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True/False Questions

3. An assumption in linear regression is that the error terms are normally distributed with

mean zero and constant variance.

and b1 is the F distribution.

5. The correlation coefficient, r, measures the degree of any relationship between two

variables.

6. The population coefficient, rho, can take on any value between -1 and 1.

explained by the regression relationship of Y with X.

9. The total deviation of any observed y value from the mean can be expressed as the

sum of the deviation explained by the regression and the unexplained deviation, or

error.

Chapter 10 Simple Linear Regression and Correlation

Chapter 10 Simple Linear Regression and Correlation

11. The slope of the regression equation and r carry the same sign.

12. The prediction interval for a given x-value and the confidence interval for the mean y

for the same given x are the same.

13. In a significant correlation you can assume causation between the independent and

dependent variables.

The following is the annual advertising expenditure and sales (in thousands of dollars) of

firms in a particular industry:

Sales: 1,089, 627, 954, 116, 334, 304, 828, 83

A) 3,814.875

B) 311

C) 15,905

D) 855,909.5

E) none of the above

Chapter 10 Simple Linear Regression and Correlation

A) 4,094,422

B) 5,090

C) 1,050,038.9

D) 55,957.25

E) none of the above

A) 224.361

B) 1,582,990

C) 253,831

D) 43,027.9

E) none of the above

A) 14.668

B) 103.405

C) 224.361

D) -9,293.64

E) none of the above

A car dealer is interested in the relationship between the amount of money (X) people spend

on maintenance of their cars, and the number of miles the car runs (Y) before a breakdown. A

random sample of 25 car owners gives the following results:

X 1,066 Y 79,425

SSX = 4,296.4 SSXY = 514,028

Chapter 10 Simple Linear Regression and Correlation

A) 74.508

B) 4.7856

C) 119.64

D) 0.00835

E) none of the above

20. Give the least squares estimate of the regression intercept parameter.

A) 42.64 - (b1)(3,177)

B) 3,177 - (b1)(42.64)

C) 514,028 - (b1)(4,296.4)

D) 3,177 - (b1)(4,296.4/42.64)

E) none of the above

A) a direct linear relationship

B) an indirect, or negative, linear relationship

C) a vertical line

D) not linear

E) none of the above

A) between -0.40 and 0.40

B) between -0.60 and -0.80

C) between 0.60 and 0.80

D) between 0.80 and 1.00

E) between -0.80 and -1.00

Chapter 10 Simple Linear Regression and Correlation

23. A regression equation is given as: y = 2.5x - 0.85. Compute the predicted value of y

when x is 10.

A) 24.15

B) 16.5

C) 1.65

D) insufficient information to determine

E) none of the above

A telemarketing company wants to know if the sales go up as they call more people per day

but spend less time per call. The following is the data of nine randomly selected days, giving

the number of calls the salesperson makes in a day and the total amount of sales made (in

thousands of dollars).

C a lls 25 29 33 37 43 48 52 55 67

S a le s 3 .5 3 .8 4 .4 4 .4 4 .6 4 .8 4 .7 4 .9 5 .5

A) .0451

B) .0415

C) .0541

D) .0514

E) none of the above

A) .9475

B) .9754

C) .9530

D) .9503

Chapter 10 Simple Linear Regression and Correlation

A) 2.71759 .53159

B) 2.71759 .35159

C) 2.17759 .53159

D) 2.17759 .35159

E) none of the above

A) .9530

B) .9350

C) .9802

D) .9082

E) none of the above

A) SSE

B) MSE

C) s(b0)

D) s

E) s(b1)

A) no linear correlation

B) almost perfect direct linear correlation

C) almost perfect indirect linear correlation

D) a non-linear relationship

E) none of the above

Chapter 10 Simple Linear Regression and Correlation

30. The estimate for the true population slope, bl, is the ratio of which two values?

A) SSX /SSY

B) SSXY/SSX

C) SSX/SSXY

D) SSXY/SSX

E) none of the above

31. When there is no linear correlation between two variables, what will the value of r be?

A) -1

B) +1

C) 0

D) a very small negative number

E) none of the above

32. The coefficient of determination, r2, has which one of the following properties?

A) is always negative

B) applies to any relationship between x and y

C) is a ratio of unexplained variation to explained variation

D) has the same sign as the slope of the regression line

E) ranges from zero to one

A) -2.5

B) 2.5

C) -3.4

D) 3.4

E) none of the above

Chapter 10 Simple Linear Regression and Correlation

34. An insurance company wants to predict sales from the amount of money they spend

on advertising. Which would be the independent variable?

