Student Name:_________________ Subject: Analysing Business Data (BUS1BAN)

Student ID:____________________ Workshop Day & Time:_____________

Test Your Knowledge – Study Session 10

These questioned are related to the contents available in videos / presentations / transcribed notes of
Study Session 10. You are required to ANSWER the followings in the space provided and SUBMIT your
answers to your workshop facilitator in face-to-face workshop - Study Session 10, as an evidence of pre-
workshop learning.

Question 1. Introduction to Simple Linear Regression.

(Note: This question is similar to Q3 of Test Your Knowledge 4)

A small-business owner wants to assess the effects of advertising on sales levels. The owner
collected paired observation data. Each pair consisted of monthly advertising expenditure and
monthly sales levels (in thousand dollars) which is reported in the table below.
Advert Sales
(X) (Y)

1 30
3 40
5 40
4 50
2 35
5 50
3 35
2 25

The scatter plot of the above data is presented below:

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 55
50
45
40
35
30
25
20
15
10
5
0
0 1 2 3 4 5 6
Advert

Recall, the least squares method produces a straight line drawn through the scatter of
points so that the sum of squared deviations between the points and the line is
minimised.

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Question 2: Introduction to Simple Linear Regression.

Consider the least squares regression equation you estimated in question 1 above. Predict
sales when the company spends $7,000 (x=7) on advertising.

ANSWER:

Question 3: Estimating a Simple Linear Regression Model using Microsoft Excel.

Consider the relationship between advertising expenditure and sales in the above questions.
Following the steps in video 10.2, we estimated the relationship between adverting expenditure
and sales. The excel output is reported below.

The regression model estimated is given below.

y= β0 + β1𝑥 + 𝜀

Use the regression output and answer the following:

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a. What is point estimator of the intercept? How do you interpret this value?
ANSWER:

b. What is point estimator of the slope coefficient?

ANSWER:

c. Write down equation of the least squares line.

d. Estimate 95% confidence interval of the slope coefficient and interpret it value.

ANSWSER:

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Question 4: Assessing the Regression Model (Coefficient of Determination,
Standard Error of Estimates and t-test for the Existence of a Linear Relationship).

Consider the excel output in question 3 above.

A. What is value of the standard error of estimate (Sε) in the regression? Interpret this value sing
the empirical rule.

ANSWER:

B. Identify the coefficient of determination in excel output and interpret your answer.

ANSWER:

C. What is standard error of the slope coefficient (𝑠𝛽̂1)?

ANSWER:

D. What is t-stat of slope coefficient?

ANSWR:

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Question 5: Assessing the Regression Model (Coefficient of Determination,
Standard Error of Estimates and t-test for the Existence of a Linear Relationship).

Consider the excel output in question 3 above.

A. Us the t-statistic approach to test for linear relationship between Y and X at 5% significance
level. Identify the test statistic in the regression output and show how it is calculated.

ANSWER:

Hypothesis:

Null Hypothesis: H0: ________________________________

Alternative Hypothesis: HA: ________________________________

Test-statistic:

Level of Significance: _______________________________

Critical value of test statistic: _______________________________

Decision Rule:

Decision:

Conclusion:

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B. Use is p-value approach to test of the existence of a linear relationship between a Y and X at 5%
significance level (use the regression table values rather than calculations).
Hypothesis:

Null Hypothesis: H0: ___________________________________

Alternative Hypothesis: HA: _____________________________________

p-value =

Decision Rule:

Decision:

Conclusion: