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Fin Model Class1 Class3 Using Excel Financial Functions Part 1
Fin Model Class1 Class3 Using Excel Financial Functions Part 1
Fin Model Class1 Class3 Using Excel Financial Functions Part 1
PROBLEM 1
Consider a 30 year bond that pays $50 at the end of years 1 - 29 and pays $1,050 at the end of year 30.
If the appropriate discount rate is 5% per year, what is the fair price of this bond ?
ANSWER
YEAR END PMT DISC.RATE = -1000.00
1 50.00 5.00% 50.00
2 50.00 50.00
3 50.00 50.00
4 50.00 NPV= 50.00
5 50.00 $1,000.00 50.00
6 50.00 50.00
7 50.00 OR: 50.00
8 50.00 PV= 50.00
9 50.00 $1,000.00 50.00
10 50.00 50.00
11 50.00 NOTE: 50.00
12 50.00 IRR= 50.00
13 50.00 5.00% 50.00
14 50.00 50.00
15 50.00 NOTE: 50.00
16 50.00 FV= 50.00
17 50.00 $4,321.94 50.00
18 50.00 50.00
19 50.00 PV(FV)= 50.00
20 50.00 $1,000.00 50.00
21 50.00 50.00
22 50.00 50.00
23 50.00 50.00
24 50.00 50.00
25 50.00 50.00
26 50.00 50.00
27 50.00 50.00
28 50.00 50.00
29 50.00 50.00
30 1050.00 1050.00
PROBLEM 2
Having earned an MBA, Michael begins work immediately at a salary of $80,000 per year.
He will receive a 5% raise every year end , beginning his 2nd year. He retires, 30 years from now.
Assume he is paid only once per year at year end.
If the cost of capital is 8% , determine the total present value of his before tax earnings ?
ANSWER
YEAR END EARNINGS DISC.RATE =
1 $ 80,000.00 8.00%
2 $ 84,000.00
3 $ 88,200.00
4 $ 92,610.00 NPV=
5 $ 97,240.50 $1,521,325
6 $ 102,102.53
7 $ 107,207.65
8 $ 112,568.03
9 $ 118,196.44 SUM OF ALL EARNINGS=
10 $ 124,106.26 $5,315,108
11 $ 130,311.57
12 $ 136,827.15 OR:
13 $ 143,668.51 FV=
14 $ 150,851.93 $5,315,108
15 $ 158,394.53
16 $ 166,314.25
17 $ 174,629.97
18 $ 183,361.47
19 $ 192,529.54
20 $ 202,156.02
21 $ 212,263.82
22 $ 222,877.01
23 $ 234,020.86
24 $ 245,721.90
25 $ 258,008.00
26 $ 270,908.40
27 $ 284,453.82
28 $ 298,676.51
29 $ 313,610.33
30 $ 329,290.85
Problem 3
Apply Linear Regression to the 10 years (120 months) of Dell stock returns compared to those of the Standard & Poor's stock index:
0. Draw a graph of x axis = S&P500 returns y axis = Dell returns; use Trendline to obtain equation of line of best fit
1. Estimate the Beta (slope) of the least squares line of best fit; S&P500 as the independent variable, Dell as the dependent variable
2. Interpret the meaning of Dell's beta. What does the intercept mean ?
3. If you believe a recession is coming , would you invest in high-beta or low-beta stock ? Why ?
4. During a month in which the stock market goes up 5% , what is the expected Dell return ? Explain.
ANSWER
Month# Date S and P return Dell return Predict BETA= 1.65 statistically significant ( data analysis toolkit )
1 1-Jan-90 -6.70% -15.88% -6.31% intercept("alpha")= 4.72% statistically significant ( data analysis toolkit )
2 1-Feb-90 1.30% 35.06% 6.86% R^2= 14.77%
3 1-Mar-90 2.60% 21.97% 9.00% std. error 15.41%
4 1-Apr-90 -2.50% 11.46% 0.60% Beta means Dell more volatile than S&P500: each 1% increase in S&P500 , Dell goes up + 1.65%; each 1% decrease in S&P down, Dell goes down -1.65%
5 1-May-90 9.80% 29.49% 20.84% Intercept (known as "Alpha") means that Dell will go up, on average, 4.72% /month even if S&P500 = 0%
6 1-Jun-90 -0.70% 14.75% 3.56% Recession => invest low beta stocks
7 1-Jul-90 -0.30% -6.92% 4.22%
8 1-Aug-90 -9.00% 0.00% -10.09% Forecast: if S&P + 5%
9 1-Sep-90 -4.90% -25.57% -3.35% expected = 12.94% with intercept Upper 10th Pctl= 32.69% Lower 10th Pctl = -6.80%
10 1-Oct-90 -0.40% 21.51% 4.06%
11 1-Nov-90 6.40% 23.49% 15.25%
12 1-Dec-90 2.70% 40.97% 9.16%
13 1-Jan-91 4.40% 22.31% 11.96%
14 1-Feb-91 7.20% 11.58% 16.57%
Dell return
15 1-Mar-91 2.40% 12.89% 8.67% 50.00%
16 1-Apr-91 0.30% -17.99% 5.21%
40.00%
17 1-May-91 4.30% 5.87% 11.79%
18 1-Jun-91 -4.60% -1.01% -2.85% 30.00%
19 1-Jul-91 4.70% 17.36% 12.45%
20 1-Aug-91 2.40% 13.46% 8.67% f(x) = 1.6456849016x + 0.0471641207 20.00%
R² = 0.1477318324
21 1-Sep-91 -1.60% 2.32% 2.08%
10.00%
22 1-Oct-91 1.30% -25.48% 6.86%
23 1-Nov-91 -4.00% -5.52% -1.87%
0.00%
24 1-Dec-91 11.40% 9.03% 23.48% -20.00% -15.00% -10.00% -5.00% 0.00% 5.00% 10.00% 15.00%
25 1-Jan-92 -1.90% 24.39% 1.59% -10.00%
26 1-Feb-92 1.30% 9.43% 6.86%
27 1-Mar-92 -2.00% 4.29% 1.43% -20.00%
NPV, IRR
Remarks:
A project is acceptable if its NPV > 0 .
When NPV > 0 then it generates a return that is greater than the cost of funds needed to purchase the project.
The NPV method requires that the investor starts with a discount rate, a required rate of return.
Another approach is to compute the rate of return that the project will produce, the IRR.
It is defined as that discount rate such that NPV = 0
When a project has an IRR > required rate of return then it generates a return greater than the cost of funds needed to purchase the project
A bond's yield to maturity and a capital budgeting project's IRR are the same.
Unfortunately, when comparing two or more projects the NPV and IRR do not always agree as to which project is best !
An NPV profile is a graph and associated Datatable that shows the NPVs of a project(s) at various discount rates (required rates of return).
