Bus Stats Ch14 PDF

Exam Chapter 14
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
1) A scatterplot can help determine if two variables are related in some systematic way. T or F
Answer: True False
2) Each point in the scatterplot represents one observed value for one variable. T or F
Answer: True False
3) Covariance can be used to determine if the linear relationship between two variables is T or F
positive or negative.
Answer: True False
4) The correlation coefficient could be considered as a "standardized covariance." T or F

Answer: True False
5) The correlation coefficient can only range between 0 and 1. T or F

Answer: True False
6) Compared to the sample correlation coefficient, the sample covariance is a better measure T or F
to gauge the strength of the linear relationship between two variables.
Answer: True False
7) The sample correlation coefficient cannot equal zero. T or F

Answer: True False
8) Another name for an explanatory variable is the dependent variable. T or F

Answer: True False
9) Simple linear regression includes more than one explanatory variable. T or F

Answer: True False
10) The simple linear regression model can be written in the form y = β0 + β1x1 + β2x2 + ε. T or F
Answer: True False
11) In the simple linear regression model, β0 is the y-intercept of the line y = β0 + β1x + ε. T or F
Answer: True False
12) The value 0.75 of a sample correlation coefficient indicates a stronger linear relationship T or F
than that of 0.60.
Answer: True False
Exam Chapter 14 pg-1

13) The value 0.35 of a sample correlation coefficient indicates a weaker linear relationship T or F
than that of –0.40.
Answer: True False
14) The value −0.75 of a sample correlation coefficient indicates a stronger linear relationship than that T or F
of 0.60.
Answer: True False
15) In testing the population correlation coefficient, the alternative hypothesis is HA: ρxy ≠ 1. T or F
Answer: True False
16) The positive square root of the coefficient of determination in simple linear regression is T or F
always equal to the correlation coefficient.
Answer: True False
17) If two linear regression models have the same number of explanatory variables, a model T or F
with an R2 value of 0.45 is a better prediction model than a model with an R2 value of
0.65.
Answer: True False
SHORT ANSWER. Write the word or phrase that best completes each statement or answers the
question.
18) The correlation coefficient captures only a ________ relationship. 18)

Answer: linear
19) ________ correlation can make two variables appear closely related when no 19)
casual relation exists.
Answer: Spurious
20) The actual value y may differ from the expected value E(y). Therefore, we add 20)
a(n) ________ ________ term ε to develop a simple linear regression model.
Answer: random error
21) With regression analysis, we explicitly assume that one variable, called the 21)
________ variable, is influenced by other variable, called the explanatory
variable.
Answer: response
22) The relationship between the response variable and the explanatory variables is 22)
________ if the value of the response variable is uniquely determined by the
explanatory variables.
Answer: deterministic
Exam Chapter 14 pg.-2

23) The ________ regression model allows us to study how the response variable is 23)
influenced by two or more explanatory variables.
Answer: multiple
24) The numerical measure that gauges dispersion from the sample regression 24)
equation is the sample ________ of the residual.
Answer: variance
25) We use ________ to derive the coefficient of determination. 25)

Answer: analysis of variance (ANOVA)
26) If ________ is substantially greater than zero and the number of explanatory 26)
variables is large compared with sample size, then the adjusted R2 will differ
substantially from R2.
Answer: error sum of squares (SSE)
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the
question.
27) Which of the following identifies the range for a correlation coefficient? 27)
A) Any value less than 1. B) Any value greater than 0.
C) Any value between 0 and 1. D) None of these choices is correct.
Answer: D
28) A correlation coefficient r = −0.85 could indicate a ________. 28)

A) very weak positive linear relationship
B) very strong negative linear relationship
C) very weak negative linear relationship
D) very strong positive linear relationship
Answer: B

29) The following scatterplot indicates that the relationship between the two variables x and 29)
y is ________.
A) strong and positive B) strong and negative

C) weak and negative D) no relationship
Answer: A
30) The following scatterplot indicates that the relationship between the two variables x and 30)
y is ________.
A) weak and positive B) strong and positive

C) strong and negative D) no relationship
Answer: C
31) Which of the following statements is the least accurate concerning correlation analysis? 31)
A) Correlation does not imply causation.
B) The correlation coefficient captures only a linear relationship.
C) The correlation coefficient may not be a reliable measure when outliers are present
in one or the both of the variables.
D) The correlation coefficient describes both the direction and strength of the
relationship between two variables only if the two variables have the same units of
measurement.
Answer: D

32) When testing whether the correlation coefficient differs from zero, the value of the test 32)
statistic is t20 = 1.95 with a corresponding p-value of 0.0653. At the 5% significance
level, can you conclude that the correlation coefficient differs from zero?
A) Yes, since the p-value exceeds 0.05.
B) Yes, since the test statistic value of 1.95 exceeds 0.05.
C) No, since the p-value exceeds 0.05.
D) No, since the test statistic value of 1.95 exceeds 0.05.
Answer: C
33) When testing whether the correlation coefficient differs from zero, the value of the test 33)
statistic is t20 = –2.95 with a corresponding p-value of 0.0061. At the 5% significance
level, can you conclude that the correlation coefficient differs from zero?
A) Yes, since the p-value is less than 0.05.
B) Yes, since the absolute value of the test statistic exceeds 0.05.
C) No, since the p-value is less than 0.05.
D) No, since the absolute value of the test statistic exceeds 0.05.
Answer: A
34) The sample standard deviations for x and y are 10 and 15, respectively. The covariance 34)
between x and y is −120. The correlation coefficient between x and y is ________.
A) −0.8 B) −0.5 C) 0.5 D) 0.8
Answer: A
35) The variance of the rates of return is 0.25 for stock X and 0.01 for stock Y. The 35)
covariance between the returns of X and Y is -0.01. The correlation of the rates of
return between X and Y is ________.
A) –0.25 B) –0.20 C) 0.20 D) 0.25
Answer: B
36) Simple linear regression analysis differs from multiple regression analysis in that 36)
________.
A) simple linear regression uses only one explanatory variable
B) the coefficient of correlation is meaningless in simple linear regression
C) goodness-of-fit measures cannot be calculated with simple linear regression
D) the coefficient of determination is always higher in simple linear regression
Answer: A
37) A regression equation was estimated as = –100 + 0.5x. If x = 20,the predicted value of 37)
y is ________.
A) −80 B) −90 C) 110 D) 120
Answer: B

38) A regression equation was estimated as = 155 – 34x1 – 12x2. If x1 = 3 and x2 = 2, the 38)
predicted value of y would be ________.
A) 29 B) 77 C) 233 D) 281
Answer: A
39) What is the name of the variable that is used to predict another variable? 39)
A) Response B) Explanatory
C) Coefficient of determination D) Standard error of the estimate
Answer: B
40) Consider the following simple linear regression model: y = β0 + β1x + ε. The response 40)
variable is ________.
A) y B) x C) ε D) β0
Answer: A
41) Consider the following simple linear regression model: y = β0 + β1x + ε. The 41)
explanatory variable is ________.
Answer: B
42) Consider the following simple linear regression model: y = β0 + β1x + ε. The random 42)
error term is ________.
Answer: C
43) Consider the following simple linear regression model: y = β0 + β1x + ε. β0 and β1 are 43)
________.
A) the response variables B) the random error terms
C) the unknown parameters D) the explanatory variables
Answer: C
44) In the sample regression equation = b0 + b1x What is ? 44)

A) The y-intercept
B) The slope of the equation
C) The value of y when x = 0
D) The predicted value of y, given a specific x value
Answer: D

45) Consider the following data: = 20, sx = 2, = –5, sy = 4, and b1 = –0.8. The sample 45)
correlation coefficient, rxy is equal to ________.
A) −0.40 B) −0.20 C) 0.20 D) 0.40
Answer: A
46) Consider the following data: = 20, sx = 2, = –5, sy = 4, and b1 = –0.8. Which of the 46)
following is the sample regression equation?
A) B)
C) D)
Answer: C
47) Consider the following data: = 20, sx = 2, = –5, sy = 4, and b1 = 0.40. The sample 47)
correlation coefficient, rxy is equal to ________.
A) −0.40 B) −0.20 C) 0.20 D) 0.40
Answer: C
48) Consider the following data: = 20, sx = 2, = –5, sy = 4, and b1 = 0.40. Which of the 48)
following is the sample regression equation?
A) B)
C) D)
Answer: B
49) Given the augmented Phillips model: y = β0 + β1x1 + β2x2 + ε, where y = actual rate of 49)
inflation (%), x1 = unemployment rate (%), and x2 = anticipated inflation rate (%). The
response variable or variables(s) in this model is (are) the ________.
A) unemployment rate
B) actual inflation rate
C) anticipated inflation rate
D) unemployment rate and anticipated inflation rate
Answer: B

50) Given the augmented Phillips model: 50)
Given the augmented Phillips model: y = β0 + β1x1 + β2x2 + ε, where y = actual rate of
inflation (%), x1 = unemployment rate (%), and x2 = anticipated inflation rate (%). The
response variable or variables(s) in this model is (are) the ________.
A) unemployment rate
B) actual inflation rate
C) anticipated inflation rate
D) unemployment rate and anticipated inflation rate
Answer: D
51) The capital asset pricing model is given by R – R F = α + β(RM – Rf) + ε, where RM = 51)
expected return on the market, Rf = risk-free market return, and R = expected return on
a stock or portfolio of interest. The response variable in this model is ________.
A) R B) R – Rf C) RM D) RM – Rf
Answer: B
52) The capital asset pricing model is given by R – R F = α + β(RM – Rf) + ε, where RM = 52)
expected return on the market, Rf = risk-free market return, and R = expected return on
a stock or portfolio of interest. The explanatory variable in this model is ________.
A) R B) R – R f C) RM D) RM – Rf
Answer: D
53) Consider the sample regression equation = 10 – 5x, with an R2 value of 0.65. Which 53)
of the following is the value of the sample correlation between y and ?
A) −0.81 B) −0.65 C) 0.81 D) 0.65
Answer: A
54) Consider the sample regression equation 100 + 10x, with an R2 value of 0.81. 54)
Which of the following is the value of the sample correlation between y and ?
A) −0.90 B) −0.81 C) 0.81 D) 0.90
Answer: D
55) In a simple linear regression model, if the plots on a scatter diagram lie on a straight 55)
line, which of the following is the standard error of the estimate?
A) -1 B) 0 C) +1 D) Infinity
Answer: B

56) In a simple linear regression model, if the plots on a scatter diagram lie on a straight 56)
line, which of the following is the coefficient of determination?
A) -1 B) 0 C) +1 D) Infinity
Answer: C
57) Calculate the value of R2 given the ANOVA portion of the following regression output: 57)
Source of variance SS df MS F p-value

Regression 2,562 1 2,562 6.58 0.0145
Residual 14,395 37 389
Total 16,957 38
A) 0.151 B) 0.515 C) 0.849 D) 1.000

Answer: A
58) Which of the following is not true of the standard error of the estimate? 58)
A) It can take on negative values.
B) Theoretically, its value has no predefined upper limit.
C) It is a measure of the accuracy of the regression model.
D) It is based on the squared deviations between the actual and predicted values of
the response variable.
Answer: A
59) The standard error of the estimate measures ________. 59)

A) the variability of the explanatory variables.
B) the variability of the values of the sample regression coefficients.
C) the variability of the observed y-values around the predicted y-values.
D) the variability of the predicted y-values around the mean of the observed y-values.
Answer: C
60) The standard error of the estimate measures ________. 60)

A) the standard deviation of the residuals.
B) the standard deviation of the response variable.
C) the standard deviation of the explanatory variable.
D) the standard deviation of the correlation coefficient.
Answer: A

61) Consider the sample regression equation = 12 + 3x1 – 5x2 + 7x3 – 2x4. When x1 61)
increases by 1 unit and x2 increases by 2 units, while x3 and x4 remain unchanged, what
change would you expect in the predicted y?
A) Decrease by 2 B) Decrease by 4
C) Decrease by 7 D) No change in predicted y
Answer: C
62) Consider the sample regression equation: = 12 + 2x1 – 6x2 + 6x3 + 2x4. When x1 62)
increases 1 unit and x2 increases 2 units, while x3 and x4 remain unchanged, what
change would you expect in the predicted y?
A) Decrease by 2 B) Decrease by 10
C) Increase by 2 D) No change in the predicted y
Answer: B
63) The R2 of a multiple regression of y on x1 and x2 measures the ________. 63)

A) percent variability of y that is explained by the variability of x1
B) percent variability of y that is explained by the variability of x2
C) statistical significance of the coefficients in the regression equation
D) percent variability of y that is explained by the variability of x1 and x2
Answer: D
64) Unlike the coefficient of determination, the coefficient of correlation in a simple linear 64)
regression ________.
A) can never have an absolute value greater than 1
B) measures the percentage of variation explained by the regression line
C) indicates whether the slope of the regression line is positive or negative
D) measures the strength of association between the two variables more exactly
Answer: C
65) A simple linear regression of the return of firm A (RA) on the return of firm B (RB) 65)
based on 18 observations, is = 2.2 + 0.4 R B. If the coefficient of determination
from this regression is 0.09, calculate the correlation between nR A and .
A) 0.03 B) 0.04 C) 0.09 D) 0.30
Answer: D

66) When two regression models applied on the same data set have the same response 66)
variable but a different number of explanatory variables, the model that would evidently
provide the better fit is the one with a ________.
A) lower standard error of the estimate and a higher coefficient of determination
B) higher standard error of the estimate and a higher coefficient of determination
C) higher coefficient of determination and a lower adjusted coefficient of
determination
D) lower standard error of the estimate and a higher adjusted coefficient of
determination
Answer: D
67) The coefficient of determination R2 is ________. 67)

A) sometimes negative B) always lower than adjusted R2
C) usually higher than adjusted R2 D) always equal to adjusted R2
Answer: C
68) Using the same data set, four models are estimated using the same response variable, however,
68)
the number of explanatory variables differs. Which of the following models provides the best
fit?
Model 1 Model 2 Model 3 Model 4

Multiple R 0.993 0.991 0.936 0.746
R Square 0.987 0.982 0.877 0.557
Adjusted R Square 0.982 0.978 0.849 0.513
Standard Error 4,043 4,463 11,615 20,878
Observations 12 12 12 12
A) Model 1 B) Model 2 C) Model 3 D) Model 4

Answer: A
69) In the estimation of a multiple regression model with two explanatory variables and 20 69)
observations, SSE = 550 and SST = 1000. Which of the following is the correct value of
R 2?
A) 0.10 B) 0.45 C) 0.55 D) 0.90
Answer: B
70) In the estimation of a multiple regression model with two explanatory variables and 20 70)
observations, SSE = 550 and SST = 1,000. The value of adjusted R2 is the closest to
________.
A) 0.39 B) 0.45 C) 0.55 D) 0.61
Answer: A

71) In the estimation of a multiple regression model with four explanatory variables and 25 71)
observations, SSE = 660 and SST = 1,000. Which of the following is the correct value
of R2?
A) 0.16 B) 0.34 C) 0.66 D) 0.84
Answer: B
72) In the estimation of a multiple regression model with four explanatory variables and 25 72)
observations, SSE = 660 and SST = 1,000.The value of adjusted R2 is the closest to
________.
A) 0.21 B) 0.34 C) 0.66 D) 0.79
Answer: A
73) Over the past 30 years, the sample standard deviations of the rates of return for stock X 73)
and Stock Y were 0.20 and 0.12, respectively. The sample covariance between the
returns of X and Y is 0.0096. The correlation of the rates of return between X and Y is
the closest to ________.
A) 0.20 B) 0.24 C) 0.36 D) 0.40
Answer: D
returns of X and Y is 0.0096. To determine whether the correlation coefficient is
significantly different from zero, the appropriate hypotheses are: ________.
A) B)
C) D)
Answer: B
returns of X and Y is 0.0096. When testing whether the correlation coefficient differs
from zero, the value of the test statistic is t 28 = 2.31. At the 5% significance level, the
critical value is t0.025,28 = 2.048. The conclusion to the hypothesis test is to ________.
A) to reject H0; we can conclude that the correlation coefficient differs from zero.
B) to reject H0; we cannot conclude that the correlation coefficient differs from zero.
C) do not reject H0; we can conclude that the correlation coefficient differs from
zero.
D) do not reject H0; we cannot conclude that the correlation coefficient differs from
zero.
Answer: A

76) A statistics student is asked to estimate y = β0 + β1x + ε. She calculates the following 76)
values: = 440, ,
= 1,120, n = 11. The value of the slope b1 is ________.
A) −1.29 B) −0.51 C) 0.51 D) 1.29
Answer: A
values: = 440, ,
= 1,120, n = 11. Which of the following is the sample
regression equation?
A) B)
C) D)
Answer: C
values: = 440, ,
= 1,120, n = 11. Which of the following is the value of y if x
equals 2?
A) 6.62 B) 11.78 C) 58.22 D) 63.38
Answer: C
79) Consider the following sample regression equation = 150 – 20x, where y is the 79)
demand for Product A (in 1,000s) and x is the price of the product (in $). The slope
coefficient indicates that if ________.
A) the price of Product A increases by $1, then on average, demand decreases by 20
B) the price of Product A increases by $1, then on average, demand increases by 20
C) the price of Product A increases by $1, then on average, demand decreases by
20,000
D) the price of Product A increases by $1, then on average, demand increases by
20,000
Answer: C
demand for Product A (in 1,000s) and x is the price of the product (in $). If the price of
Product A is $5, then we expect demand to be ________.
A) 50 B) 500 C) 5,000 D) 50,000
Answer: D

demand for Product A (in 1,000s) and x is the price of the product (in $). If the price of
the good increases by $3, then we expect demand for Product A to ________.
A) increase by 60 B) decrease by 60
C) decrease by 60,000 D) increase by 60,000
Answer: C
82) Consider the following sample regression equation = 200 + 10x, where y is the supply 82)
for Product A (in 1000s)(in 1,000s) and x is the price of Product A (in $). The slope
coefficient indicates that if ________.
A) the price of Product A increases by $1, then on average, supply decreases by 10
B) the price of Product A increases by $1, then on average, supply increases by 10
C) the price of Product A increases by $1, then on average, supply decreases by
10,000
D) the price of Product A increases by $1, then on average, supply increases by
10,000
Answer: D
for Product A (in 1000s)(in 1,000s) and x is the price of Product A (in $). If the price of
Product A is $5, then we expect supply to be ________.
A) 250 B) 2,500 C) 25,000 D) 250,000.
Answer: D
for Product A (in 1000s)(in 1,000s) and x is the price of Product A (in $). If the price of
Product A increases by $3, then we expect the supply for Product A to ________.
A) increase by 30. B) decrease by 30.
C) increase by 30,000. D) decrease by 30,000.
Answer: C

85) An marketing analyst wants to examine the relationship between sales (in $1,000s) and 85)
advertising (in $100s) for firms in the food and beverage industry and collects monthly data for
25 firms. He estimates the model:
Sales= β0 + β1 Advertising + ε. The following ANOVA table below shows a portion of the
regression results.
df SS MS F
Regression 1 78.53 78.53 3.58
Residual 23 504.02 21.91
Total 24 582.55
Coefficients Standard Error t-stat p-value
Intercept 40.1 14.08 2.848 0.0052
Advertising 2.88 1.52 -1.895 0.0608
Which of the following is the prediction of Sales for a firm with Advertising of $500?
A) $1,480 B) $40,100 C) $54,500 D) $148,000
Answer: C
Sales = β0 + β1 Advertising + ε. The following ANOVA table below shows a portion of the
regression results.
df SS MS F
Regression 1 78.53 78.53 3.58
Residual 23 504.02 21.91
Total 24 582.55
Intercept 40.1 14.08 2.848 0.0052
Advertising 2.88 1.52 -1.895 0.0608
Which of the following is true?

A) If Advertising goes up by $100, then on average, Sales go up by $2,880.
B) If Sales go up by $100, then on average, Advertising goes up by $2,880.
C) If Advertising goes up by $100, then on average, Sales go up by $4,298.
D) If Sales go up by $100, then on average, Advertising goes up by $4,298.
Answer: A

regression results.
df SS MS F
Regression 1 78.53 78.53 3.58
Residual 23 504.02 21.91
Total 24 582.55
Intercept 40.1 14.08 2.848 0.0052
Advertising 2.88 1.52 -1.895 0.0608
Which of the following is the standard error of the estimate?

A) 4.68 B) 8.86 C) 21.91 D) 78.53
Answer: A
regression results.
df SS MS F
Regression 1 78.53 78.53 3.58
Residual 23 504.02 21.91
Total 24 582.55
Intercept 40.1 14.08 2.848 0.0052
Advertising 2.88 1.52 -1.895 0.0608
Which of the following is the coefficient of determination?

A) 0.1348 B) 0.1558 C) 0.8442 D) 0.8652
Answer: A

89) A manager at a local bank analyzed the relationship between monthly salary (y, in $) 89)
and length of service (x, measured in months) for 30 employees. She estimates the
model:
Salary = β0 + β1 Advertising + ε. The following ANOVA table below shows a portion of the
regression results.
df SS MS F
Regression 1 555,420 555,420 7.64
Residual 27 1,962,873 72,699
Total 28 2,518,293
Intercept 784.92 322.25 2.44 0.02
Service 9.19 3.20 2.87 0.01
Which of the following is the monthly salary of an employee that has worked for 48 months at
the bank?
A) $441. B) $785. C) $1,050. D) $1,226.
Answer: D
model:
regression results.
df SS MS F
Regression 1 555,420 555,420 7.64
Residual 27 1,962,873 72,699
Total 28 2,518,293
Intercept 784.92 322.25 2.44 0.02
Service 9.19 3.20 2.87 0.01

A) 3.20 B) 269.63 C) 322.25 D) 72699
Answer: B

model:
regression results.
df SS MS F
Regression 1 555,420 555,420 7.64
Residual 27 1,962,873 72,699
Total 28 2,518,293
Intercept 784.92 322.25 2.44 0.02
Service 9.19 3.20 2.87 0.01
The coefficient of determination indicates that ________.

A) 22.06% of the variation in Salary is explained by the variation in Service
B) 22.06% of the variation in Service is explained by the variation in Salary
C) 81.61% of the variation in Salary is explained by the variation in Service
D) 81.61% of the variation in Service is explained by the variation in Salary
Answer: A
model:
regression results.
df SS MS F
Regression 1 555,420 555,420 7.64
Residual 27 1,962,873 72,699
Total 28 2,518,293
Intercept 784.92 322.25 2.44 0.02
Service 9.19 3.20 2.87 0.01
How much of the variation in Salary is unexplained by the model?

A) 1% B) 2% C) 18.39% D) 77.94%
Answer: D

93) Assume you ran a multiple regression to gain a better understanding of the relationship 93)
between lumber sales, housing starts, and commercial construction. The regression uses
lumber sales (in $100,000s) as the response variable with housing starts (in 1000s)(in
1,000s) and commercial construction (in 1000s)(in 1,000s) as the explanatory variables.
The estimated model is Lumber Sales = β0 + β1 Housing Starts + β2 Commercial
Constructions + ε. The following ANOVA table summarizes a portion of the regression
results.
df SS MS F
Regression 2 180,770 90,385 103.3
Residual 45 39,375 875
Total 47 220,145
Intercept 5.37 1.71 3.14 0.003
Housing Starts 0.76 0.09 8.44 0
Commercial Construction 1.25 0.33 3.78 0.0005
If Housing Starts were 17,000 and Commercial Construction was 3,200, the best
estimate of Lumber Sales would be ________.
A) $16,920,000 B) $16,925,370 C) $22,014,000 D) $22,290,000
Answer: D

1,000s) and commercial construction (in 1000s)(in 1,000s) as the explanatory
variables. The estimated model is Lumber Sales = β0 + β1 Housing Starts + β2
Commercial Constructions + ε. The following ANOVA table summarizes a portion of the
regression results.
df SS MS F
Regression 2 180,770 90,385 103.3
Residual 45 39,375 875
Total 47 220,145
Intercept 5.37 1.71 3.14 0.003
The explanatory variables (Housing Starts and Commercial Construction) together

explained approximately ________% of the variations in the response variable (Lumber
Sales).
A) 18 B) 22 C) 78 D) 82
Answer: D

1,000s) and commercial construction (in 1000s)(in 1,000s) as the explanatory variables.
The estimated model is Lumber Sales = β0 + β1 Housing Starts + β2 Commercial
Constructions + ε. The following ANOVA table summarizes a portion of the regression
results.
df SS MS F
Regression 2 180,770 90,385 103.3
Residual 45 39,375 875
Total 47 220,145
Intercept 5.37 1.71 3.14 0.003
The standard deviation of the difference between actual lumber sales and the estimate of those
sales is ________.
A) 29.58 B) 48 C) 103.3 D) 875
Answer: A

96) An real estate analyst believes that the three main factors that influence an apartment's 96)
rent in a college town are the number of bedrooms, the number of bathrooms, and the
apartment's square footage. For 40 apartments, she collects data on the rent (y, in $), the
number of bedrooms (x1), the number of bathrooms (x2), and its square footage (x3).
She estimates the following model as Rent = β0 + β1 Bedroom + β2 Bath + β3 Sqft + ε.
The following ANOVA table shows a portion of the regression results.
df SS MS F
Regression 3 5,694,717 1,898,239 50.88
Residual 36 1,343,176 37,310
Total 39 7,037,893
Intercept 300 84.0 3.57 0.001
Bedroom 226 60.3 3.75 0.0006
Bath 89 55.9 1.59 0.1195
Sq ft 0.2 0.09 2.22 0.0276
Which of the following would be the rent for a 1,000-square-foot apartment that has two
bedrooms and two bathrooms?
A) $840 B) $1,130 C) $1,260 D) $1,335
Answer: B

df SS MS F
Regression 3 5,694,717 1,898,239 50.88
Residual 36 1,343,176 37,310
Total 39 7,037,893
Intercept 300 84.0 3.57 0.001
Bedroom 226 60.3 3.75 0.0006
Bath 89 55.9 1.59 0.1195
Sq ft 0.2 0.09 2.22 0.0276
The slope coefficient attached to Bedroom indicates that, holding other explanatory
variables constant, ________.
A) an additional bedroom increases rent, on average, by $226
B) an additional bedroom increases rent, on average, by $526
C) an additional $226 in rent will lead to an additional bedroom
D) an additional $526 in rent will lead to an additional bedroom
Answer: A

She estimates the following model as Rent = β0 + β1 Bedroom + β2 Bath + β3 Sq ft + ε.
df SS MS F
Regression 3 5,694,717 1,898,239 50.88
Residual 36 1,343,176 37,310
Total 39 7,037,893
Intercept 300 84.0 3.57 0.001
Bedroom 226 60.3 3.75 0.0006
Bath 89 55.9 1.59 0.1195
Sq ft 0.2 0.09 2.22 0.0276

A) 19.08% of the variation in Rent is explained by the variation in the explanatory
variables
B) 19.08% of the variation in the explanatory variables is explained by the variation
in Rent
C) 80.92% of the variation in Rent is explained by the variation in the explanatory
variables
D) 80.92% of the variation in the explanatory variables is explained by the variation
in Rent
Answer: C

df SS MS F
Regression 3 5,694,717 1,898,239 50.88
Residual 36 1,343,176 37,310
Total 39 7,037,893
Intercept 300 84.0 3.57 0.001
Bedroom 226 60.3 3.75 0.0006
Bath 89 55.9 1.59 0.1195
Sq ft 0.2 0.09 2.22 0.0276
The standard deviation of the difference between actual rent and the estimate of rent is
________.
A) 40 B) 50.88 C) 193 D) 37310
Answer: C
100) When estimating = b0 + b1x1 + b2x2, the following regression results using ANOVA 100)
were obtained.
df SS MS F
Regression 2 210.9 105.5 114.7
Residual 17 15.6 0.92
Total 19 226.5
Intercept −1.6 0.57 −2.77 0.0132
x1 −0.5 0.04 −15.11 2.77E-11
x2 0.1 0.07 1.89 0.0753
Which of the following is the prediction of if x1 = 1 and x2 = 2?

A) −1.9 B) −0.3 C) 1.3 D) 1.9
Answer: A

101) When estimating = β0 + β1x1 + β2x2 + ε, the following regression results using ANOVA
101)
were obtained.
df SS MS F
Regression 2 210.9 105.5 114.7
Residual 17 15.6 0.92
Total 19 226.5
Intercept −1.6 0.57 −2.77 0.0132
x1 −0.5 0.04 −15.11 2.77E-11
x2 0.1 0.07 1.89 0.0753
Which of the following is the coefficient of determination?

A) 0.07 B) 0.10 C) 0.90 D) 0.93
Answer: D
102) When estimating = β0 + β1x1 + β2x2 + ε, the following regression results using 102)
ANOVA were obtained.
df SS MS F
Regression 2 210.9 105.5 114.7
Residual 17 15.6 0.92
Total 19 226.5
Intercept −1.6 0.57 −2.77 0.0132
x1 −0.5 0.04 −15.11 2.77E-11
x2 0.1 0.07 1.89 0.0753

A) 0.82 B) 0.86 C) 0.92 D) 0.96
Answer: D

103) When estimating = β0 + β1x1 + β2x2 + ε, the following regression results using 103)
ANOVA were obtained.
df SS MS F
Regression 2 210.9 105.5 114.7
Residual 17 15.6 0.92
Total 19 226.5
Intercept −1.6 0.57 −2.77 0.0132
x1 −0.5 0.04 −15.11 2.77E-11
x2 0.1 0.07 1.89 0.0753
Which of the following is the adjusted R2?

A) 0.82 B) 0.86 C) 0.92 D) 0.96
Answer: C
104) A sociologist examines the relationship between the poverty rate and several 104)
socioeconomic factors. For the 50 states and the District of Columbia (n = 51), he
collects data on the poverty rate (y, in %), the percent of the population with at least a
high school education (x1), median income (x2, in $1000s), and the mortality rate per
1,000 residents (x3). He estimates the following model as = β0 + β1 Education + β2
Income + β3 Mortality + ε. The following ANOVA table shows a portion of the regression
results.
df SS MS F
Regression 3 417.3 139.1 94.6
Residual 47 69.1 ?
Total 50 486.4
Intercept 60.3 4.8 12.47 1.65E-16
Education −0.43 0.05 −7.78 5.45E-10
Income −0.20 0.03 −7.75 6.02E-10
Mortality 0.08 0.17 0.47 0.6438
What is the poverty rate for a state where 85% of the population has at least a high school
education, the median income is $50,000, and the mortality rate is 10 per 1,000 residents?
A) 12.6% B) 14.6% C) 16.6% D) 18.6%
Answer: B

1,000 residents (x3). He estimates the following model as y = β0 + β1 Education + β2
results.
df SS MS F
Regression 3 417.3 139.1 94.6
Residual 47 69.1 ?
Total 50 486.4
Intercept 60.3 4.8 12.47 1.65E-16
Education −0.43 0.05 −7.78 5.45E-10
Income −0.20 0.03 −7.75 6.02E-10
Mortality 0.08 0.17 0.47 0.6438

A) 14% of the variation in the poverty rate is explained by the regression model.
B) 14% of the variation in the regression model is explained by the variation in the
poverty rate.
C) 86% of the variation in the poverty rate is explained by the regression model.
D) 86% of the variation in the regression model is explained by the variation in the
poverty rate.
Answer: C

1,000 residents (x3). He estimates the following model as y = β0 + β1 Education + β2
results.
df SS MS F
Regression 3 417.3 139.1 94.6
Residual 47 69.1 ?
Total 50 486.4
Intercept 60.3 4.8 12.47 1.65E-16
Education −0.43 0.05 −7.78 5.45E-10
Income −0.20 0.03 −7.75 6.02E-10
Mortality 0.08 0.17 0.47 0.6438
Which of the following is the value of the mean square error, (MSE)?
A) 0 B) 1.5 C) 3.0 D) 4.5
Answer: B
107) The following table shows the number of cars sold last month by six dealers at Centreville 107)
Nissan dealership and their number of years of sales experience.
Years of Experience Sales

