B) The dependent variable increases by 1.5 units if X decreases by 1 unit.

C) The dependent variable declines by -1.5 units if X increases by 1 unit.

---

The slope represents the change in the dependent variable for a one-unit change in the independent variable. If the value of X is zero, the value of Y will be equal to the intercept, in this case, 0.78.

invic

A regression between the returns on a stock and its industry index gives the following results:

	Coefficient	Standard Error
Intercept	2.1	2.01
Industry Index	1.9	0.31

• Standard error of estimate = 15.1
• Correlation coefficient = 0.849

If the return on the industry index is 4%, the stock’s expected return would be:

A) 7.6%.

B) 11.2%.

C) 9.7%.

---

Y = b0 + bX1
Y = 2.1 + 1.9(4) = 9.7%

---

The percentage of the variation in the stock return explained by the variation in the industry index return is closest to:

A) 84.9%.

B) 63.2%.

C) 72.1%.

---

The coefficient of determination, R2, is the square the correlation coefficient. 0.8492 = 0.721.