The crossover point, or point of indifference, if it exists, is that discount rate such that NPV Project 1 = NPV Project 2
It can be computed with Goal Seek or simply using the IRR function after subtracting the nominal cash flows: Project 1 - Project 2
cash flows
year project1 project2 difference
0 (5,000) (5,000) -
1 800 2,400 (1,600)
2 900 1,800 (900)
3 1,500 900 600
4 1,200 900 300
5 3,200 700 2,500
ANSWER:
discount rate= 5.00%
NPV= 1,368.51 984.72 383.79
IRR= 12.50% 13.94% 10.15% NPV PROFILE: PROJECT1 AND PROJECT2
total cash flow= 2,600 1,700 900
NPV Datatable
discount rate project1 project2 difference
3,000.00
1,368.51 984.72 383.79
1.0% 2,328.10 1,545.21 782.89 2,500.00
2.0% 2,069.80 1,396.61 673.19
3.0% 1,824.28 1,253.86 570.42 2,000.00
4.0% 1,590.76 1,116.66 474.09
5.0% 1,368.51 984.72 383.79 1,500.00
TWO-WAY DATATABLE
Develop a Two-way Datatable showing how change in PRICE and ADVERTISING effects change in SALES
Develop a Two-way Datatable showing how change in PRICE and ADVERTISING effects change in PROFIT
Find the maximum PROFIT at each level of ADVERTISING
Discuss this analysis
ANSWER:
ADVERTISING =
Workup Example: SALES= 36.66 20 40 60 80 100 120 140 160 180
ADVERTISING = 127.15 PRICE= 1 68.02 70.01 71.53 72.81 73.93 74.94 75.87 76.73 77.55
PRICE= 10.00 2 62.87 65.63 67.74 69.51 71.07 72.48 73.77 74.97 76.10
COST= 3.00 3 57.29 60.64 63.20 65.35 67.25 68.96 70.53 71.99 73.37
SALES= 36.66 4 51.49 55.33 58.27 60.75 62.93 64.90 66.70 68.38 69.96
PROFIT= 129.50 5 45.54 49.83 53.10 55.86 58.29 60.48 62.50 64.37 66.13
6 39.50 44.18 47.76 50.77 53.42 55.82 58.02 60.07 61.99
7 33.38 38.42 42.28 45.53 48.39 50.97 53.34 55.55 57.63
8 27.19 32.57 36.69 40.16 43.21 45.97 48.50 50.86 53.08
9 20.96 26.66 31.02 34.69 37.93 40.85 43.53 46.03 48.38
10 14.69 20.68 25.28 29.15 32.55 35.63 38.46 41.09 43.56
1. For a given level of ADVERTISING, as PRICE increases, SALES decreases (at an increasing rate)
2. For a given level of PRICE, as ADVERTISING increases, SALES increases, but at a decreasing rate
3. For higher level of PRICE, ADVERTISING will increase SALES with a larger effect
4. As ADVERTISING levels increase, maximum PROFIT is seen as PRICE increases from $8 to $10
5. We find that the maximum PROFIT occurs when PRICE = $10 And ADVERTISING = $120
ADVERTISING =
PROFIT= 129.50 20 40 60 80 100 120 140 160 180
PRICE= 1 -156.03 -180.02 -203.06 -225.61 -247.86 -269.88 -291.74 -313.47 -335.09
2 -82.87 -105.63 -127.74 -149.51 -171.07 -192.48 -213.77 -234.97 -256.10
3 -20.00 -40.00 -60.00 -80.00 -100.00 -120.00 -140.00 -160.00 -180.00
4 31.49 15.33 -1.73 -19.25 -37.07 -55.10 -73.30 -91.62 -110.04
5 71.09 59.65 46.21 31.72 16.58 0.96 -15.01 -31.26 -47.74
6 98.49 92.53 83.27 72.31 60.27 47.46 34.06 20.21 5.98
7 113.50 113.67 109.11 102.10 93.54 83.88 73.37 62.21 50.50
8 115.96 122.86 123.46 120.80 116.06 109.85 102.52 94.31 85.38
9 105.76 119.95 126.13 128.17 127.57 125.10 121.21 116.20 110.27
10 82.80 104.79 116.95 124.02 127.86 129.39 129.19 127.60 124.89
MAX PROFIT= 115.96 122.86 126.13 128.17 127.86 129.39 129.19 127.60 124.89
PROBLEM 7
USING A TWO-WAY DATATABLE:
GIVEN A COMPANY'S REVENUE GROWTH % PER YEAR, AND EXPENSE GROWTH % PER YEAR, FIND BREAKEVEN YEAR
THAT IS, THE YEAR ,T, WHEREIN REVENUE(T) > EXPENSE(T) LET REVENUE GROWTH VARY FROM 10% TO 35%; EXPENSE GROWTH FROM 2% TO 20%
at time = 0 growth
Revenue 10,000,000 25.00%
Exp 15,000,000 5.00%
YEARS FROM TODAY
0 1 2 3 4 5 6 7 8 9 10 11 12 13
Rev 10,000,000 12,500,000 15,625,000 19,531,250 24,414,063 30,517,578 38,146,973 47,683,716 59,604,645 74,505,806 93,132,257 116,415,322 145,519,152 181,898,940
Exp 15,000,000 15,750,000 16,537,500 17,364,375 18,232,594 19,144,223 20,101,435 21,106,506 22,161,832 23,269,923 24,433,419 25,655,090 26,937,845 28,284,737
Breakeven ? 0 0 3 0 0 0 0 0 0 0 0 0 0
Year Breakeven 3
Exp growth
3 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00% 11.00% 12.00% 13.00% 14.00% 15.00% 16.00% 17.00% 18.00% 19.00% 20.00%
10.00% 6 7 8 9 11 NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE
Rev 11.00% 5 6 7 8 9 12 NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE
growth 12.00% 5 5 6 7 8 9 12 NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE
13.00% 4 5 5 6 7 8 9 12 NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE
14.00% 4 4 5 5 6 7 8 10 12 NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE
15.00% 4 4 5 5 5 6 7 8 10 12 NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE
16.00% 4 4 4 5 5 6 6 7 8 10 12 NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE
17.00% 3 4 4 4 5 5 6 6 7 8 10 12 NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE
18.00% 3 3 4 4 4 5 5 6 6 7 8 10 12 NO_BE NO_BE NO_BE NO_BE NO_BE NO_BE
19.00% 3 3 4 4 4 4 5 5 6 6 7 8 10 12 NO_BE NO_BE NO_BE NO_BE NO_BE
20.00% 3 3 3 4 4 4 4 5 5 6 6 7 8 10 12 NO_BE NO_BE NO_BE NO_BE
21.00% 3 3 3 3 4 4 4 4 5 5 6 6 7 8 10 13 NO_BE NO_BE NO_BE
22.00% 3 3 3 3 3 4 4 4 4 5 5 6 6 7 9 10 13 NO_BE NO_BE
23.00% 3 3 3 3 3 3 4 4 4 4 5 5 6 7 7 9 10 13 NO_BE
24.00% 3 3 3 3 3 3 3 4 4 4 4 5 5 6 7 7 9 10 13
25.00% 2 3 3 3 3 3 3 3 4 4 4 5 5 5 6 7 8 9 10
26.00% 2 3 3 3 3 3 3 3 3 4 4 4 5 5 5 6 7 8 9
27.00% 2 2 3 3 3 3 3 3 3 4 4 4 4 5 5 5 6 7 8
28.00% 2 2 2 3 3 3 3 3 3 3 4 4 4 4 5 5 5 6 7
29.00% 2 2 2 2 3 3 3 3 3 3 3 4 4 4 4 5 5 6 6
30.00% 2 2 2 2 2 3 3 3 3 3 3 3 4 4 4 4 5 5 6
31.00% 2 2 2 2 2 3 3 3 3 3 3 3 3 4 4 4 4 5 5
32.00% 2 2 2 2 2 2 3 3 3 3 3 3 3 3 4 4 4 4 5
33.00% 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 4 4 4 4
34.00% 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 4 4 4
35.00% 2 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 4 4 4
Problem 8
MIRR
Remarks:
The Modified Internal Rate of Return, MIRR, is a modification of the IRR: its goal is to improve the IRR as a project measure
Namely, the IRR can fail to be unique for projects with alternating positive and negative cash flows.