1 7
2 9
2 9
4 8
5 14
8 14
Management would like to use simple regression analysis to estimate monthly car sales using
the number of years of sales experience. The slope of the regression equation is equal to
________.
A) −3.33 B) 0.71 C) 1.00 D) 6.15
Answer: C


1 7
2 9
2 9
4 8
5 14
8 14
the number of years of sales experience. The coefficient of determination for this sample is
equal to ________.
A) 0.456 B) 0.519 C) 0.667 D) 0.712
Answer: D

1 7
2 9
2 9
4 8
5 14
8 14
the number of years of sales experience. The standard error of the estimate is equal to
________.
A) 1.84 B) 2.60 C) 2.84 D) 5.00
Answer: A

110) Costco sells paperback books in their retail stores and wanted to examine the relationship 110)
between price and demand. The price of a particular novel was adjusted each week and the
weekly sales were recorded in the following table.
Sales Price
7 $12
4 $11
5 $10
9 $9
8 $8
8 $7
7 $7
Management would like to use simple regression analysis to estimate weekly demand for this
novel using the price of the novel. The average weekly sales for the novel when priced
at $10 is equal to ________.
A) 4.60 B) 5.07 C) 6.45 D) 7.33
Answer: C
Sales Price
7 $12
4 $11
5 $10
9 $9
8 $8
8 $7
7 $7
novel using the price of the novel. The total sum of squares for this sample is equal to
________.
A) 18.86 B) 21.56 C) 22.86 D) 26.93
Answer: A

Sales Price
7 $12
4 $11
5 $10
9 $9
8 $8
8 $7
7 $7
novel using the price of the novel. The error sum of squares for this sample is equal to
________.
A) 10.19 B) 13.70 C) 16.61 D) 20.33
Answer: B
Sales Price
7 $12
4 $11
5 $10
9 $9
8 $8
8 $7
7 $7
novel using the price of the novel. The regression sum of squares for this sample is
equal to ________.
A) 4.17 B) 4.61 C) 5.16 D) 6.25
Answer: C

Sales Price
7 $12
4 $11
5 $10
9 $9
8 $8
8 $7
7 $7
novel using the price of the novel. The coefficient of determination for this sample is
equal to ________.
A) 0.273 B) 0.311 C) 0.392 D) 0.450
Answer: A
115) The following data for five years of the annual returns for two of Vanguard's mutual 115)
funds, the Vanguard Energy Fund (x) and the Vanguard Healthcare Fund (y), were
given as sx = 35.77, sy = 13.34, sxy = 447.68. Which of the following is the value of the
sample correlation coefficient?
A) 0.88 B) 0.94 C) 0.78 D) −0.78
Answer: B
given as sx = 35.77, sy = 13.34, sxy = 447.68. The competing hypotheses are
. Which of the following is the value of the test statistic?
A) 7.47 B) 5.74 C) 4.77 D) 4.27
Answer: C
. At the 5% significance level, which of the following is the
critical value of the test statistic?
A) 2.353 B) 2.571 C) 2.776 D) 3.182
Answer: D

. At the 5% significance level which of the following is the
correct conclusion to the test?
A) Reject H0 and conclude that the returns of these two mutual funds are correlated.
B) Reject H0 and conclude that the returns of these two mutual funds are not
correlated.
C) Do not reject and conclude that the returns of these two mutual funds are not
correlated.
D) Do not reject and conclude that the returns of these two mutual funds are
correlated.
Answer: A
119) Which of the following Excel's functions return the correlation coefficient? 119)
A) CORRELATION B) CORREL
C) CORREL.S D) COVARIANCE.S
Answer: B
120) Which of the following is a common approach to fitting a line to the scatterplot? 120)
A) Residual Sum of Squares. B) Error Least Squares.
C) Ordinary Least Squares. D) Regression Least Squares.
Answer: C
121) Which of the following is the relationship between the slope and correlation 121)
coefficient?
A) B)
C) D)
Answer: D

SHORT ANSWER. Write the word or phrase that best completes each statement or answers the
question.
122) Consider the following sample data.: 122)
x 3 13 9 6 20
y 50 83 20 80 160
a. Construct and interpret a scatterplot.

b. Calculate and interpret the sample covariance.
c. Calculate and interpret the sample correlation coefficient.
Answer: a. The scatterplot indicates that there is a positive linear relationship
between x and y.:
b. sxy = 270.10; positive linear relationship

c. sxy = 0.78; relatively strong positive linear relationship

123) A sample of 30 observations provides the following statistics: sx = 14;sy = 19; 123)
sxy = –150.
a. Calculate and interpret the sample correlation coefficient rxy.
b. Specify the hypotheses to determine whether or not x and y are significantly

correlated.
c. At the 5% significance level, what is the conclusion to the test using the critical-value
approach? Explain.
d. At the 5% significance level, what is the conclusion to the test using the p-value
approach? Explain.
Answer: a. rxy = –0.56; moderate negative linear relationship;
b.
c. t28 = –3.58; Reject H0 if t28 < –2.048 or t28 > 2.048. Conclusion:
variables are significantly correlated.
d. Using the t-table, the p-value < 0.005; Since the p-value < α = 0.05,
reject H0. Conclusion: variables are significantly correlated.

124) A statistics instructor wants to examine the relationship between the hours a student124)
spends studying for the final exam (Hours) and a student's grade on the final exam
(Grade). She takes a sample of five students.
Student x (Hours) y (Grade)

1 8 75
2 2 47
3 3 50
4 15 88
5 25 93
= 10.6 = 70.6
sx = 9.6 sy = 21.2 sxy = 186.8
a. Compute the sample correlation coefficient.
b. Specify the competing hypotheses in order to determine whether the hours spent
studying and the final grade are correlated.
c. Calculate the value of the test statistic and approximate the corresponding p-value.
d. At the 10% significance level, what is the conclusion to the test? Explain.
Answer: a. rxy = –0.92
b.
c. t3 = 4.07 using the t table; 0.02 < p-value < 0.05
d. Because the p-value < α = 0.10, we reject H0; we can conclude that the
hours spent studying and the final grade are correlated.

125) A portfolio manager is interested in reducing the risk of a particular portfolio by 125)
including assets that have little, if any, correlation. He wonders whether the stock prices
for the firms Apple and Google are correlated. As a very preliminary step, he collects
the monthly closing stock price for each firm from January 2012 to April 2012.
Month Apple Google

1 $428.58 $614.89
2 $497.57 $606.40
3 $577.51 $627.27
4 $606.00 $619.43
527 617
sx = 80.30 sy = 8.72 sxy = 410.11
a. Compute the sample correlation coefficient.
b. Specify the competing hypotheses in order to determine whether the stock prices are
correlated.
c. Calculate the value of the test statistic and approximate the corresponding p-value.
d. At the 5% significance level, what is the conclusion to the test? Explain.

Answer: a. rxy = 0.59
b.
c. t2 = 1.03 using the t table, the p-value > 0.20;

d. Because the p-value > α = 0.05, we do not reject H0; we cannot
conclude that the stock prices are significantly correlated. Including these
two stocks may increase the diversification effect; however, keep in mind
that this was a preliminary step and the test was based on a very small
sample.

126) Consider the following information regarding a response variable y and an 126)
explanatory variable x.
a. Calculate b0 and b1.
b. What is the sample regression equation? Predict y if x equals 10.
c. Calculate the standard error of the estimate.
d. Calculate and interpret the coefficient of determination.

Answer: a. b1 = –0.5, b0 = –1
b. = –1 – 0.5x, –6
c. se = 0.75
d. R2 = 0.93, 93% of the variation in y is explained by the variation in x.

127) Consider the following sample data: 127)
x 22 35 14 10
y 26 55 30 12
a. Construct a scatterplot.
b. Calculate b1 and b0. What is the sample regression equation?
c. Find the predicted value for y if x equals 10, 15, and 20.
Answer: a. The scatterplot indicates a positive linear relationship between x and y.
b. b1 = 1.50, b0 = 0375, = 0.375 + 1.50x

c. If x = 10, = 15.375; if x = 15, = 22.875; if x = 20, = 30.375

128) Consider the following sample data: 128)
x 12 23 11 20 14
y 20 12 17 13 18
a. Construct a scatterplot and verify that estimating a simple linear regression is

appropriate.
b. Calculate b0 and b1. What is the sample regression equation? Predict y if x
equals 15.
c. Interpret the value of the slope coefficient, b1.
d. Calculate and se.
e. Calculate R2.
Answer: a. The variables x and y appear to have a negative linear relationship.
b. b1 = –0.59, b0 = 25.44, = 25.44 – 0.59x

c. If x increases by 1 unit, then on average, y decreases by 0.59;
d. = 2.53, se = 1.59
e. R2 = 0.8350

129) John is an undergraduate business major studying at a local university. He 129)
wonders how his grade point average (GPA) can affect his future earnings. He
asks five recent business school graduates information on their GPA and income
(in $1,000s). The following table shows this information.
x: GPA 3 3.9 3.2 3.7 3.5

y: Income (in $1,000s) 39 58 36 45 48
a. Construct a scatterplot and verify that estimating a simple linear regression is

appropriate in this case.
b. Calculate b0 and b1. What is the sample regression equation?
c. Interpret the coefficient for GPA.
d. Find the predicted income earned if a GPA equals 3.0, 3.3, and 3.6.
Answer: a. Because GPA and Income appear to have a positive linear relationship,
the simple linear regression model is appropriate in this case.
b. b1 = 20.56, b0 = – 25.94, = – 25.94 + 20.56 GPA

c. For each 0.1 increase in GPA, income is expected to increase by $2,056.
d. If GPA = 3.0, = $35,740; if GPA = 3.3, = $41,910; if
GPA = 3.6, = $48,080

130) The following portion of regression results was obtained when estimating a simple 130)
linear regression model.
df SS MS F
Regression 1 725.56 725.56 751.68
Residual 23 22.2 B
Total 24 A
Intercept 80.3 2.08 38.68 1.95E-22
x -0.28 0.01 -27.42 4.54E-19
a. What is the sample regression equation?

b. Interpret the slope coefficient for x1.
c. Find the predicted value for y if x1 equals 200.
d. Fill in the missing values A and B in the ANOVA table.
e. Calculate the standard error of the estimate.
f. Calculate R2.
Answer: a.
b. As x1 increases by 1 unit, y is expected to decrease by 0.28
c.
d. A(SST) = 747.76, B(MSE) = 0.965
e.
f.
131) When estimating a multiple regression model, the following portion of output is 131)
obtained:
Coefficient Standard Error t-stat p-value

Intercept 10.66 6.78 1.57 0.1770
x1 2.53 0.40 6.30 0.0015
x2 0.29 0.18 1.68 0.1534

c. Find the predicted value for y if x1 equals 22 and x2 equals 41.
Answer: a.
b. As x1 increases by 1 unit, y is expected to increase by 2.53, holding x2
constant.
c.