A) sales

B) advertising

C) insufficient information to decide

35. Observed errors, which represent information from the data which is not explained by

the model, are called?

A) marginal values

B) residuals

C) mean square errors

D) standard errors

E) none of the above

36. When testing H0: b1 = 0, against H1: b1 0, failing to reject the null hypothesis means

what?

A) the slope of the regression line is not zero

B) there is evidence of a relationship between x and y, but it is not linear

C) the relationship between x and y is an inverse one

D) there is not a linear relationship between x and y

E) there is a linear relationship between x and y

Test the hypothesis that the population slope of the regression line, b1 is zero against the

alternative that it is not equal to zero. The regression equation is: y = 4x - 5 and the standard

error of b1 is 1.6.

A) 4.0

B) 0.4

C) 2.5

D) -0.4

E) -2.5

Chapter 10 Simple Linear Regression and Correlation

Chapter 10 Simple Linear Regression and Correlation

38. If the decision is to reject the null hypothesis, what is the conclusion?

A) no linear relationship

B) the true population slope is zero

C) there is a relationship between x and y, but it is not linear

D) there is evidence of a linear relationship between x and y

E) none of the above

A) the errors are normally distributed

B) the error terms have a constant variance

C) the errors have a mean of zero

D) a and b

E) a, b, and c

The following data gives the monthly sales (in thousands) for different advertising

expenditures and sales commission percentages.

A d v e rtis in g 1 6 .5 1 8 .5 2 2 .3 1 7 .4 1 9 .0 2 0 .0 3 2 .0 1 8 .6

y = -103.367 + 20.238

40. Compute a 90% confidence interval for the average sales given advertising of 25,000.

A) 402.58 (1.943)(s)(0.4934)

B) 402.58 (1.943)(s)(1.115)

C) 402.58 (1.895)(s)(0.4934)

D) 402.58 (1.895)(s)(1.115)

E) none of the above

Chapter 10 Simple Linear Regression and Correlation

41. Compute a 95% prediction interval for sales when advertising is $22,000.

A) 341.87 (2.365)(s)(0.372)

B) 341.87 (2.447)(s)(0.372)

C) 341.87 (2.447)(s)(1.067)

D) 341.87 (2.365)(s)(1.067)

E) 341.87 (1.943)(s)(0.372)

A) 514,921

B) 518.95

C) 507,040

D) cannot determine from information given

E) none of the above

The following are the GMAT scores and the GPAs of a random sample of 6 students in a

graduate school. This graduate school wants to try to predict GPA based on GMAT score.

G M A T G PA

610 3 .6

470 3 .2 5

590 3 .5

520 3 .2

410 3 .0

750 4 .0

A) 71,683.3334

B) 1,942,100

C) 3,350

D) 0.62875

E) 11,682.5

Chapter 10 Simple Linear Regression and Correlation

A) 68,842.5

B) 71,683.3334

C) 11,682.50

D) 208.75

E) none of the above

A) 1.8

B) 343.39

C) 0.0029

D) 332.008

E) none of the above

A) 0.78

B) a negative number

C) a number very close to zero

D) 0.09

E) 0.98

A) 0.005212

B) 0.0764

C) 0.023375

D) 0.0029

E) none of the above

Chapter 10 Simple Linear Regression and Correlation

A) no linear correlation at all

B) perfect linear correlation

C) correlation, but not linear

D) some linear correlation

E) negative linear correlation

49. An unbiased estimator for s2, the variance of the population regression errors, is:

A) MSE

B) SSE

C) s(bl)

D) s(b0)

E) SSxy

50. The measure of how well the regression line fits the data is the:

A) coefficient of determination

B) slope of the regression line

C) mean square error

D) standard error of the regression coefficient

E) s(b0)

51. The deviation which is explained by the regression line can be expressed as:

A) the difference between each actual y value and the mean of the y's

B) the difference between each residual and the corresponding y value

C) the difference between each predicted y value and the mean of the y's

D) the difference between each actual y value and the predicted y value

E) the difference between each x value and each y value

Chapter 10 Simple Linear Regression and Correlation

52. The correlation coefficient, r, can take on any value within what range?

A) r 1

B) 0 r 1

C) -1 r

D) -1 r 1

E) any value that the slope of the regression equation can take on

A) 17

B) 4

C) 21

D) 13

E) None of the above

54. In regression, my estimated slope is equal to -3.2 and the standard deviataion of the

slope is 0.5 (sample size is large, over 100). Is there statistical evidence of a linear

relationship between X and Y?

A) No evidence

B) Some evidence

C) Strong evidence

D) Can't tell

55. In regression analysis, I get a z (or t) statistic value of 18.9 (the sample size is very

large). Is there evidence of a relationship between X and Y?

