Problem # 01:

a) Interpretation of number 64,100:

The number 64,100 is the y-intercept. It indicates that when the regional population is zero, per
capita income is zero, and the regional unemployment is zero, the monthly sales are $64,100.

b) Estimated Monthly Sales:

^y =64,100+ 0.394 X 1 +9.6 X 2−11,600 X 3

 X 1 =Regional Population=796,000
 X 2 =Per capita income=$ 694 0
 X 3 =unemployment rate=6 %

^y =64,100+ 0.394 ( 796,000 ) +9.6 ( 6,940 ) −11,600 ( 6 )=374,748

The estimated monthly sales are $ 374,748.

Problem # 02:
a) Estimated Index of Satisfaction:

^y =16.24 +0.017 X 1 +0.0028 X 2 + 42 X 3+ 0.0012 X 4 +0.19 X 5 +26.8 X 6

 X 1 =Age at thetime of first marriage=1 8

 X 2 =Annual Income=$ 26,50 0
 X 3 =Number of childrenliving=3
 X 4=Value of all assests=$ 156,00 0
 X 5 =Status of health=14 1
 X 6 = Average number of social activities per week=2. 5

^y =16.24 +0.017(18)+0.0028(26,500)+ 42(3)+ 0.0012(156,000)+ 0.19(141)+26.8(2.5)

^y =497,736
b)

Additional income of $ 10,000 increases the index of satisfaction by 0.0028(10,000) = 28. The two
social activities a week increase the index of satisfaction by 26.8(2) = 53.6. Therefore, two more
social activities a week add more to satisfaction.

Problem # 03:
a) Standard error of estimate:

SSE 583.693
SY .12=
√ n−(k +1) √
=
65−(2+1)
=√ 9.414=3.068

95 % of the residual will be between ± 6.136 found by 2(3.068).

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 b) Coefficient of multiple determination:

SSR 77.907
R 2= = =11.8
SStotal 661.6
The independent variables explain 11.8 % of the variation.

c) Adjusted coefficient of determination:

SSE 583.693
n−( k +1 ) 65− ( 2+1 ) 9.414
Radj 2=1− =1− =1− =1−0.911=0.089
SStotal 661.6 10.3375
n−1 65−1
Problem # 04:
a) Value of dependent variable:

^y =84.998+2.391 X 1+ 0.4086 X 2

^y =84.998+2.391 ( 4 ) +0.4086 ( 11 )=99.0566

b) How large is the sample:

The sample size is n = 65 and the number of independent variables are 2.

c) Global test of hypothesis:

Null Hypothesis:

H 0 : β 1=β 2=0

Alternative Hypothesis:

H 1 : Not all β ' sare 0

Reject Ho if F > 3.5

F = 4.14 therefore we reject the null hypothesis. Not all the net regression coefficients equal to zero.

d) Test of hypothesis:

For X1 For X2

H 0 : β 1=0 H 0 : β 2=0

H 1 : β 1≠ 0 H 1 : β 2≠ 0

t=1.99 t=2.38

Reject null hypothesis if t >2.0 or t<-2.0. Therefore, we delete the variable 1 and keep the variable 2.

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