HWB: Ch 12 instructions I help Question 11 (of 11) Save & Exit Submit 11. 9.10 p

Question

HWB: Ch 12 instructions I help Question 11 (of 11) Save & Exit Submit 11. 9.10 points The regression equation Netincome 2,277 0.0307 Revenue was estimated from a sample of 100 eading world companies (variables are in millions of dollars). (a-1) Calculate the residual for the x, y pair ($41,078, $8,301). (A negative value should be indicated by a minus sign. Round your answer to 4 decimal places.) Residual (a-2) Did the regression equation underestimate or overestimate the net income? O The regression equation underestimated the net income. O The regression equation overestimated the net income. (b-1) Calculate the residual for the x, y pair ($61,768, S893) (A negative value should be indicated by a minus sign. Round your answer to 4 decimal places.) Residual (b-2) Did the regression equation underestimate or overestimate the net income? O The regression equation overestimated the net income. O The regression equation underestimated the net income. Hints References eBook & Resources

Explanation / Answer

a1)
Our observed value is 8301.
For predicted value, plug in 41078 into the regression equation

Netincome = 2277 + 0.0307 * 41078
= 3538.0946
The difference is = 8301 - 3538.0946 = 4762.9054
which is the residual.

a2)
Since the predicted value is less than the observed value, the regression equation underestimated the net income.

b1)
Our observed value is 893
For predicted value, plug in 61768 into the regression equation

Netincome = 2277 + 0.0307 * 61768
= 2295.9419
The difference is = 893-2295.9419 = -1402.9419

which is the residual.

b2)
Since the predicted value is greater than the observed value, the regression equation overestimated the net income.

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