Suppose we wish to predict the profits (in hundreds of thousands of dollars) for

Question

Suppose we wish to predict the profits (in hundreds of thousands of dollars) for companies that had sales (in hundreds of thousands of dollars) of 500. We use statistical software to do the prediction and obtain the following output. Sales Predict St. dev. mean predict 95% C.I. 95% P.I. 500 –130.4 59.3 (–248.5, –12.3) (–1066.4, 805.6) A random sample of 19 companies from the Forbes 500 list was selected, and the relationship between sales (in hundreds of thousands of dollars) and profits (in hundreds of thousands of dollars) was investigated by regression. The following simple linear regression model was used: Profits = + (Sales) where the deviations were assumed to be independent and Normally distributed, with mean 0 and standard deviation . This model was fit to the data using the method of least squares. The following results were obtained from statistical software. r2 = 0.662 s = 466.2 Parameter Parameter estimate Std. err. of parameter est. –176.644 61.16 0.092498 0.0075 A 95% confidence interval for the average profit of companies with 500 units of sales is: A. –189.7 to –71.1. B. –1066.4 to 805.6. C. –248.5 to –12.3. D. 400.7 to 559.3.

Explanation / Answer

500

–130.4

59.3

(–248.5, –12.3)

(–1066.4, 805.6)

From the above output, the 95% confidence interval for the average profit of companies with 500 units of sales is:

C. –248.5 to –12.3.

500

–130.4

59.3

(–248.5, –12.3)

(–1066.4, 805.6)

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

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