Specifically, the MIRR represents the rate of return that equates the present value of a projects's negative cash outflows
with the future value of the positive cash inflows.
The positive cash flows are invested at the reinvestment rate, the negative cash flows are discounted at the finance rate.
year project pos cash flows neg cash flows NPV Datatable
0 $ (3,000) - (3,000) discount rate project
1 $ 1,000 1,000 - (189.57)
2 $ 1,000 1,000 - 1.0% (770.99)
3 $ 1,000 1,000 - 2.0% (580.20)
4 $ 1,000 1,000 - 3.0% (422.55)
5 $ 1,000 1,000 - 4.0% (293.62) NPV PROFILE
6 $ 1,000 1,000 - 5.0% (189.57) 100.00
7 $ 1,000 1,000 - 6.0% (107.07)
50.00
8 $ 1,000 1,000 - 7.0% (43.21)
-
9 $ 1,000 1,000 - 8.0% 4.53 0.0% 5.0% 10.0% 15.0% 20.0% 25.0%
(50.00)
10 $ (7,000) - (7,000) 9.0% 38.37
10.0% 60.22 (100.00)
NPV
ANSWER: 11.0% 71.76 (150.00)
Chipco is a small maker of computer chips and wants to forecast monthly operating costs based on the number of units produced.
Chipco collects data on 16 months production.
We develop a linear model of the relationship between our dependent variable, Total Cost, and the independent variable, Units Produced.
a) find the linear model that predicts Total Monthly Cost based on Monthly Units Produced
graph the data, find the intercept, slope coefficients, R^2; discuss the statistical significance of these parameters.
b) if Chipco is to produce 400 units next month, what is the estimated Total Cost,
what is the accuracy of that predicition ?
what is the probabilty that actual cost is greater than $112,000 ?
X Y
Month Units Produced Total Cost
1 500 131,000
600 135,000
3 400 104,000
4 300 76,000
5 800 186,000
6 900 190,100
7 600 150,000
8 400 98,000
9 300 78,000
10 200 60,000
11 400 108,000
12 600 152,000
13 700 158,000
14 500 134,380
15 300 86,000
16 200 60,002
answer:
a) X Y
Predictions Residual from
from Trend Predictions from Equation of Line
Month Units Produced Total Cost Function Equation of Line Residuals (steyx units) Total Cost
1 500 131,000 122,876 122,876 8,124 1.12 200000
600 135,000 142,723 142,723 (7,723) -1.06 f(x) = 198.4650824442x + 23643.8040737149
180000 R² = 0.9717356528
3 400 104,000 103,030 103,030 970 0.13
4 300 76,000 83,183 83,183 (7,183) -0.99 160000
5 800 186,000 182,416 182,416 3,584 0.49 140000
6 900 190,100 202,262 202,262 (12,162) -1.67
120000
7 600 150,000 142,723 142,723 7,277 1.00
8 400 98,000 103,030 103,030 (5,030) -0.69 100000
9 300 78,000 83,183 83,183 (5,183) -0.71 80000
10 200 60,000 63,337 63,337 (3,337) -0.46 60000
11 400 108,000 103,030 103,030 4,970 0.68
40000
12 600 152,000 142,723 142,723 9,277 1.28
13 700 158,000 162,569 162,569 (4,569) -0.63 20000
14 500 134,380 122,876 122,876 11,504 1.58 0
15 300 86,000 83,183 83,183 2,817 0.39 100 200 300 400 500 600 700 800 900 1000
16 200 60,002 63,337 63,337 (3,335) -0.46
PREDICTION= 400 103,030 103,030
b) if we make 400 units , what is probability that actual cost > $112,000 ? Ans: about 10%
Prob(Costs
X Y >=$112,000
400 103,032 10.84%
PREDICTED Y
ACTUAL X ACTUAL Y OLS RESIDUAL
500 131,000 122,876 8,124
600 135,000 142,723 (7,723)
400 104,000 103,030 970
300 76,000 83,183 (7,183)
800 186,000 182,416 3,584
900 190,100 202,262 (12,162)
600 150,000 142,723 7,277
400 98,000 103,030 (5,030)
300 78,000 83,183 (5,183)
200 60,000 63,337 (3,337)
400 108,000 103,030 4,970
600 152,000 142,723 9,277
700 158,000 162,569 (4,569)
500 134,380 122,876 11,504
300 86,000 83,183 2,817
200 60,002 63,337 (3,335)
STDEV= 207.26 41,728.59 41,134.65 7,015.41
MEAN= 481.25 119,155.13 119,155.13 (0.00)
SUM OF SQUARED
ERRORS:
738,240,254
RSQ:
97.09%
PROBLEM 10.
Price =Intercept + beta(1)*Bedrooms + beta(2)*Bathrooms + beta(3)*SqFt + beta(4)*new york +beta(5)* boston + beta(6)*portland + error
HERE WE EXTEND SIMPLE LINEAR REGRESSION TO MLR, MULTIPLE LINEAR REGRESSION, ALLOWING MORE THAN ONE INDEPENDENT VARIABLE.
NOT ONLY DOES MLR IMPROVE ACCURACY, BUT IT ALSO REDUCES THE VOLATILITY OF OUR ESTIMATES.
CAVEAT, DATA MINING; TOO MANY EXPLANATORY VARIABLES.
TOO MANY VARIABLES WITH NO THEORETICAL JUSTIFICATION ENABLES STATISTICAL SIGNIFICANCE BY CHANCE.
SOLID RESULTS CALLS FOR REPLICATION.
PREDICTING HOUSE PRICES BASED ON ATTRIBUTES: NUMBER OF BEDROOMS, NUMBER OF BATHROOMS, SQUARE FEET, CITY (NEIGHBORHOOD)
BECAUSE CITY IS A CATEGORICAL VARIABLE WE TRANSFORM INTO A DUMMY OR INDICATOR VARIABLES.
