Where StartingSalary is a recent graduate’s starting salary in dollars, GPA is t

Question

Where StartingSalary is a recent graduate’s starting salary in dollars, GPA is their cumulative

grade point average, Male = 1 if the person is a male and Male = 0 if the person is a Female and

Business = 1 if the person graduated from the College of Business and Business = 0 if the person

did not graduate from the College of Business.

Answer questions 1 – 4.

1. Which of the following is true?

a. StartingSalary is a dummy variable

b. the disturbance (or error) term captures the effect of GPA on starting salary

c. Male and Business are both dummy variables

d. GPA is a dummy variable

2. Using the Excel output obtained from running the OLS regression, suppose you formed the

following: StartingSalary = $25,000 + $2,000GPA + $1,700Male + $4,500Business . Given this

sample regression function, which of the following is true?

a. We predict that males will earn $1,700 more than females in starting salary amounts.

b. We predict that males will earn $26,700 more than females in starting salary amounts.

c. We predict a one unit increase in Male causes a $1,700 increase in starting salary.

d. We predict Business majors to earn lower starting salaries compared to non-Business

majors.

1

3. Using the sample regression function given in Question 2, predict the starting salary for a

recent female graduate with a GPA = 3.78 and a major in English.

a. $41,230

b. $38,760

c. $34,260

d. $32,560

4. Suppose from Question 2 that the standard error for the parameter estimate for GPA is sb1 =

1,500. (Hint: the parameter estimate is b1). Calculate the test statistic and use it to test the

following hypothesis:

H0: 1 = 0

HA: 1 0.

What do you conclude using critical t-values of -2.045, 2.045?

a. GPA has a significant effect on starting salary

b. GPA does not have a significant effect on starting salary

c. More information is required to answer this question

Explanation / Answer

1. c. Male and Business are both dummy variables because both take values 0 and 1.

2. a. We predict that males will earn $1,700 more than females in starting salary amounts because when Male = 1 and everything else is constant, then starting salary of males is $1,700 more than when Male = 0.

3. d. $32,560

StartingSalary = $25,000 + $2,000(3.78) + $1,700(0) + $4,500(0) = $32,560

4. b. GPA does not have a significant effect on starting salary

t=b1/Sb1 = 2000/1500=1.33

since test statistic falls within critical values, fail to reject null hypothesis. there is insufficient evidence to conclude that GPA has a significant effect on starting salary.

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.