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Problems 1
Problems 1
A researcher wants to test some hypotheses regarding the relationship between size and age
of a firm and its performance in a particular industry. Size was measured by the number of
employees (in 100s) working in the firm, age was the number of years for which the firm has
been operating, and performance was measured by return on equity. A sample of 50 firms
was selected at random. Data on these variables is given in following table.
(a) State the multiple regression equation.
(b) Interpret the meaning of the slopes, b1 and b2, in this problem.
(c) Explain why the regression coefficient, b0, has no practical meaning in the context of this
problem.
(d) Predict the performance of the firm whose size is 55 and age 10.
(e) Compute the coefficient of multiple determination,r², and interpret its meaning.
(f) Determine whether a significant relationship exists between the dependent variable and
the independent variable at the 0.05 level of significance.
(g) At the 0.05 level of significance, determine whether each independent variable makes a
significant contribution to the regression model.
(h) Analyze correlation between the dependent variable and independent variables and
interpret the result.
The appraised value (in thousands of dollars), land area (in acres), and age of house (in years)
was collected for a sample of 30 single-family homes located in Glen Cove, New York (see the
following table). Develop a multiple linear regression model to predict appraised value based
on land area of the property and age, in years.