A finance manager employed by an automobile dealership believes that the number

Question

A finance manager employed by an automobile dealership believes that the number of cars sold in his local market can be predicted by the interest rate charged for a loan.

The finance manager performed a regression analysis of the number of cars sold and interest rates using the sample of data above. Shown below is a portion of the regression output.

Are there factors other than interest rate charged for a loan that the finance manager should consider in predicting future car sales?

Is interest rate charged for a loan the most important factor to be considered in predicting future car sales? Explain your reasoning.The dealership’s vice-president of marketing has requested a sales forecast at the prevailing interest rate of 7%.

As finance manager, what reasons would you convey to the vice-president in recommending this forecasting model?

Is the prediction of car sales at 7% a reflection of the current downturn in the economy? How might this impact the dealership’s business?

Explanation / Answer

Are there factors other than interest rate charged for a loan that the finance manager should consider in predicting future car sales?

No there are no other factors because R^2 is almost 1.00 that means that is a good predicting this regression

Is interest rate charged for a loan the most important factor to be considered in predicting future car sales?

Y = 14.88 - 1.615 * 7

Y = 3.575

what reasons would you convey to the vice-president in recommending this forecasting model?

lower interest but in a equilibrium point to see incomes

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