answer:
Predictions from
Trend Function
Selling 1 2 3 4 Est.Selling
Price Bedrooms Bathrooms SqFt new york boston portland chicago CITY City Price
$ 777,000 3 2.5 1638 1 0 0 0 new york 1 783,486
$ 335,000 3 1 1160 0 1 0 0 boston 2 221,658
$ 1,308,000 5 3.5 3937 1 0 0 0 new york 1 1,374,048
$ 950,000 3 2.5 2153 1 0 0 0 new york 1 883,751
$ 578,500 3 2 1516 1 0 0 0 new york 1 706,520
$ 2,430,000 5 4.5 4204 0 0 0 1 chicago 4 1,524,643
$ 1,890,000 5 4.5 4283 0 0 0 1 chicago 4 1,540,024
$ 1,325,000 4 2.5 3426 0 0 0 1 chicago 4 1,142,048
$ 810,000 4 2.5 3200 0 1 0 0 boston 2 796,738
$ 690,000 5 3.5 3000 0 1 0 0 boston 2 882,500
$ 545,000 3 2 1976 0 1 0 0 boston 2 486,952
$ 500,000 3 1.5 1395 1 0 0 0 new york 1 629,749
$ 432,000 2 1 1100 1 0 0 0 new york 1 500,830
$ 1,500,000 4 5.5 4269 0 0 0 1 chicago 4 1,625,453
$ 1,375,000 5 5.5 5613 1 0 0 0 new york 1 1,913,202
$ 1,265,000 4 3.5 2898 1 0 0 0 new york 1 1,153,494
$ 1,150,000 4 3.5 4480 1 0 0 0 new york 1 1,461,492
$ 1,085,000 4 2.5 2134 1 0 0 0 new york 1 898,324
$ 1,075,000 4 4.5 3519 1 0 0 0 new york 1 1,380,823
$ 1,030,000 4 2.5 2408 0 0 0 1 chicago 4 943,854
$ 1,010,000 3 2.5 1735 1 0 0 0 new york 1 802,371
$ 1,007,500 4 3.5 2763 0 0 0 1 chicago 4 1,119,396
$ 980,000 3 2.5 2626 1 0 0 0 new york 1 975,839
$ 940,000 4 2.5 2500 1 0 0 0 new york 1 969,580
$ 905,000 4 3 2539 0 0 0 1 chicago 4 1,022,572
$ 799,000 3 2.5 2022 1 0 0 0 new york 1 858,246
$ 788,000 3 2.5 2614 0 1 0 0 boston 2 664,378
$ 759,000 4 2.5 2632 0 1 0 0 boston 2 686,154
$ 753,000 4 2.5 1924 0 0 0 1 chicago 4 849,625
$ 670,500 3 2 1566 1 0 0 0 new york 1 716,254
$ 650,000 3 2.5 1872 1 0 0 0 new york 1 829,043
$ 410,000 2 2 1502 0 1 0 0 boston 2 376,397
$ 2,125,000 4 5.5 3626 1 0 0 0 new york 1 1,508,082
$ 2,000,000 6 5.5 4753 1 0 0 0 new york 1 1,764,042
$ 1,770,000 5 4.5 4700 0 0 0 1 chicago 4 1,621,209
$ 1,601,000 8 4.5 5559 0 0 0 1 chicago 4 1,843,264
$ 1,260,000 4 4.5 4500 0 0 0 1 chicago 4 1,563,999
$ 1,250,000 5 3.5 3018 1 0 0 0 new york 1 1,195,129
$ 1,050,000 4 4.5 5142 0 1 0 0 boston 2 1,387,679
$ 887,000 3 2.5 2374 1 0 0 0 new york 1 926,777
$ 807,000 4 3.5 3904 0 0 1 0 portland 3 1,079,216
$ 775,000 3 1.5 1748 0 0 0 1 chicago 4 690,660
$ 700,000 4 2.5 2459 0 1 0 0 boston 2 652,473
$ 693,000 4 2.5 3060 0 1 0 0 boston 2 769,481
$ 649,000 3 2.5 2465 0 1 0 0 boston 2 635,369
$ 630,000 3 2 1780 1 0 0 0 new york 1 757,918
$ 557,000 4 1.5 2169 1 0 0 0 new york 1 798,711
$ 546,000 4 2.5 2002 0 1 0 0 boston 2 563,500
$ 530,000 4 2 1581 0 1 0 0 boston 2 428,322
$ 527,000 4 1.5 2100 0 1 0 0 boston 2 476,152
$ 441,000 3 2 1377 0 1 0 0 boston 2 370,333
$ 439,000 2 2 1521 0 1 0 0 boston 2 380,096
$ 2,340,000 5 3.5 4302 1 0 0 0 new york 1 1,445,110
$ 1,440,000 5 4.5 4036 0 0 0 1 chicago 4 1,491,935
$ 1,308,000 3 3.5 3553 1 0 0 0 new york 1 1,262,743
$ 1,155,000 4 3 2446 1 0 0 0 new york 1 1,012,281
$ 982,000 3 2.5 3007 0 0 1 0 portland 3 779,880
$ 910,000 4 2 2900 0 0 0 1 chicago 4 986,428
$ 809,200 4 2.5 2428 0 0 0 1 chicago 4 947,748
$ 770,000 4 5 2895 0 0 0 1 chicago 4 1,304,737
$ 659,000 4 2.5 1600 1 0 0 0 new york 1 794,360
$ 580,000 3 2 1264 1 0 0 0 new york 1 657,458
$ 415,000 3 2 1068 0 1 0 0 boston 2 310,175
$ 400,000 2 2 2000 0 1 0 0 boston 2 473,352
$ 370,000 4 1.5 2032 0 1 0 0 boston 2 462,913
$ 321,000 4 1 1914 0 1 0 0 boston 2 386,726
$ 2,750,000 5 4.5 4668 1 0 0 0 new york 1 1,622,793
$ 1,570,000 4 4.5 4600 0 0 0 1 chicago 4 1,583,468
$ 1,300,000 6 2.5 2952 1 0 0 0 new york 1 1,094,124
$ 1,290,000 5 4.5 4800 0 0 0 1 chicago 4 1,640,678
$ 1,250,000 4 2.5 3624 1 0 0 0 new york 1 1,188,411
$ 1,238,000 6 3.5 3244 1 0 0 0 new york 1 1,257,401
$ 1,191,000 3 4.5 2606 0 0 0 1 chicago 4 1,176,985
$ 1,145,000 4 3 2431 0 0 0 1 chicago 4 1,001,546
$ 981,000 5 3.5 3108 1 0 0 0 new york 1 1,212,651
$ 895,800 7 3.5 3296 1 0 0 0 new york 1 1,285,797
$ 678,000 4 2.5 2650 0 1 0 0 boston 2 689,659
$ 595,000 3 1.5 1402 1 0 0 0 new york 1 631,112
$ 511,000 3 2 1701 0 1 0 0 boston 2 433,413
$ 469,000 3 1.5 1822 0 1 0 0 boston 2 403,756
$ 295,500 3 1.5 1196 0 1 0 0 boston 2 281,881
$ 124,900 2 1 800 0 1 0 0 boston 2 133,298
$ 1,290,000 3 3.5 2878 1 0 0 0 new york 1 1,131,328
$ 1,259,500 4 2.5 2785 0 0 0 1 chicago 4 1,017,252
$ 1,136,500 5 4 3440 1 0 0 0 new york 1 1,330,501
$ 1,035,000 4 2.5 2740 1 0 0 0 new york 1 1,016,306
$ 1,025,000 5 3 3316 1 0 0 0 new york 1 1,199,932
$ 875,000 5 3.5 4012 0 1 0 0 boston 2 1,079,525
$ 755,000 3 2.5 1995 1 0 0 0 new york 1 852,990
$ 695,000 3 2 1617 1 0 0 0 new york 1 726,184