132) The following ANOVA table was obtained when estimating a multiple regression 132)
model.
df SS MS F
Regression 2 699 349.5 116.5
Residual 17 52 3
Total 19 751
a. Calculate the standard error of the estimate.

b. Calculate the coefficient of determination.
c. Calculate adjusted R2.
Answer: a.
b.
c. Adjusted
133) The following portion of regression results was obtained when estimating a multiple133)
regression model.
df SS MS F
Regression A 8,693.11 4,346.56 375.16
Residual 22 254.89 C
Total 24 B
Intercept 257.74 22.82 11.29 1.27E-10
x1 −2.97 0.47 −6.31 2.37E-06
x2 0.23 0.24 0.96 0.3454

c. Find the predicted value for y if x1 equals 25 and x2 equals 50.
d. Fill in the missing values in the ANOVA table.
e. Calculate the standard error of the estimate.
f. Calculate R2.
Answer: a.
b. As x1 increases by 1 unit, y is expected to decrease by 2.97, holding x2
constant
c.
d. A = 2, B = 8948, C = 11.59
e. Se = 3.40
f. R2 = 0.97

134) A researcher analyzes the relationship between amusement park attendance and 134)
the price of admission. She estimates the following model:
, where Attendance is the daily attendance
(in 1000s) and Price is the gate price (in $). A portion of the regression results is shown
in the accompanying table.
df SS MS F
Regression 1 19,744.99 19,744.99 44.79
Residual 28 12,343.78 440.85
Total 29 32,088.78
Intercept 334.6 38.84 8.61 2.32E-09
Price −3.10 0.46 −6.69 2.90E-07
a. Predict the Attendance for an amusement park that charges $80 for admission.
b. Interpret the slope coefficient attached to Price.
c. Calculate the standard error of the estimate. If the sample mean for Attendance
75.9, what can you infer about the model's predictive power.
d. Calculate and interpret the coefficient of determination. How much of the variability
in Attendance is unexplained.
Answer: a. 86,600 people
b. If the Price goes up by $1, then on average Attendance decreases by 3,100
people
c. ; since , model may have some promise, but

typically a ratio of less than 0.20 provides evidence of a good model. More
assessing is necessary.
d. , 61.5% of the variation in Attendance is explained by the
variation in Price; this infers that 38.5% of the variability in Attendance
is unexplained.

135) An economist examines the relationship between the number of patent 135)
applications filed and expenditures in research and development (Ramp;D) for
the 50 states and the District of Columbia. She believes that if a state spends
more on research and development, then more patents will be filed. She
estimates the following model: , where Patents is
the number of patent applications filed and R&D is the state's expenditures on
research and development (in $1,000,000s). The regression results are shown in the
accompanying table.
df SS MS F
Regression 1 19,744.99 19,744.99 44.79
Residual 28 12,343.78 440.85
Total 29 32,088.78
Intercept 334.6 38.84 8.61 2.32E-09
R&D −3.10 0.46 −6.69 2.90E-07
a. Predict the number of patents filed for a state that spends $5,000,000 on R&D.
b. Interpret the coefficient attached to R&D.
d. Interpret the coefficient of determination.
Answer: a. 719 patents
b. If the R&d increases by $1,000,000, then on average, the number of patents
filed increase by approximately 59.
c.
d. , so 29.7% of the variation in Patents is explained by the
variation in R&D.

136) An investment analyst wants to examine the relationship between a mutual 136)
fund's return, its turnover rate, and its expense ratio. She randomly selects 10
mutual funds and estimates: ,
where Return is the average five-year return (in %), Turnover is the annual
holdings turnover (in %), Expense is the annual expense ratio (in %), and is the
random error component. A portion of the regression results is shown in the
accompanying table.
df SS MS F
Regression 2 93.33 46.67 4.9
Residual 7 66.69 9.53
Total 9 160.02
Intercept 30.6 4.3 7.12 0
Turnover 0.13 0.06 2.23 0.061
Expense 0.9 4.08 0.22 0.831
a. Predict the return for a mutual fund that has an annual holdings turnover of 60% and an
annual expense ratio of 1.5%.
b. Interpret the slope coefficient attached to Expense.
c. Calculate the standard error of the estimate. If the sample mean for Return is 34.7%,
what can you infer about the model's predictive power.
Answer: a. 39.75%
b. If the expense ratio goes up by 1%, then on average the return increases by
0.90%, holding the turnover rate constant.
c. ; since , so the model appears promising.

d. , 58% of the variation in Return is explained by the
variation in the explanatory variables.
137) Data was collected for 30 professional tennis players regarding their 137)
performance in Grand Slams (the four major tennis tournaments in the world).
The response variable Win, expressed as a proportion ranging from 0 to 1, is
believed to depend on two explanatory variables: the percentage of the Double
Faults and the number of Aces. The following model is estimated:
. A portion of the regression results
is shown in the accompanying table.
df SS MS F
Regression 2 1.24 0.62 41.85
Residual 27 0.40 0.015

Total 29 1.64
Intercept 0.451 0.08 5.646 5.40E-06
DoubleFaults −0.007 0.0024 −2.875 0.0078
Aces 0.015 0.003 4.65 7.80E-05
a. Predict the winning percentage for a player who had 20 double faults and five aces.
b. Interpret the slope coefficient attached to DoubleFaults.
c. Calculate the standard error of the estimate. If the sample mean for Win is 0.50, what
can you infer about the model's predictive power?
e. Calculate the adjusted R2.
Answer: a. 38.6%
b. If DoubleFaults go up by 1%, then on average, the winning proportion goes
down by 0.007, holding the number of Aces constant.
c. ; since , the model may have some

promise, but typically a ratio of less than 0.20 provides evidence of a good model.
More assessing is necessary.
d. , 76% of the variation in Win is explained by the variation in the
explanatory variables.
e. Adjusted

138) A manager at a ski resort in Vermont wanted to determine the effect that 138)
weather had on its sales of lift tickets. The manager of the resort collected data
over the last 20 years on the number of lift tickets sold during Christmas week
(y), the total snowfalls in inches (x1), and the average temperature in degrees
Fahrenheit (x2). The following model is estimated:
. A portion of the
regression results is shown in the accompanying table.
df SS MS F
Regression 2 32,516 16,250 6.49
Residual 17 42,539 2,502
Total 19 75,055
Intercept 8,308 903.7 9.19 0.0001
Snowfall 74.59 31.57 2.36 0.0305
Temperature −8.75 19.7 −0.44 0.6625
a. Predict the number of lift tickets sold if during Christmas week, the total snowfall was
25 inches and the average temperature was 35 degrees Fahrenheit.
b. Interpret the slope coefficient attached to Snowfall.
c. Calculate the standard deviation of the difference between the actual number of
tickets sold and the estimate of the number of tickets sold.
Answer: a. 9,867
b. If Snowfall increases by 1 inch, then on average, Sales of lift tickets increase
by approximately 75, holding Temperature constant.
c.
d. ; 43% of the variation in ticket Sales is explained by the variation
in the explanatory variables.
e. Adjusted

139) A sociologist studies the relationship between a district's average score on a 139)
standardized test for 10th-grade students (y), the average school expenditures
per student (x1 in $1,000s), and an index of the socioeconomic status of the
district (x2). The following model is estimated:
. A portion of the regression
results is shown in the accompanying table.
df SS MS F
Regression 2 840 420 21.47
Residual 23 450 19.57
Total 25 1,290
Intercept 10.16 11.9 0.85 0.4041
Expenditures 8.50 2.23 3.81 0.0009
Index 4.3 1.9 2.26 0.0336
a. Predict a district's average test score if average expenditures are $4,500 and the
district's social index is 8.
b. Interpret the slope coefficient attached to Expenditures.
Answer: a. 82.8
b. If Expenditures increase by $1,000, then on average, a district's test Score
increases by 8.5, holding the socioeconomic Index constant.
c.
d. ; 65% of the variation in test Scores is explained by the variation
in the explanatory variables.
e. Adjusted

140) An analyst examines the effect that various variables have on crop yield. He 140)
estimates the following model: , where y is
the average yield in bushels per acre, x1 is the amount of summer rainfall, x2 is
the average daily use in machine hours of tractors on the farm, and x3 is the
amount of fertilizer used per acre. A portion of the regression results is shown in the
accompanying table.
df SS MS F
Regression 3 12,000 4000 10
Residual 6 2,400 400
Total 9 14,400
Intercept 1.6 1 1.6 0.1232
x1 7.5 2.5 3 0.0064
x2 6 4 1.5 0.1472
x3 1 0.5 2 0.0574
a. Predict the crop yield per acre if x1 is 5, x2 is 4, and x3 is the 0.5.

b. Calculate the standard deviation of the difference between the actual crop yield and
the estimate of the crop yield.
c. How much of the variation in crop yield is unexplained by the model?
Answer: a. 63.6
b.
c. Approximately 17% is unexplained.

Answer Key
Testname: BUS_STATS_CH14
1) TRUE
Explanation: A scatterplot is a graphical tool that helps in determining whether two variables are related
in some systematic way.
ID: Bs2Jaggi 14-1
2) FALSE
Explanation: Each point represents a pair of observed values of two quantitative variables, typically
denoted by x and y.
ID: Bs2Jaggi 14-2
3) TRUE
Explanation: Covariance assesses whether a positive or a negative linear relationship exists between two
quantitative variables.
ID: Bs2Jaggi 14-3
4) TRUE
Explanation: The covariance ranges from-infinity to infinity. However, when it is divided by the product
of the standard deviations, the obtained correlation coefficient ranges between –1 and 1.
Therefore, this coefficient can be called the standardized covariance.
ID: Bs2Jaggi 14-4
5) FALSE
Explanation: The range of the sample correlation coefficient rxy is –1 ≤ rxy ≤ 1.
ID: Bs2Jaggi 14-5
6) FALSE
Explanation: The sample covariance only indicates only if a positive or negative relationship exists
between two variables, while the sample correlation coefficient is a good measure to access
the strength of the relationship.
ID: Bs2Jaggi 14-6
7) FALSE
ID: Bs2Jaggi 14-7
8) FALSE
Explanation: An explanatory variable is sometimes called the independent variable, predictor variable,
control variable, or regressor.
ID: Bs2Jaggi 14-8
9) FALSE
Explanation: A simple linear regression model uses one explanatory variable to explain the variability in
ID: Bs2Jaggi 14-9
10) FALSE
Explanation: The simple linear regression model is defined as y = β0 + β1x + ε.
ID: Bs2Jaggi 14-10
11) TRUE
Explanation: In the simple linear regression model, β0 is the y-intercept of the line y = β0 + β1x + ε.
ID: Bs2Jaggi 14-11
Exam Chapter 14 pg-1
Answer Key
12) TRUE
Explanation: As the absolute value of the sample correlation coefficient increases, the linear relationship
between x and y becomes stronger.
ID: Bs2Jaggi 14-12
13) TRUE
ID: Bs2Jaggi 14-13
14) TRUE
ID: Bs2Jaggi 14-14
15) FALSE
Explanation: A two-tailed test of whether the population correlation coefficient differs from zero takes
the following form H0: ρxy = 0, HA: ρxy ≠ 0.
ID: Bs2Jaggi 14-15
16) FALSE
Explanation: In a simple linear regression, the sample correlation between the response variable and its
predicted value is the positive square root of the coefficient of determination:
. The sign we select must be consistent with the existence of a positive or a

negative linear relationship between x and y. In other words, this sign must be the same as
the sign of the slope b1.
ID: Bs2Jaggi 14-16
17) FALSE
Explanation: Assuming that two regression models have the same number of explanatory variables, the
one with greater R2 value is stronger.
ID: Bs2Jaggi 14-17
18) linear
Explanation: Several limitations apply to correlation analysis. The correlation coefficient captures only a
linear relationship.
ID: Bs2Jaggi 14-18
19) Spurious
Explanation: Spurious correlation can make two variables appear closely related when no casual relation
exists. Spurious correlation between two variables is not based on any theoretical
relationships, but rather on a relation that arises in the data solely because each of the two
variables is related to some third variable.
ID: Bs2Jaggi 14-19