A) No evidence

B) Some evidence

C) Strong evidence

D) Can't tell

Chapter 10 Simple Linear Regression and Correlation

56. In regression, if the estimated slope is greater than 1.96 (with a large sample), is there

evidence of a relationship between X and Y?

A) No evidence

B) Some evidence

C) Strong evidence

D) Can't tell

57. A regression with R-square equal to 5% is classified, for prediction purposes as:

A) Poor

B) Fair

C) Good

D) Excellent

E) Can't tell

A) The strength of the relationship between two variables.

B) The direction of the relationship between two variables.

C) The strength and direction of the relationship between two variables.

D) The strength and direction of the relationship between two or more variables.

A) A positive correlation is from 0 to 1.00 and is stronger than a negative correlation.

B) A negative correlation is from -1.00 to 0 and is weaker than a negative correlation.

C) Both A and B, above.

D) In a positive correlation, as the independent variable increases, the dependent

variable decreases.

E) In a negative correlation, as the independent variable increases, the dependent

variable decreases.

F) Both D and E, above.

Chapter 10 Simple Linear Regression and Correlation

60. As the relationship deteriorates from a perfect correlation, what happens to the points

on a scatter diagram?

A) They become more scattered.

B) The slope changes.

C) The y-intercept changes.

D) Both B and C, above.

E) None of the above.

61. If two variables have a correlation coefficient of .30, what percentage of one variable

is accounted for by the other variable?

A) 30%

B) 70%

C) 10%

D) 9%

62. If you have 20 pairs of subjects what would be the degrees of freedom for a test of

correlation between the groups of scores?

A) 22

B) 21

C) 20

D) 19

E) 18

Chapter 10 Simple Linear Regression and Correlation

A shipping company offers customers the opportunity to purchase damage insurance for

shipped packages. The shipping company is interested in whether or not a simple predictive

model for package value can be constructed based on the package weight.

Eight packages have been randomly sampled, and their weight and value recorded in the

following table:

W e ig h t (X ) V a lu e (Y )

5 1 .6 7 3 4 .2 2

1 0 6 .0 8 7 8 .4 8

8 6 .2 8 4 5 .8 6

9 3 .7 4 5 1 .0 3

9 4 .4 6 4 6 .0 6

9 8 .9 6 6 0 .3 4

7 4 .7 6 4 1 .0 6

8 1 .3 8 4 7 .4 4

A) 2,082.09

B) 2,028.90

C) 1,824.27

D) 1,284.72

E) 1,333.78

A) 2,082.09

B) 2,028.90

C) 1,824.27

D) 1,284.72

E) 1,333.78

Chapter 10 Simple Linear Regression and Correlation

65. Which of the following pairs provide the correct least squares estimates for 0 and 1

in this situation?

A) b0 = -5.919; b1 = 0.657

B) b0 = 5.919; b1 = -0.657

C) b0 = 0.657; b1 = -5.919

D) b0 = -0.657; b1 = 5.919

E) b0 = -5.919; b1 = -0.657

66. Given least squares estimates for b0 and b1 in this situation, what proportion of

variation in package value is being explained by the linear model?

A) 0.286

B) 0.354

C) 0.534

D) 0.682

E) 0.863

67. Do these data provide sufficient evidence that package value is related to package

weight (assume a = 0.05)?

A) No, because FOBSERVED = 5.99 < FCRITICAL = 12.89; therefore, H0: b1 = 0 cannot

be rejected at a = 0.05

B) No, because FOBSERVED = 12.89 > FCRITICAL = 5.99; therefore, H0: b1 = 0 cannot

be rejected at a = 0.05

C) Yes, because FOBSERVED = 12.89 > FCRITICAL = 5.99; therefore, H0: b1 = 0 can be

rejected at a = 0.05

D) Yes, because FOBSERVED = 5.99 < FCRITICAL = 12.89; therefore, H0: b0 = 0 can be

rejected at a = 0.05

Chapter 10 Simple Linear Regression and Correlation

Twenty mutual funds specializing in technology-intensive stocks were randomly selected for a

study involving the effect of fund manager's experience on fund performance. Summary data

from the random sample are as follows:

V a ria b le A v erag e SS

E x p e rie n c e (X ) 1 9 .5 2 ,8 4 5

P e rfo rm a n c e (Y ) 1 0 .5 6 ,5 8 3

X *Y - 2 ,9 1 3

68. Which of the following pairs provide the correct least squares estimates for b0 and b1

in this situation?