$ 625,900 3 2 2162 1 0 0 0 new york 1 832,289
$ 451,750 3 2 1740 0 1 0 0 boston 2 441,006
$ 1,925,000 6 6 5117 1 0 0 0 new york 1 1,888,122
$ 1,915,000 5 4.5 5524 0 0 0 1 chicago 4 1,781,633
$ 939,000 4 4 2252 1 0 0 0 new york 1 1,080,938
$ 885,000 4 2.5 2592 1 0 0 0 new york 1 987,492
$ 819,663 4 3.5 1876 0 0 0 1 chicago 4 946,707
$ 740,000 4 1.5 1737 1 0 0 0 new york 1 714,605
$ 530,000 3 1.5 1317 1 0 0 0 new york 1 614,563
$ 431,000 3 2 1428 0 1 0 0 boston 2 380,263
$ 570,000 3 1.5 1440 0 0 1 0 portland 3 368,375
$ 1,131,000 4 3.5 3996 0 0 1 0 portland 3 1,097,127
$ 899,000 4 2 3552 0 0 1 0 portland 3 851,044
$ 1,507,900 4 3.5 4500 0 0 1 0 portland 3 1,195,250
$ 1,350,000 5 4.5 5798 0 0 1 0 portland 3 1,572,657
$ 1,387,500 4 3.5 5220 0 0 1 0 portland 3 1,335,426
$ 1,500,000 4 3.5 6264 0 0 1 0 portland 3 1,538,682
$ 3,000,000 6 6.5 12500 0 0 1 0 portland 3 3,108,590
$ 1,799,000 5 3.5 6489 0 0 1 0 portland 3 1,600,759
$ 875,000 4 2.5 2804 0 0 1 0 portland 3 758,630
$ 640,000 4 2 2595 0 0 1 0 portland 3 664,726
$ 675,000 2 2.5 2670 0 0 1 0 portland 3 695,997
$ 709,700 3 2.5 3316 0 0 1 0 portland 3 840,039
$ 977,500 4 3.5 3300 0 0 1 0 portland 3 961,623
$ 749,000 4 2.5 3035 0 0 1 0 portland 3 803,603
$ 1,000,000 4 3.5 5079 0 0 1 0 portland 3 1,307,975
? 4 2.5 2900 0 0 0 1 chicago 4 1,039,641
Selling
City Price Bedrooms Bathrooms SqFt new york boston portland chicago
SUMMARY OUTPUT
Regression Statistics
Multiple R 89.02%
R Square 79.24%
Adjusted R Square 78.10%
Standard Error 240,224.70
Observations 116
Coefficients Standard Error t Stat P-value < 5% ? Lower 95% Upper 95%
Intercept 135,885.08 121,399.79 1.12 26.5% (104,725.36) 376,495.51
Bedrooms 18,272.33 30,699.61 0.60 55.3% (42,573.30) 79,117.95
Bathrooms 106,427.45 35,895.03 2.96 0.4% 35,284.67 177,570.23
SqFt 194.69 29.84 6.52 0.0% 135.54 253.84
new york 7,814.42 63,073.97 0.12 90.2% (117,196.14) 132,824.98
boston (301,310.39) 75,696.43 (3.98) 0.0% (451,338.25) (151,282.53)
portland (262,321.00) 89,373.33 (2.94) 0.4% (439,456.03) (85,185.97)
RESIDUAL OUTPUT
2_SIG 1_SIG INTERPRETATION:
Observation actual price Predicted Price Residuals Standard Residuals OUTLIER ? OUTLIER ?
1 $ 777,000 783,485.82 (6,485.82) (0.03) 0.00 0.00 R^2 = 79.24%
2 $ 335,000 221,658.45 113,341.55 0.48 0.00 0.00 THAT IS, 79% OF THE VARIATION IN PRICE IS EXPLAINED BY THE INDEPENDENT VARIABLES.
3 $ 1,308,000 1,374,048.12 (66,048.12) (0.28) 0.00 0.00 STD.ERROR OF ESTIMATE = 240,224.70
4 $ 950,000 883,750.69 66,249.31 0.28 0.00 0.00 THAT IS, USING THIS MODEL TO PREDICT PRICES WE WILL BE OFF BY THAT AMOUNT, ON AVERAGE.
5 $ 578,500 706,520.02 (128,020.02) (0.55) 0.00 0.00 THIS IS LESS THAN HALF THE STD.DEV. OF ACTUAL PRICES
6 $ 2,430,000 1,524,643.14 905,356.86 3.87 1.00 1.00 THE INTERCEPT, HERE, HAS NO INTERPRETATION ( EMPTY LOT ?)
7 $ 1,890,000 1,540,023.57 349,976.43 1.50 0.00 1.00 EACH SLOPE HAS A MEANING.
8 $ 1,325,000 1,142,047.81 182,952.19 0.78 0.00 0.00 E.G., BATHROOMS = $106,427 THAT IS, EACH ADDITIONAL BATHROOM INCREASES PRICE BY $106,427 ON AVERAGE, HOLDING ALL VARIABLES CONSTANT
9 $ 810,000 796,737.68 13,262.32 0.06 0.00 0.00 SLOPE OF DUMMY VARIABLES HAS SPECIAL MEANING.
10 $ 690,000 882,499.64 (192,499.64) (0.82) 0.00 0.00 EACH SLOPE IS REALTIVE TO THE CITY LEFT OUT;
11 $ 545,000 486,952.19 58,047.81 0.25 0.00 0.00 E.G., NEW YORK HOUSES SELL FOR $7,814 MORE THAN CHICAGO, ON AVERAGE.
12 $ 500,000 629,748.92 (129,748.92) (0.55) 0.00 0.00 PORTLAND SELL FOR $262,231 LESS THAN CHICAGO, ON AVERAGE
13 $ 432,000 500,829.59 (68,829.59) (0.29) 0.00 0.00 HOLDING CONSTANT ALL OTHER VARIABLES.
14 $ 1,500,000 1,625,453.05 (125,453.05) (0.54) 0.00 0.00
15 $ 1,375,000 1,913,201.92 (538,201.92) (2.30) 1.00 1.00 EACH SLOPE HAS A P-VALUE, WHICH INDICATES STATISTICAL SIGNIFICANCE.
16 $ 1,265,000 1,153,493.84 111,506.16 0.48 0.00 0.00 E.G., BOSTON, PORTLAND ARE SIGNFICANT IN DETERMINING SELLING PRICE
17 $ 1,150,000 1,461,491.97 (311,491.97) (1.33) 0.00 1.00 WE COULD, FOR EXAMPLE, LUMP TOGETHER NEW YORK WITH CHICAGO.
18 $ 1,085,000 898,323.93 186,676.07 0.80 0.00 0.00
19 $ 1,075,000 1,380,823.21 (305,823.21) (1.31) 0.00 1.00 NOT TO SAY THAT NO. OF BEDROOMS IS NOT AN IMPORTANT FACTOR , BUT THAT ITS ADDITIONAL INSIGHT ABOVE,
20 $ 1,030,000 943,854.32 86,145.68 0.37 0.00 0.00 AND BEYOND BATHROOMS, SQUARE FEET, ... IS NOT STATISTICALLY SIGNIFICANT.
21 $ 1,010,000 802,370.66 207,629.34 0.89 0.00 0.00 IF WE REMOVE BEDROOMS FROM THE REGRESSION WE AS GOOD A MODEL (R^2 UNCHANGED).