Answer Key
20) random error

Explanation: The actual value y may differ from the expected value E(y). Therefore, we add a random
error term ε to develop a simple linear regression model.
ID: Bs2Jaggi 14-20
21) response
Explanation: With regression analysis, we explicitly assume that one variable, called the response
variable, is influenced by other variable, called the explanatory variable.
ID: Bs2Jaggi 14-21
22) deterministic
Explanation: The relationship between the response variable and the explanatory variables is
deterministic if the value of the response variable is uniquely determined by the explanatory
variables; otherwise, the relationship is stochastic.
ID: Bs2Jaggi 14-22
23) multiple
Explanation: The multiple regression model allows to study how the response variable is influenced by
two or more explanatory variables.
ID: Bs2Jaggi 14-23
24) variance
Explanation: The numerical measure that gauges dispersion from the sample regression equation is the
sample variance of the residual S2e.
ID: Bs2Jaggi 14-24
25) analysis of variance (ANOVA)
Explanation: We use analysis of variance (ANOVA) to derive the coefficient of determination.
ID: Bs2Jaggi 14-25
26) error sum of squares (SSE)
Explanation: If SSE is substantially greater than zero and the number of explanatory variables is large
compared with sample size, then the adjusted R2 will differ substantially from R2.
ID: Bs2Jaggi 14-26
27) D
ID: Bs2Jaggi 14-27
28) B
Explanation: As the absolute value of the sample correlation coefficient approaches 1, the linear
relationship is said to be stronger.
ID: Bs2Jaggi 14-28
29) A
Explanation: If the observations are close to a line with a positive slope, the relationship between x and y
is strong and positive.
ID: Bs2Jaggi 14-29

Answer Key
30) C
Explanation: If the observations are close to a line with a negative slope, the relationship between x and y
is strong and negative.
ID: Bs2Jaggi 14-30
31) D
Explanation: The sample correlation coefficient is a unit-free measure.
ID: Bs2Jaggi 14-31
32) C
Explanation: Using the p-value approach, the decision rule is reject the null hypothesis H0: ρxy = 0 if the
p-value is less than the significance level α, do not reject the null hypothesis H0: ρxy = 0 if
the p-value is greater than the significance level α. To get p-value for two-tailed test the
Excel's function T.DIST.2T can be used.
ID: Bs2Jaggi 14-32
33) A
Explanation: Using the p-value approach, the decision rule is reject the null hypothesis H0: ρxy = 0 if the
p-value is less than the significance level α, do not reject the null hypothesis if the p-value
is greater than the significance level α. To get p-value for two-tailed test the Excel's
function T.DIST.2T can be used.
ID: Bs2Jaggi 14-33
34) A
Explanation: The correlation coefficient is computed as

ID: Bs2Jaggi 14-34
35) B
Explanation: If variances are given then the correlation coefficient is computed as

ID: Bs2Jaggi 14-35
36) A
Explanation: Simple linear regression analysis differs from multiple regression analysis since because it
uses only one explanatory variable.
ID: Bs2Jaggi 14-36
37) B
Explanation: The predicted value is computed using the regression equation = b0 + b1x, substituting x
value.
ID: Bs2Jaggi 14-37
38) A
Explanation: The predicted value is computed using the regression equation = b0 + b1x1 + b2x2,
substituting x1 and x2 values.
ID: Bs2Jaggi 14-38

Answer Key
39) B
Explanation: The information on the explanatory variables is used to predict and/or describe changes in
ID: Bs2Jaggi 14-39
40) A
Explanation: The simple linear regression model is defined as y = β0 + β1x + ε, where y and x are the
response variable and the explanatory variable, respectively, and ε is the random error term.
The coefficients β0 and β1 are the unknown parameters to be estimated.
ID: Bs2Jaggi 14-40
41) B
ID: Bs2Jaggi 14-41
42) C
ID: Bs2Jaggi 14-42
43) C
ID: Bs2Jaggi 14-43
44) D
Explanation: The sample regression equation or the predicted regression equation for a simple linear
regression model is denoted as = b0 + b1x, Where is the predicted value of the response
variable given a specified value of the explanatory variable x, b0 and b1 are the point
estimates of β0 and β1, respectively.
ID: Bs2Jaggi 14-44
45) A
Explanation: Given the estimated slope coefficient b1 and standard deviations sx and sy, the sample
correlation coefficient between x and y is computed as

ID: Bs2Jaggi 14-45
46) C
Explanation: The intercept b0 of the sample regression equation is computed as
ID: Bs2Jaggi 14-46

Answer Key
47) C
Explanation: Given the estimated slope coefficient β1 and standard deviations sx and sy, the sample
correlation coefficient between x and y is computed as

ID: Bs2Jaggi 14-47
48) B
Explanation: The intercept b0 of the sample regression equation is computed as
ID: Bs2Jaggi 14-48
49) B
Explanation: The multiple linear regression model is defined as y = β0 + β1x1 + β2x2 + ... + βkxk + ε,
where y is the response variable, x1,x2, ... , xk are the k explanatory variables, and ε is the
random error term. The coefficients β0, β1, β2, ... , βK are the unknown parameters to be
estimated.
ID: Bs2Jaggi 14-49
50) D
Explanation: The multiple linear regression model is defined as y = β0 + β1x1 + β2x2 + ... + βkxk + ε,
where y is the response variable, x1,x2, ... , xk are the k explanatory variables, and ε is the
random error term. The coefficients β0, β1, β2, ... , βk are the unknown parameters to be
estimated.
ID: Bs2Jaggi 14-50
51) B
Explanation: The simple linear regression model is defined as y = β0 + β1+ ε, where y and x are the
ID: Bs2Jaggi 14-51
52) D
Explanation: The simple linear regression model is defined as y = β0 + β1+ ε, where y and x are the
response variable and the explanatory variable, respectively, and is the random error term.
ID: Bs2Jaggi 14-52
53) A
Explanation: The sample correlation between the response variable y and its predicted value is the
square root of R2, that is, . Its sign is determined by the sign on the regression
coefficient b1.
ID: Bs2Jaggi 14-53

Answer Key
54) D
Explanation: The sample correlation between the response variable y and its predicted value is the
square root of R2, that is, Its sign is determined by the sign on the regression
coefficient b1.
ID: Bs2Jaggi 14-54
55) B
Explanation: The standard deviation of the residual se is referred to as the standard error of the estimate.
The less the dispersion, the smaller the se is, which implies a better fit to the model. If all
points fall on the line, then no dispersion occurs, so se equals zero. The value of se is
computed as
ID: Bs2Jaggi 14-55
56) C
Explanation: The coefficient of determination R2 is the proportion of the variation in the response
variable that is explained by sample regression equation, and it is computed as
The standard deviation of the residual se is referred to as the standard error
of the estimate. The value of se is computed as The less the

dispersion, the smaller the se is, which implies a better fit to the model. If all points fall on
the line, the an no dispersion occurs, so se equals zero.
ID: Bs2Jaggi 14-56
57) A
Explanation: The coefficient of determination R2 is the proportion of the variation in the response
variable that is explained by sample regression equation, and it is computed as
, where SSR is the regression sum of squares.

ID: Bs2Jaggi 14-57
58) A
Explanation: Theoretically, the standard error of the estimate can assume any value between zero and
infinity,
ID: Bs2Jaggi 14-58
59) C
Explanation: The standard error of the estimate se, is a point estimate of the standard deviation of the
random error which is the variability of the observed y-values around the predicted
y-values.
ID: Bs2Jaggi 14-59
60) A
Explanation: The standard error of the estimate, se, is a point estimate of the standard deviation of the
residuals.
ID: Bs2Jaggi 14-60
Answer Key
61) C
Explanation: In the multiple linear regression model the coefficients measure the change in the predicted
value of the response variable given a unit increases in the associated explanatory
variables, holding all other explanatory variables constant.
ID: Bs2Jaggi 14-61
62) B
Explanation: In the multiple linear regression model, the coefficients measure the change in the predicted
value of the response variable given a unit increases in the associated explanatory
variables, holding all other explanatory variables constant.
ID: Bs2Jaggi 14-62
63) D
Explanation: R2 quantifies the sample variability in the response variable y that is explained by changes
in the explanatory variable(s), that is, by sample regression equation. It is computed as the
ratio of the explained variation of the response variable to its total variation and expressed
in percentages.
ID: Bs2Jaggi 14-63
64) C
Explanation: The coefficient of correlation in a simple linear regression indicates whether the slope of
the regression line is positive or negative.
ID: Bs2Jaggi 14-64
65) D
Explanation: If the sign on the slope coefficient is positive, the sample correlation between the response
variable and its predicted value is the positive square root of the coefficient of
determination: .
ID: Bs2Jaggi 14-65
66) D
Explanation: If two models differ in the number of explanatory variables, the adjusted R2 is a better
goodness-of-fit measure than R2. The comparison of two models becomes straightforward
when one of them has a better (lower) se and a better (higher) adjusted R2. Unfortunately, it
may happen that one model has a better se but a worse adjusted R2.
ID: Bs2Jaggi 14-66
67) C
Explanation: The adjusted coefficient of determination is used to compare competing regression models
with different numbers of explanatory variables; the higher the adjusted R2, the better the
model. Usually the coefficient of determination is higher than adjusted coefficient of
determination.
ID: Bs2Jaggi 14-67

Answer Key
68) A
Explanation: The adjusted coefficient of determination is used to compare competing regression models
with different numbers of explanatory variables; the higher the adjusted R2, the better
model. Another criteria is the standard error: the lower it is, the better the model.
ID: Bs2Jaggi 14-68
69) B
Explanation: The coefficient of determination is computed as

ID: Bs2Jaggi 14-69
70) A
Explanation: The adjusted coefficient of determination is computed as: Adjusted
, where
ID: Bs2Jaggi 14-70
71) B
Explanation: The coefficient of determination is computed as .

