Question 1.

P=𝐛𝐨 + 𝐛𝟏 (𝐒 − 𝟑𝟎) + 𝐛𝟐 𝐆 + 𝐛𝟑
(a). Set S=0, G=0 ,E=0 then P= 4117.85
The Intercept can be interpreted as the average price of the car, when average speed of in
highways is 30, the car takes petrol as fuel and size of its engine is zero (or the engine is not
present)
Interpretation of G can be stated line as following-
If a petrol car and diesel car have the same size of engine and the same average speed in
highways , then the price of diesel car will 2527.74 units higher than petrol car , on an average.
With same average speed S and same engine size E the price for diesel car is
P1=4117.85 − 268.41(S − 30) + 2527.74 + 135.12 ∗ E
And the price for petrol car is
P2=4117.85 − 268.41(S − 30) + 135.12 ∗ E
P1 - P2 = 2527.74
(b). To test H0 : b1 =0 vs H0 : b1 ≠0
̂
b
Test statistics is t=SE(b1̂ ) ~ t n−4 , Here n=205 , n-4 = 201
1
We reject H0 at 5% level if t< t 0.025,201 or t< t 0.975,201
−268.41
t= 55.09 =-4.87
t 0.025,201 = - 1.97 , t 0.975,201 =1.97
Based on the given evidence we conclude that coefficient of S is significant at 5 % level
(c). 𝐑𝟐 = 0.79 => It means 79 % variability of the data is explained by regression of Y on S ,
G and E
RMSE=3556.2 => It means the average square deviation of the predicted regression line
from the data is 3556.2 units. It’s a measure of accuracy of the regression line.
(d). Here R2 = 0.79. It means 79% variability of data is explained by the regression so, the fit
of the regression can be taken to be good.
A formal test can be done by calculating the F-statistics
R2 n−p 0.79 205−4 201
F= 1− R2 × p−1 = 1−0.79 × 4−1
= 3.76 × 3
= 251.9
We say that the regression fit is significant at 5% if F>F0.05,3,201 = 0.117
Hence we say that the regression fit is significant at 5% level.
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Question 2
Source DF SS MS F-Ratio
(1).
Regression 3 372 124 42.72
Error 41 119 2.9
Total 44 491
(2). The hypothesis is
H0 = β1 = β2 = β3 = 0 H1 : H0 is not true
In other words , the null hypothesis here is that the overall regression model is useful.
(3). The P-Value is P ( F3,41 > Fobserved) = P ( F3,41 > 42.72)=0
(4). The conclusion is that the overall regression model for page-costs is significant/useful.
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Question 3
1)
a) PBT = 20.50 + 1.4 ∗ 50 − .03 ∗ 300 − 0.2 ∗ 200 = 20.50 + 70 − 9 − 40 = 41.50
b) The prediction interval is wider than the length of a confidence interval for PBT.
Therefore (30.5, 52.5) is the possible choice for the prediction interval.
c) Note that the formula for the prediction interval is.
̂ −t
[L, U] = [PBT α SE, ̂ +t
PBT α SE ]
n−p, n−p,
2 2

(U − L) = 2t n−p,α SE
2
(U − L) 52.5 − 30.5 11
SE = = = = 5.51
2t n−p,α 2 ∗ t 66,0.025 1.996
2
2) B) Model 2
3) A. C) 1.103 ± t ∗ .359
B. C) 30 n=35 , p=5 , n-p= 30
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Question 4
a) Profit = 912.39 + 687.69log e 3 = 912.39 + 755.504 = 1667.89
b) 95% confidence interval for β is: -
=[β̂ − t n−p,0.025 SE(β̂), β̂ + t n−p,0.025 SE(β̂)]
= [687.69 − t 98,0.025 ∗ 32.81, 687.69 + t 98,0.025 ∗ 32.81 ]
=[622.57, 752.8 ]
For z-cut off = 1.96 Interval is
=[623.38, 751.997 ] Both intervals are correct.
c) G(x) = α + β log e x − 1000x
Alternative acceptable answer
G(x) = α + β log e x − 1000x
G(x) = α + β log e x − 1000x = 912.39 + 687.69 log e x − 1000x
d) G(x) = α + β log e x − 1000x
dG(x) β
= 0 + x − 1000
dx
If xopt is the optimal display space, then.
dG(x) β
=0 ⇒ − 1000 = 0
dx x
β d2 G(x) β
⇒ xopt = = 0.68769, | = − x2 < 0 if β >
1000 dx2 x=xopt
0 so this point is optimal
β β
e) xopt = , a parametric function of β. AS, β ⇾ is a increasing function, a
1000 1000
95% confidence interval for xopt can be obtained by applying the function directly to
the lower and upper bounds for the confidence interval that we obtained in part (b).
622.57 752.8
Therefore a 95% confidence interval for xopt is [ , ]=
1000 1000
[0.62257, 0.7528] Also, other acceptable answer is [0.623, 0.7519]
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