22 $ 1,007,500 1,119,396.39 (111,896.39) (0.48) 0.00 0.00
23 $ 980,000 975,838.63 4,161.37 0.02 0.00 0.00 THE 95% CONFIDENCE INTERVAL TELLS US THAT, FOR EXAMPLE, WE ARE 95% CONFIDENT THAT
24 $ 940,000 969,580.13 (29,580.13) (0.13) 0.00 0.00 EACH ADDITIONAL SQUARE FOOT ADDS BETWEEN $136 TO $245 TO THE SELLING PRICE.
25 $ 905,000 1,022,572.31 (117,572.31) (0.50) 0.00 0.00
26 $ 799,000 858,246.42 (59,246.42) (0.25) 0.00 0.00 USING THE MODEL TO PREDICT WE SIMPLY PLUG IN NEEDED INPUT VARIABLE VALUES,
27 $ 788,000 664,377.55 123,622.45 0.53 0.00 0.00 E.G., 4 BEDROOMS, 2.5 BATHROOMS, 2900 SQUARE FEET, IN CHICAGO.
28 $ 759,000 686,154.28 72,845.72 0.31 0.00 0.00 EST. PRICE =135885 + 18272*4 + 106427*2.5 + 195*2900 + 7814*0 - 301310*0 -262321*0 = $1,039,641
29 $ 753,000 849,624.80 (96,624.80) (0.41) 0.00 0.00 WITH A STD. ERROR = $240,224 WE CAN BE 68% CONFIDENT THAT THE SELLING PRICE WILL
30 $ 670,500 716,254.48 (45,754.48) (0.20) 0.00 0.00 BE BETWEEN $799,417 AND $1,279,866
31 $ 650,000 829,043.06 (179,043.06) (0.77) 0.00 0.00 AND 95% CONFIDENT BETWEN $559,192 AND $ 1,520,091
32 $ 410,000 376,397.24 33,602.76 0.14 0.00 0.00
33 $ 2,125,000 1,508,082.39 616,917.61 2.64 1.00 1.00
34 $ 2,000,000 1,764,041.64 235,958.36 1.01 0.00 1.00
35 $ 1,770,000 1,621,208.92 148,791.08 0.64 0.00 0.00
36 $ 1,601,000 1,843,263.82 (242,263.82) (1.04) 0.00 1.00
37 $ 1,260,000 1,563,998.78 (303,998.78) (1.30) 0.00 1.00
38 $ 1,250,000 1,195,128.85 54,871.15 0.23 0.00 0.00
39 $ 1,050,000 1,387,678.78 (337,678.78) (1.44) 0.00 1.00
40 $ 887,000 926,776.98 (39,776.98) (0.17) 0.00 0.00
41 $ 807,000 1,079,215.64 (272,215.64) (1.16) 0.00 1.00
42 $ 775,000 690,659.75 84,340.25 0.36 0.00 0.00
43 $ 700,000 652,473.07 47,526.93 0.20 0.00 0.00
44 $ 693,000 769,481.21 (76,481.21) (0.33) 0.00 0.00
45 $ 649,000 635,368.88 13,631.12 0.06 0.00 0.00
46 $ 630,000 757,917.94 (127,917.94) (0.55) 0.00 0.00
47 $ 557,000 798,710.60 (241,710.60) (1.03) 0.00 1.00
48 $ 546,000 563,500.16 (17,500.16) (0.07) 0.00 0.00
49 $ 530,000 428,322.33 101,677.67 0.43 0.00 0.00
50 $ 527,000 476,152.24 50,847.76 0.22 0.00 0.00
51 $ 441,000 370,333.43 70,666.57 0.30 0.00 0.00
52 $ 439,000 380,096.33 58,903.67 0.25 0.00 0.00
53 $ 2,340,000 1,445,109.64 894,890.36 3.83 1.00 1.00
54 $ 1,440,000 1,491,935.37 (51,935.37) (0.22) 0.00 0.00
55 $ 1,308,000 1,262,742.86 45,257.14 0.19 0.00 0.00
56 $ 1,155,000 1,012,280.65 142,719.35 0.61 0.00 0.00
57 $ 982,000 779,879.76 202,120.24 0.86 0.00 0.00
58 $ 910,000 986,427.62 (76,427.62) (0.33) 0.00 0.00
59 $ 809,200 947,748.10 (138,548.10) (0.59) 0.00 0.00
60 $ 770,000 1,304,736.52 (534,736.52) (2.29) 1.00 1.00
61 $ 659,000 794,359.96 (135,359.96) (0.58) 0.00 0.00
62 $ 580,000 657,458.37 (77,458.37) (0.33) 0.00 0.00
63 $ 415,000 310,174.50 104,825.50 0.45 0.00 0.00
64 $ 400,000 473,352.40 (73,352.40) (0.31) 0.00 0.00
65 $ 370,000 462,913.38 (92,913.38) (0.40) 0.00 0.00
66 $ 321,000 386,726.35 (65,726.35) (0.28) 0.00 0.00
67 $ 2,750,000 1,622,793.29 1,127,206.71 4.82 1.00 1.00
68 $ 1,570,000 1,583,467.69 (13,467.69) (0.06) 0.00 0.00
69 $ 1,300,000 1,094,124.25 205,875.75 0.88 0.00 0.00
70 $ 1,290,000 1,640,677.83 (350,677.83) (1.50) 0.00 1.00
71 $ 1,250,000 1,188,410.66 61,589.34 0.26 0.00 0.00
72 $ 1,238,000 1,257,400.91 (19,400.91) (0.08) 0.00 0.00
73 $ 1,191,000 1,176,985.33 14,014.67 0.06 0.00 0.00
74 $ 1,145,000 1,001,545.89 143,454.11 0.61 0.00 0.00
75 $ 981,000 1,212,650.87 (231,650.87) (0.99) 0.00 0.00
76 $ 895,800 1,285,797.07 (389,997.07) (1.67) 0.00 1.00
77 $ 678,000 689,658.68 (11,658.68) (0.05) 0.00 0.00
78 $ 595,000 631,111.74 (36,111.74) (0.15) 0.00 0.00
79 $ 511,000 433,412.69 77,587.31 0.33 0.00 0.00
80 $ 469,000 403,756.35 65,243.65 0.28 0.00 0.00
81 $ 295,500 281,880.98 13,619.02 0.06 0.00 0.00
82 $ 124,900 133,298.05 (8,398.05) (0.04) 0.00 0.00
83 $ 1,290,000 1,131,327.73 158,672.27 0.68 0.00 0.00
84 $ 1,259,500 1,017,252.10 242,247.90 1.04 0.00 1.00
85 $ 1,136,500 1,330,501.37 (194,001.37) (0.83) 0.00 0.00
86 $ 1,035,000 1,016,305.51 18,694.49 0.08 0.00 0.00
87 $ 1,025,000 1,199,932.48 (174,932.48) (0.75) 0.00 0.00
88 $ 875,000 1,079,524.99 (204,524.99) (0.87) 0.00 0.00
89 $ 755,000 852,989.82 (97,989.82) (0.42) 0.00 0.00
90 $ 695,000 726,183.62 (31,183.62) (0.13) 0.00 0.00
91 $ 625,900 832,289.17 (206,389.17) (0.88) 0.00 0.00
92 $ 451,750 441,005.57 10,744.43 0.05 0.00 0.00
93 $ 1,925,000 1,888,122.19 36,877.81 0.16 0.00 0.00
94 $ 1,915,000 1,781,632.73 133,367.27 0.57 0.00 0.00
95 $ 939,000 1,080,938.41 (141,938.41) (0.61) 0.00 0.00
96 $ 885,000 987,491.53 (102,491.53) (0.44) 0.00 0.00
97 $ 819,663 946,707.17 (127,044.17) (0.54) 0.00 0.00
98 $ 740,000 714,604.91 25,395.09 0.11 0.00 0.00
99 $ 530,000 614,563.17 (84,563.17) (0.36) 0.00 0.00