ID: Bs2Jaggi 14-71
72) A
Explanation: The adjusted coefficient of determination is computed as: Adjusted
, where
ID: Bs2Jaggi 14-72
73) D
Explanation: The correlation coefficient is computed as

ID: Bs2Jaggi 14-73
74) B
Explanation: The competing hypotheses are .
ID: Bs2Jaggi 14-74
75) A
Explanation: Using critical value approach, the decision rule is:is to reject the null hypothesis if the test
statistic is greater than the critical value; do not reject the null hypothesis if the test statistic
is less than the critical value.
ID: Bs2Jaggi 14-75
76) A
Explanation: The slope b1 of the simple regression equation is computed as

ID: Bs2Jaggi 14-76

Answer Key
77) C
Explanation: The slope b1 and the intercept b0 of the simple regression equation are computed as
and The simple linear regression equation is

.
ID: Bs2Jaggi 14-77
78) C

.
ID: Bs2Jaggi 14-78
79) C
Explanation: The slope parameter b1 determines whether the linear relationship between x and is
positive (b1 > 0) or negative (b1 < 0).
ID: Bs2Jaggi 14-79
80) D
Explanation: Use the regression equation b0 + b1x with given coefficients and x to compute the
value of .
ID: Bs2Jaggi 14-80
81) C
Explanation: In the simple linear regression model the coefficient b1 measures the change in the
predicted value of the response variable given a unit increases in the associated
explanatory variable. Estimate the change.
ID: Bs2Jaggi 14-81
82) D
Explanation: The slope parameter b1 determines whether the linear relationship between x and is
positive (b1 > 0) or negative (b1 < 0).
ID: Bs2Jaggi 14-82
83) D
Explanation: Use the regression equation = b0 + b1x with given coefficients and x to compute the
value of .
ID: Bs2Jaggi 14-83
84) C
Explanation: In the simple linear regression model, the coefficient b1 measures the change in the
ID: Bs2Jaggi 14-84

Answer Key
85) C
value of .
ID: Bs2Jaggi 14-85
86) A
Explanation: In the simple linear regression model the coefficient b1 measures the change in the
ID: Bs2Jaggi 14-86
87) A
Explanation: The standard error of the estimate se is a point estimate of the standard deviation of the
random error ε, and is computed as , where MSE is the mean square error for
the residuals.
ID: Bs2Jaggi 14-87
88) A
Explanation: The coefficient of determination is the proportion of the variation in the response variable
that is explained by the sample regression equation, and it is computed as .

ID: Bs2Jaggi 14-88
89) D
value of .
ID: Bs2Jaggi 14-89
90) B
Explanation: The standard error of the estimate, se is a point estimate of the standard deviation of the
random error, ε, and is computed as , where MSE is the mean square error for
the residuals.
ID: Bs2Jaggi 14-90
91) A

ID: Bs2Jaggi 14-91
92) D
Explanation: The total variation in y can be decomposed into explained and unexplained variations, and
unexplained part can be computed as

ID: Bs2Jaggi 14-92

Answer Key
93) D
Explanation: Use the regression equation = b0 + b1x1 + b2x2 with given coefficients, x1 and x2, to
compute the value of .
ID: Bs2Jaggi 14-93
94) D
Explanation: The total variation in y can be decomposed into explained and unexplained variations, and
the explained part can be computed as the coefficient of determination

ID: Bs2Jaggi 14-94
95) A
Explanation: The standard error of the estimate, se is a point estimate of the standard deviation of a
random error, and it is computed as .
ID: Bs2Jaggi 14-95
96) B
Explanation: Use the regression equation = b0 + b1x1 + b2x2 + b3x3 with given coefficients and x1,
x2, and x3 to compute the value of .
ID: Bs2Jaggi 14-96
97) A
Explanation: For each explanatory variable, the corresponding slope coefficient measures the change in
the predicted variable of the response variable given a unit increase in the associated
explanatory variable, holding all other explanatory variables constant.
ID: Bs2Jaggi 14-97
98) C

ID: Bs2Jaggi 14-98
99) C
ID: Bs2Jaggi 14-99
100) A
Explanation: Use the regression equation = b0 + b1x1 + b2x2 with given coefficients, x1 and x2, to
compute the value of .
ID: Bs2Jaggi 14-100
101) D

ID: Bs2Jaggi 14-101

Answer Key
102) D
ID: Bs2Jaggi 14-102
103) C
Explanation: The adjusted coefficient of determination, adjusted R2, is computed as: Adjusted
The coefficient of determination is the proportion of the

variation in the response variable that is explained by the sample regression equation, and it
is computed as .
ID: Bs2Jaggi 14-103
104) B
Explanation: Use the regression equation = b0 + b1x1 + b2x2 + b3x3 with given coefficients, x1, x2,
and x3, to compute the value of .
ID: Bs2Jaggi 14-104
105) C

ID: Bs2Jaggi 14-105
106) B
Explanation: The mean square error (MSE) is computed as .

ID: Bs2Jaggi 14-106
107) C
Explanation: The slope of the regression equation is computed as b1 = .
ID: Bs2Jaggi 14-107

108) D
that is explained by the sample regression equation. It is computed as , where

the regression sum of squares (SSR) is computed as , and the total sum
of squares is computed as
ID: Bs2Jaggi 14-108

Answer Key
109) A
random error, and it is computed as

ID: Bs2Jaggi 14-109
110) C
Explanation: The slope b1 and the intercept b0 of the simple regression equation are computed as b1 =
and b0 = . The simple linear regression equation is = b0 + b1x.

ID: Bs2Jaggi 14-110
111) A
Explanation: The total sum of squares (SST) is computed as .
ID: Bs2Jaggi 14-111
112) B
Explanation: The error sum of squares (SSE) is computed as .
ID: Bs2Jaggi 14-112

113) C
Explanation: The regression sum of squares (SSR) is computed as .
ID: Bs2Jaggi 14-113

114) A
that is explained by the sample regression equation. It is computed as
where the error sum of squares (SSE) is computed as ,

and the total sum of squares is computed as .
ID: Bs2Jaggi 14-114
115) B
Explanation: The correlation coefficient is computed as .

ID: Bs2Jaggi 14-115
116) C
Explanation: Compute the value of the test statistic as .

ID: Bs2Jaggi 14-116

Answer Key
117) D
Explanation: The critical value for the test statistic tdf can be found in the t table, or using
Excel's function T.INV.2T.
ID: Bs2Jaggi 14-117
118) A
Explanation: Compute the value of the test statistic as . The critical value
for the test statistic tdf can be found in the t table, or using Excel's function T.INV.2T. The
decision rule is:is reject the null hypothesis if the test statistic is greater than or
less than ; otherwise, do not reject the null hypothesis.
ID: Bs2Jaggi 14-118

119) B
Explanation: The Excel's function CORREL is used to compute the correlation coefficient.
ID: Bs2Jaggi 14-119
120) C
Explanation: The most common method to fit the line to the scatterplot is to use the method of least
squares, also referred to as ordinary least squares (OLS).
ID: Bs2Jaggi 14-120
121) D
Explanation: The relationship between the slope and correlation coefficient is defined as or
as .
ID: Bs2Jaggi 14-121

Answer Key
122) a. The scatterplot indicates that there is a positive linear relationship between x and y.:
b. sxy = 270.10; positive linear relationship

c. sxy = 0.78; relatively strong positive linear relationship
Explanation: If the observations are close to a line with a positive slope, the relationship between x and y
is strong and positive. The covariance assesses whether a positive or a negative linear
relationship exists between x and y, and is computed as . The
correlation coefficient is computed as

ID: Bs2Jaggi 14-122

Answer Key
123) a. rxy = –0.56; moderate negative linear relationship;
b.
c. t28 = –3.58; Reject H0 if t28 < –2.048 or t28 > 2.048. Conclusion: variables are significantly correlated.
d. Using the t-table, the p-value < 0.005; Since the p-value < α = 0.05, reject H0. Conclusion: variables are
significantly correlated.
Explanation: The correlation coefficient is computed as A two-tailed test of whether the

population correlation coefficient differs from zero takes the following form
. Compute the value of the test statistic as .

The critical value
for the test statistic tdf can be found in the t table, or using Excel's function T.INV.2T. Using
the critical value approach, the decision rule is:is reject the null hypothesis if the test
statistic is greater than or less than ; otherwise, do not reject the null
hypothesis. Using the p-value approach, the decision rule is:is reject the null hypothesis
if the p-value is less than the significance level α; do not reject the null
hypothesis if the p-value is greater than the significance level α. To get
p-value for two-tailed test the Excel's function T.DIST.2T can be used.
ID: Bs2Jaggi 14-123
124) a. rxy = –0.92
b.
c. t3 = 4.07 using the t table; 0.02 < p-value < 0.05
d. Because the p-value < α = 0.10, we reject H0; we can conclude that the hours spent studying and the
final grade are correlated.


Using the p-value approach, the decision rule is reject the null hypothesis if
the p-value is less than the significance level α; do not reject the null hypothesis
if the p-value is greater than the significance level α. To get p-value for the
two-tailed test the Excel's function T.DIST.2T can be used.
ID: Bs2Jaggi 14-124

Answer Key
125) a. rxy = 0.59

b.
c. t2 = 1.03 using the t table, the p-value > 0.20;

d. Because the p-value > α = 0.05, we do not reject H0; we cannot conclude that the stock prices are
significantly correlated. Including these two stocks may increase the diversification effect; however, keep
in mind that this was a preliminary step and the test was based on a very small sample.