A) b0 = -1.0239; b1 = -30.4661

B) b0 = 1.0239; b1 = -30.4661

C) b0 = -1.0239; b1 = 30.4661

D) b0 = -30.4661; b1 = 1.0239

E) b0 = 30.4661; b1 = -1.0239

69. Which of the following is the correct estimate for the population correlation

coefficient between experience and performance?

A) 0.76133

B) -0.67311

C) 0.54803

D) -0.45308

E) 0.34508

70. Because the estimate for the slope coefficient, b1, is ___________ in this instance, we

would expect ___________ fund performance with ___________ manager experience.

A) Negative; higher; lower

B) Negative; lower; lower

C) Negative; lower; higher

D) Positive; higher; higher

E) Both A and C are correct

Chapter 10 Simple Linear Regression and Correlation

71. The covariance of returns of investments A and B is -65.32. The standard deviation of

returns from investment A is 11.4, and the standard deviation of returns from

investment B is 18.1. If a linear regression model were formulated with A as the

independent variable and B as the dependent variable, what percentage of variability

in investment B would be explained by the model?

approximately -.317 = -65.32/[11.4 * 18.1]. The coefficient of determination in a

regression model would therefore be -.3172 = 0.10.

72. Director's insurance is a means by which corporate firms protect members of their

boards of directors from financial liability in lawsuits from disgruntled investors. It

has been suggested that more experienced boards tend to be sued less, and when they

are sued the losses tend to be lower. Data on collective experience and cumulative

legal losses were gathered on eight boards randomly selected for study. The data are as

follows:

E x p . (Y rs) ($ 0 0 0 s)

1 2 0 .0 6 - 2 8 6 .0 6

7 6 .3 1 - 1 3 5 .2 8

8 5 .7 6 - 1 4 5 .6 2

9 9 .2 7 - 1 4 0 .9 8

9 9 .2 6 - 1 4 4 .4 2

7 5 .9 8 - 1 2 2 .6 3

9 7 .8 9 -9 3 .7 0

1 2 2 .2 6 - 2 4 6 .1 7

A) Formulate the least squares regression model with estimates for b0 and b1.

B) Test formally whether board experience is a significant predictor of legal losses

C) Provide a 90% interval for the average losses expected when the board has a

collective experience of 95 years.

B) FOBSERVED = 9.77 > FCRITICAL = 5.99, therefore reject H0: b1 = 0; experience

appears to be significantly related to legal losses

C) A 90% interval for the average losses expected when the board has a collective

experience of 95 years is -$188,580 to -$127,790.

Chapter 10 Simple Linear Regression and Correlation

73. If, after the formulation of a least squares regression model, the 95% confidence

interval for b1 is [-1.43; 2.62], what should be true about the overall F-test for a

regression relationship?

Answer: Since the 95% confidence interval for b1 includes zero, we would not be able

to reject H0: b1 = 0 without incurring a substantial risk of making a Type I error. This

particular independent variable is most likely unrelated to the dependent variable of

interest.

74. Your company is interested in the effect of the amount they spend on advertising on

sales. Given the following monthly advertising/sales data for the last two years (in

thousands of dollars), what would be your conclusion?

2.4/369; 2.6/337; 2.8/399; 3.0/355; 3.2/469; 3.4/424; 3.6/529; 3.8/480; 4.0/514;

4.2/573; 4.4/642; 4.5/605; 4.8/642; 5.0/632; 5.2/702.

What would you predict that the sales would be if the company spends $5,000 on

advertising?

Answer: R = .9808, R2 is .962, and P < .000. Sales = 29.2 + 126.93 (Advertising),

therefore, if the company spends $5,000 in advertising, they can expect $634,673 in

sales.

75. You are interested your employee's opinion of a training class. Specifically, you want

to know if their experience level is a factor in how they perceive the value of the

training. What are the null and alternate hypotheses?

Alternate Hypothesis: Experience has an effect on an employee's opinion.

Chapter 10 Simple Linear Regression and Correlation

76. As the Human Resources manager for a large company you suspect that there is a

relationship between productivity and the employees' perception of how they are

treated. For five years, you measure employee perception of how they are treated and

their productivity and arrive at the following indexes.

P e r c e p tio n o f

T r e a tm e n t Y ear P r o d u c tiv ity

2 1 .3

4 2 .6

3 3 .5

6 4 .7

7 5 .8

A) Test to see if there is a relationship between the two variables t the 95% confidence

level.

B) If a relationship exists, what proportion of the variation in productivity can be

accounted for by the workers' perception of how they are treated?

C) If the index for perception of treatment is 5, what would you predict the workers'

index for productivity to be if the slope of the regression line is .0895 and the y-

intercept is .186?

B) 93%

C) 0.6337