100 $ 431,000 380,262.57 50,737.43 0.22 0.00 0.00
101 $ 570,000 368,374.51 201,625.49 0.86 0.00 0.00
102 $ 1,131,000 1,097,127.04 33,872.96 0.14 0.00 0.00
103 $ 899,000 851,043.91 47,956.09 0.21 0.00 0.00
104 $ 1,507,900 1,195,250.33 312,649.67 1.34 0.00 1.00
105 $ 1,350,000 1,572,656.54 (222,656.54) (0.95) 0.00 0.00
106 $ 1,387,500 1,335,426.47 52,073.53 0.22 0.00 0.00
107 $ 1,500,000 1,538,681.88 (38,681.88) (0.17) 0.00 0.00
108 $ 3,000,000 3,108,590.00 (108,590.00) (0.46) 0.00 0.00
109 $ 1,799,000 1,600,759.25 198,240.75 0.85 0.00 0.00
110 $ 875,000 758,630.20 116,369.80 0.50 0.00 0.00
111 $ 640,000 664,726.46 (24,726.46) (0.11) 0.00 0.00
112 $ 675,000 695,997.21 (20,997.21) (0.09) 0.00 0.00
113 $ 709,700 840,038.68 (130,338.68) (0.56) 0.00 0.00
114 $ 977,500 961,623.43 15,876.57 0.07 0.00 0.00
115 $ 749,000 803,603.38 (54,603.38) (0.23) 0.00 0.00
116 $ 1,000,000 1,307,975.31 (307,975.31) (1.32) 0.00 1.00
LET'S SEE IF DAILY UP AND DOWN CHANGES IN THE PRICE RETURNS OF GOOGLE STOCK , 2004 - 2014, ARE CONSISTENT WITH
WE SAY THAT THE SHARE PRICE IS UP IF THE RETURN IS > 0.
1 MEAN= 1,183.72
1 STDEV= 24.2995
0 PROBABILITY OF AT LEAST 1,188 RUNS =
0 HENCE:
(COUNTIF=1)
43.00%
5.22%
PROBLEM 12
CELL_PHONES
YEAR_NUMBER Year IN 000'S
1 1985 340
2 1986 681
3 1987 1,230
4 1988 2,069
5 1989 3,508
6 1990 5,283
7 1991 7,557
8 1992 11,032
9 1993 16,009
10 1994 24,134
11 1995 33,758
12 1996 44,042
13 1997 55,312
14 1998 69,209
15 1999 86,047
16 2000 109,478
17 2001 128,374
18 2002 140,766
19 2003 158,721
20 2004 182,140
21 2005 207,896
22 2006 233,000
24 2008 262,700
25 2009 276,610
26 2010 300,520
30 2014 327,177
C
U.S. Cell Phones Per 100 People
e
l
l 100
P 80
h
o 60
n
e 40
s
20
P
e 0
r 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 20
1 Year
0
0
p
e
o
p
l
e
Y= L / ( 1+a*e(-bt) ) L a b
107.7480775384 146.4539125451 0.2685755147
US_POULATION
IN MILLIONS CELL PHONES/100 Pearl Forecast Squared error ABS_ERROR
238 0.143 0.954 0.66 0.81
240 0.284 1.244 0.92 0.96
242 0.508 1.622 1.24 1.11
244 0.848 2.112 1.60 1.26
247 1.420 2.746 1.76 1.33
250 2.113 3.564 2.11 1.45
253 2.987 4.615 2.65 1.63
257 4.293 5.958 2.77 1.67
260 6.157 7.664 2.27 1.51
263 9.176 9.810 0.40 0.63
266 12.691 12.482 0.04 0.21
269 16.372 15.765 0.37 0.61
273 20.261 19.733 0.28 0.53
276 25.076 24.434 0.41 0.64
279 30.841 29.875 0.93 0.97
282 38.822 36.003 7.94 2.82
285 45.044 42.700 5.49 2.34
288 48.877 49.778 0.81 0.90
290 54.731 57.001 5.15 2.27
293 62.164 64.113 3.80 1.95
296 70.235 70.874 0.41 0.64
298 78.188 77.087 1.21 1.10
304 86.414 87.426 1.02 1.01
307 90.101 91.491 1.93 1.39
308 97.571 94.862 7.34 2.71
317 103.210 102.971 0.24
AVG.ABS.ERROR
0 People 1.30
one-way datatable
Col umn G
Col umn H Pearl Forecast DIFF=
0.95 Y(t)-Y(T-1) DIFF(DIFF)
10.00 9.81
4 2007 2010 2013 year= 10.20 10.30 0.49
10.40 10.81 0.51 0.02
10.60 11.34 0.53 0.02
10.80 11.90 0.56 0.02
11.00 12.48 0.58 0.02
11.20 13.09 0.61 0.02
11.40 13.72 0.63 0.03
11.60 14.37 0.66 0.03
11.80 15.06 0.68 0.03
12.00 15.77 0.71 0.03
12.20 16.50 0.74 0.03
12.40 17.27 0.76 0.03
12.60 18.06 0.79 0.03
12.80 18.88 0.82 0.03
13.00 19.73 0.85 0.03
13.20 20.61 0.88 0.03
13.40 21.52 0.91 0.03
13.60 22.46 0.94 0.03
13.80 23.43 0.97 0.03
14.00 24.43 1.00 0.03
14.20 25.46 1.03 0.03
14.40 26.52 1.06 0.03
14.60 27.61 1.09 0.03
14.80 28.73 1.12 0.03
15.00 29.87 1.15 0.03
15.20 31.05 1.17 0.03
15.40 32.25 1.20 0.03
15.60 33.48 1.23 0.03
15.80 34.73 1.25 0.03
16.00 36.00 1.28 0.02
16.20 37.30 1.30 0.02
16.40 38.62 1.32 0.02
16.60 39.96 1.34 0.02
16.80 41.32 1.36 0.02
17.00 42.70 1.38 0.02
17.20 44.09 1.39 0.02
17.40 45.50 1.41 0.01
17.60 46.92 1.42 0.01
17.80 48.34 1.43 0.01
18.00 49.78 1.44 0.01
18.20 51.22 1.44 0.01
18.40 52.66 1.44 0.00
18.60 54.11 1.45 0.00
18.80 55.56 1.45 0.00
19.00 57.00 1.44 0.00
19.20 58.44 1.44 0.00
19.40 59.87 1.43 -0.01
19.60 61.30 1.42 -0.01
19.80 62.71 1.41 -0.01
20.00 64.11 1.40 -0.01
20.20 65.50 1.39 -0.01
20.40 66.87 1.37 -0.02
20.60 68.23 1.35 -0.02
20.80 69.56 1.33 -0.02
21.00 70.87 1.31 -0.02
21.20 72.17 1.29 -0.02
21.40 73.43 1.27 -0.02
21.60 74.68 1.24 -0.02
21.80 75.90 1.22 -0.03
22.00 77.09 1.19 -0.03
22.20 78.25 1.16 -0.03
22.40 79.39 1.14 -0.03
22.60 80.50 1.11 -0.03
22.80 81.58 1.08 -0.03
23.00 82.63 1.05 -0.03
23.20 83.64 1.02 -0.03
23.40 84.64 0.99 -0.03
23.60 85.60 0.96 -0.03
23.80 86.53 0.93 -0.03
24.00 87.43 0.90 -0.03
24.20 88.30 0.87 -0.03
24.40 89.14 0.84 -0.03
24.60 89.95 0.81 -0.03
24.80 90.74 0.78 -0.03
25.00 91.49 0.76 -0.03
SSE
53.5323221725
INFLECTION POINT:
Y= L /2 ----> 53.9
YEARS -----> 18.6
DATA SET BELOW CONTAINS WEEKLY SALES OF A PRODUCT AS WELL AS PRODUCT PRICE AND ADVERTISING EXPENSE
EXPLAIN HOW PRICE AND ADVERTISING EFFECT SALES ?