Using the p-value approach, the decision rule is reject the null hypothesis if
the p-value is less than the significance level α, do not reject the null hypothesis
if the p-value is greater than the significance level α. To get p-value for the
two-tailed test the Excel's function T.DIST.2T can be used.
ID: Bs2Jaggi 14-125
126) a. b1 = –0.5, b0 = –1
b. = –1 – 0.5x, –6
c. se = 0.75
d. R2 = 0.93, 93% of the variation in y is explained by the variation in x.
and . The simple linear regression equation is

. The standard error of the estimate, se, is a point estimate of the standard
deviation of a random error, and it is computed as . The

coefficient of determination is the proportion of the variation in the response variable that is
explained by the sample regression equation.It is computed as where the error sum of
squares (SSE) is computed as , and the total sum of squares is computed as

.
ID: Bs2Jaggi 14-126

Answer Key
127) a. The scatterplot indicates a positive linear relationship between x and y.
b. b1 = 1.50, b0 = 0375, = 0.375 + 1.50x

c. If x = 10, = 15.375; if x = 15, = 22.875; if x = 20, = 30.375

.
ID: Bs2Jaggi 14-127

Answer Key
128) a. The variables x and y appear to have a negative linear relationship.
b. b1 = –0.59, b0 = 25.44, = 25.44 – 0.59x

c. If x increases by 1 unit, then on average, y decreases by 0.59;
d. = 2.53, se = 1.59
e. R2 = 0.8350

. For each explanatory variable, the corresponding slope coefficient
measures the change in the predicted variable of the response variable given a unit increase
in the associated explanatory variable, holding all other explanatory variables constant. The
mean square error . The standard error of the estimate, se,is a point estimate of
the standard deviation of a random error, and it is computed as
The coefficient of determination is the proportion of the

variation in the response variable that is explained by the sample regression equation. It is
computed as , where the error sum of squares (SSE) is computed as

, and the total sum of squares is computed as
ID: Bs2Jaggi 14-128

Answer Key
129) a. Because GPA and Income appear to have a positive linear relationship, the simple linear regression
model is appropriate in this case.
b. b1 = 20.56, b0 = – 25.94, = – 25.94 + 20.56 GPA

c. For each 0.1 increase in GPA, income is expected to increase by $2,056.
d. If GPA = 3.0, = $35,740; if GPA = 3.3, = $41,910; if GPA = 3.6, = $48,080

. For each explanatory variable, the corresponding slope coefficient
in the associated explanatory variable, holding all other explanatory variables constant.
ID: Bs2Jaggi 14-129

Answer Key
130) a.
b. As x1 increases by 1 unit, y is expected to decrease by 0.28
c.
d. A(SST) = 747.76, B(MSE) = 0.965
e.
f.
Explanation: The regression equation is . For each explanatory variable, the corresponding
slope coefficient measures the change in the predicted variable of the response variable
given a unit increase in the associated explanatory variable, holding all other explanatory
variables constant. Use given coefficients and x to compute the value of . SST = SSR +
SSE. . The standard error of the estimate is a point estimate of the

standard deviation of a random error, and it is computed as . The coefficient of
determination is the proportion of the variation in the response variable that is explained by
the sample regression equation, and it is computed as .

ID: Bs2Jaggi 14-130
131) a.
b. As x1 increases by 1 unit, y is expected to increase by 2.53, holding x2 constant.
c.
Explanation: The regression equation is For each explanatory variable, the
corresponding slope coefficient measures the change in the predicted variable of the
response variable given a unit increase in the associated explanatory variable, holding all
other explanatory variables constant. Use given coefficients, x1 and x2, to compute the
value of .
ID: Bs2Jaggi 14-131
132) a.
b.
c. Adjusted
Explanation: The standard error of the estimate, , is a point estimate of the standard deviation of the
random error ε, and is computed as , where MSE is the mean square error for
the residuals. The coefficient of determination is the proportion of the variation in the
response variable that is explained by the sample regression equation, and it is computed as
. The adjusted coefficient of determination is computed as Adjusted
.
ID: Bs2Jaggi 14-132

Answer Key
133) a.
b. As x1 increases by 1 unit, y is expected to decrease by 2.97, holding x2 constant
c.
d. A = 2, B = 8948, C = 11.59
e. Se = 3.40
f. R2 = 0.97
Explanation: The regression equation is . For each explanatory variable, the
other explanatory variables constant. Use given coefficients, x1 and x2, to compute the
value of . Degrees of freedom for SSR k, is the number of explanatory variables, or can be
computed from given value of n – k – 1. SST = SSR + SSE. . The standard

error of the estimate is a point estimate of the standard deviation of a random error, and it
is computed as . The coefficient of determination is the proportion of the
is computed as .
ID: Bs2Jaggi 14-133
134) a. 86,600 people
b. If the Price goes up by $1, then on average Attendance decreases by 3,100 people
c. ; since , model may have some promise, but typically a ratio of less than 0.20
provides evidence of a good model. More assessing is necessary.
d. , 61.5% of the variation in Attendance is explained by the variation in Price; this infers
that 38.5% of the variability in Attendance is unexplained.
other explanatory variables constant. Use given coefficients and x to compute the value of
. The standard error of the estimate is a point estimate of the standard deviation of a
random error, and it is computed as . If we construct the ratio and find that
this ratio is less than 0.20, then we have some evidence that the model is an effective
analytical and forecasting tool. The coefficient of determination is the proportion of the
is computed as .
ID: Bs2Jaggi 14-134

Answer Key
135) a. 719 patents

b. If the R&d increases by $1,000,000, then on average, the number of patents filed increase by approximately 59.
c.
d. , so 29.7% of the variation in Patents is explained by the variation in R&D.
other explanatory variables constant. Use given coefficients and x to compute the value of
. The standard error of the estimate, , is a point estimate of the standard deviation of a
random error, and it is computed as . The coefficient of determination is the
proportion of the variation in the response variable that is explained by the sample
regression equation, and it is computed as .

ID: Bs2Jaggi 14-135
136) a. 39.75%
b. If the expense ratio goes up by 1%, then on average the return increases by 0.90%, holding the turnover rate
constant.
c. ; since , so the model appears promising.

d. , 58% of the variation in Return is explained by the variation in the explanatory variables.
Explanation: The regression equation is . Use given coefficients, x1 and x2, to
compute the value of . For each explanatory variable, the corresponding slope coefficient
standard error of the estimate is a point estimate of the standard deviation of a random
error, and it is computed as . If we construct the ratio and find that this ratio
is less than 0.20, then we have some evidence that the model is an effective analytical and
forecasting tool. The coefficient of determination is the proportion of the variation in the
.
ID: Bs2Jaggi 14-136

Answer Key
137) a. 38.6%
b. If DoubleFaults go up by 1%, then on average, the winning proportion goes down by 0.007, holding the number
Aces constant.
c. ; since , the model may have some promise, but typically a ratio of less than
0.20 provides evidence of a good model. More assessing is necessary.
d. , 76% of the variation in Win is explained by the variation in the explanatory variables.
e. Adjusted
error, and it is computed as . If we construct the ratio and find that this ratio
is less than 0.20, then we have some evidence that the model is an effective analytical and
forecasting tool. The coefficient of determination is the proportion of the variation in the
. The adjusted coefficient of determination is computed as Adjusted
.
ID: Bs2Jaggi 14-137
138) a. 9,867
b. If Snowfall increases by 1 inch, then on average, Sales of lift tickets increase by approximately 75, holding
Temperature constant.
c.
d. ; 43% of the variation in ticket Sales is explained by the variation in the explanatory variables.
e. Adjusted
error, and it is computed as . The coefficient of determination is the proportion
of the variation in the response variable that is explained by the sample regression equation,
and it is computed as . The adjusted coefficient of determination is
computed as Adjusted .
ID: Bs2Jaggi 14-138

Answer Key
139) a. 82.8
b. If Expenditures increase by $1,000, then on average, a district's test Score increases by 8.5, holding the
socioeconomic Index constant.
c.
d. ; 65% of the variation in test Scores is explained by the variation in the explanatory variables.
e. Adjusted
standard error of the estimate, , is a point estimate of the standard deviation of a random
error, and it is computed as . The coefficient of determination is the proportion
of the variation in the response variable that is explained by the sample regression equation,
and it is computed as . The adjusted coefficient of determination is
computed as Adjusted .
ID: Bs2Jaggi 14-139
140) a. 63.6
b.
c. Approximately 17% is unexplained.
Explanation: The regression equation is . Use given coefficients, x1, x2,
and x3, to compute the value of . The standard error of the estimate, , is a point
estimate of the standard deviation of a random error, and it is computed as .
The coefficient of determination is the proportion of the variation in the response variable
that is explained by the sample regression equation, and it is computed as
. The value of defines an unexplained part of
variation.
ID: Bs2Jaggi 14-140

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Exam Chapter 14

4) The correlation coefficient could be considered as a "standardized covariance." T or F

5) The correlation coefficient can only range between 0 and 1. T or F

7) The sample correlation coefficient cannot equal zero. T or F

8) Another name for an explanatory variable is the dependent variable. T or F

9) Simple linear regression includes more than one explanatory variable. T or F

Exam Chapter 14 pg-1

18) The correlation coefficient captures only a ________ relationship. 18)

Exam Chapter 14 pg.-2

25) We use ________ to derive the coefficient of determination. 25)

28) A correlation coefficient r = −0.85 could indicate a ________. 28)

Exam Chapter 14 pg.-3

A) strong and positive B) strong and negative

A) weak and positive B) strong and positive

Exam Chapter 14 pg.-4

Exam Chapter 14 pg.-5

44) In the sample regression equation = b0 + b1x What is ? 44)

Exam Chapter 14 pg.-6

Exam Chapter 14 pg.-7

Exam Chapter 14 pg.-8

Source of variance SS df MS F p-value

A) 0.151 B) 0.515 C) 0.849 D) 1.000

59) The standard error of the estimate measures ________. 59)

60) The standard error of the estimate measures ________. 60)

Exam Chapter 14 pg.-9

63) The R2 of a multiple regression of y on x1 and x2 measures the ________. 63)

Exam Chapter 14 pg.-10

67) The coefficient of determination R2 is ________. 67)

Model 1 Model 2 Model 3 Model 4

A) Model 1 B) Model 2 C) Model 3 D) Model 4

Exam Chapter 14 pg.-11

Exam Chapter 14 pg.-12

Exam Chapter 14 pg.-13

Exam Chapter 14 pg.-14

Which of the following is true?

Exam Chapter 14 pg.-15

Which of the following is the standard error of the estimate?

Which of the following is the coefficient of determination?

Exam Chapter 14 pg.-16

Which of the following is the standard error of the estimate?

Exam Chapter 14 pg.-17

The coefficient of determination indicates that ________.

How much of the variation in Salary is unexplained by the model?

Exam Chapter 14 pg.-18

Exam Chapter 14 pg.-19

The explanatory variables (Housing Starts and Commercial Construction) together

Exam Chapter 14 pg.-20

Exam Chapter 14 pg.-21

Exam Chapter 14 pg.-22

Exam Chapter 14 pg.-23

The coefficient of determination indicates that ________.

Exam Chapter 14 pg.-24

Which of the following is the prediction of if x1 = 1 and x2 = 2?

Exam Chapter 14 pg.-25

Which of the following is the coefficient of determination?

Which of the following is the standard error of the estimate?

Exam Chapter 14 pg.-26

Which of the following is the adjusted R2?

Exam Chapter 14 pg.-27