WHAT DOES IT MEAN TO SAY THAT AN INDEPENDENT VARIABLE HAS A NONLINEAR EFFECT ON THE DEPENDENT VARIABLE ?
WHAT DOES IT MEAN TO SAY THAT TWO INDEPENDENT VARIABLES HAVE AN INTERACTION EFFECT ON THE DEPENDENT VARIABLE ?
ABSOLUTE VALUE
STANDARDIZED FINAL
Sales Price Ad A*P Ad^2 Sales Fcst Residuals Residuals OUTLIER ? Coefficients
22,845 8 1 8 1 22,938 (93) 0.69 NO Intercept 24012.24758
20,417 9 8 72 64 20,321 96 0.71 NO Price -137.997013
23,761 5 3 15 9 23,854 (93) 0.69 NO Ad 660.0418883
22,674 4 12 48 144 22,441 233 1.73 NO A*P -74.1289748
22,782 7 5 35 25 22,818 (36) 0.26 NO Ad^2 -37.3728822
23,807 5 3 15 9 23,854 (47) 0.35 NO
18,924 10 9 90 81 18,874 50 0.37 NO residuals
21,855 9 5 45 25 21,800 55 0.41 NO mean= 0.00
21,749 10 4 40 16 21,709 40 0.29 NO stdev= 133.20
22,683 4 12 48 144 22,441 242 1.80 NO
20,968 6 11 66 121 21,030 (62) 0.46 NO RSQ= 99.39%
22,202 10 2 20 4 22,320 (118) 0.88 NO
23,241 6 5 30 25 23,326 (85) 0.63 NO TWO-WAY DATATABLE
19,004 10 9 90 81 18,874 130 0.97 NO EFFECT OF PRICE & AD ON SALES FCST
23,978 4 1 4 1 23,786 192 1.42 NO
20,497 8 9 72 81 20,484 13 0.10 NO PRICE=
22,322 9 3 27 9 22,413 (91) 0.67 NO 22,938 3 5 7 9 12 15
22,628 8 4 32 16 22,578 50 0.37 NO 1 23,999 23,574 23,150 22,726 22,089 21,453
21,051 10 6 60 36 20,799 252 1.87 NO 3 24,575 23,854 23,133 22,413 21,331 20,250
24,515 3 3 9 9 24,575 (60) 0.44 NO 5 24,852 23,835 22,818 21,800 20,274 18,749
22,126 10 2 20 4 22,320 (194) 1.44 NO 7 24,831 23,517 22,203 20,889 18,918 16,948
22,141 5 11 55 121 21,984 157 1.17 NO 9 24,510 22,900 21,289 19,679 17,264 14,848
21,151 9 7 63 49 20,889 262 1.94 NO 12 23,468 21,413 19,358 17,303 14,221 11,138
22,558 5 10 50 100 22,479 79 0.59 NO
21,734 7 8 56 64 21,784 (50) 0.37 NO FOR GIVEN AD : PRICE EFFECT
22,137 6 9 54 81 22,094 43 0.32 NO AS PRICES INCREASE SALES DECREASE
23,368 5 7 35 49 23,517 (149) 1.10 NO EFFECT IS GREATER AT HIGHER AD
24,572 3 7 21 49 24,831 (259) 1.92 NO
23,732 5 4 20 16 23,882 (150) 1.11 NO FOR GIVEN PRICE: ADD EFFECT
24,717 3 6 18 36 24,879 (162) 1.20 NO AT LOW PRICES AD INCREASE EFFECT INCREASES SALES
21,618 8 7 56 49 21,546 72 0.53 NO AT HIGH PRICES AD INCREASE EFFECT DECREASES SALES
24,346 3 9 27 81 24,510 (164) 1.22 NO
24,041 3 11 33 121 23,890 151 1.12 NO
18,068 10 10 100 100 18,083 (15) 0.11 NO
22,820 8 1 8 1 22,938 (118) 0.87 NO SUMMARY OUTPUT
22,842 8 3 24 9 22,773 69 0.51 NO
23,166 6 6 36 36 23,130 36 0.26 NO Regression Statistics
20,979 9 7 63 49 20,889 90 0.67 NO Multiple R 0.996924419
22,499 9 2 18 4 22,607 (108) 0.80 NO R Square 0.993858298
21,026 9 7 63 49 20,889 137 1.01 NO Adjusted R0.993704755
24,599 3 6 18 36 24,879 (280) 2.07 YES Standard E134.8554475
23,676 5 1 5 1 23,574 102 0.75 NO Observatio 165
22,855 6 7 42 49 22,860 (5) 0.04 NO
21,756 10 4 40 16 21,709 47 0.35 NO
20,976 10 6 60 36 20,799 177 1.31 NO
22,111 10 2 20 4 22,320 (209) 1.55 NO
21,038 6 11 66 121 21,030 8 0.06 NO
23,050 6 6 36 36 23,130 (80) 0.60 NO
24,054 4 7 28 49 24,174 (120) 0.89 NO
22,184 7 7 49 49 22,203 (19) 0.14 NO Coefficients Standard Error t Stat P-value Lower 95% Upper 95%
24,024 4 2 8 4 24,038 (14) 0.10 NO Intercept 24012.24758 71.11479957 337.6547179 3.3475E-230 23871.80285 24152.69231
24,255 3 1 3 1 23,999 256 1.90 NO Price -137.997013 9.633696108 -14.32441 1.78044E-30 -157.022614 -118.971411
23,635 5 1 5 1 23,574 61 0.45 NO Ad 660.0418883 16.09294845 41.01435424 8.35145E-87 628.2598993 691.8238773
20,533 10 7 70 49 20,232 301 2.23 YES A*P -74.1289748 1.420979292 -52.1675264 2.3559E-102 -76.935269 -71.3226805
24,313 3 1 3 1 23,999 314 2.33 YES Ad^2 -37.3728822 1.016172056 -36.7781047 5.94521E-80 -39.379722 -35.3660424
24,347 3 2 6 4 24,324 23 0.17 NO
24,102 3 11 33 121 23,890 212 1.57 NO
24,482 3 2 6 4 24,324 158 1.17 NO