CHAPTER 2

A REVIEW OF BASIC STATISTICAL CONCEPTS

ANSWERS TO ODD NUMBERED PROBLEMS

1. Descriptive Statistics

Variable N Mean Median Tr Mean StDev SE Mean

C1 28 21.32 17.00 20.69 13.37 2.53

Variable Min Max Q1 Q3

C1 5.00 54.00 11.25 28.75

a. X = 21.32
b. S = 13.37
c. S2 = 178.76
d. If the policy is successful, smaller orders will be eliminated and the mean will
increase.

e. If the change causes all customers to consolidate a number of small orders into
large orders, the standard deviation will probably decrease. Otherwise, it is very
difficult to tell how the standard deviation will be affected.

f. The best forecast over the long-term is the mean of 21.32.

3. a. Point estimate: X  10.76%

b. 1 = .95  Z = 1.96, n = 30, X  10.76, S  13.71


X  1.96 S /  
n  10.76  1.96 13.71 / 
30  10.76  4.91
(5.85%, 15.67%)
c. df = 301 = 29, t = 2.045
X  2.045 S /  
n  10.76  2.045 13.71 /  
30  10.76  5.12
(5.64%, 15.88%)

d. We see that the 95% confidence intervals in b and c are not much different.
This explains why a sample of size n = 30 is often taken as the cutoff between
large and small samples.

5. H0:  = 12.1 n = 100  = .05

1
 H1:  > 12.1 S = 1.7 X = 13.5

Reject H0 if Z > 1.645

13.5  12.1
Z = 1.7 = 8.235
100

Reject H0 since the computed Z (8.235) is greater than the critical Z (1.645). The mean has
increased.        

7. n = 60, X  5.60, S  .87

H 0 :   5 .9
two-sided test,  = .05, critical value: |Z|= 1.96
H 1 :   5 .9
X  5.9 5.60  5.9
Test statistic: Z    2.67
S/ n .87 / 60

Since |2.67| = 2.67 > 1.96, reject H 0 at the 5% level. The mean satisfaction rating is
different from 5.9.
p-value: P(Z <  2.67 or Z > 2.67) = 2 P(Z > 2.67) = 2(.0038) = .0076, very strong
evidence against H 0

9. H0:  = 700 n = 50  = .05

H1:   700 S = 50 X = 715

Reject H0 if Z < -1.96 or Z > 1.96

715  700
Z = 50 = 2.12
50

Since the calculated Z is greater than the critical Z (2.12 > 1.96), reject the null hypothesis.
The forecast does not appear to be reasonable.

p-value: P(Z <  2.12 or Z > 2.12) = 2 P(Z > 2.12) = 2(.017) = .034, strong evidence
against H 0

11. a.

2
 b. Positive

c. Y = 6058 Y2 = 4,799,724 X = 59

X2 = 513 XY = 48,665 r = .938

13. This is a good population for showing how random samples are taken. If three-digit
random numbers are generated from Minitab as demonstrated in Problem 10, the selected

3
 items for the sample can be easily found. In this population,  = 0.06, so most students
will not reject the null hypothesis which so states this. The few students that erroneously
reject H0 demonstrate Type I error.

15. n = 175, X  45.2, S  10.3

Point estimate: X  45.2
98% confidence interval: 1 = .98  Z = 2.33

X  2.33 S /   
n  45.2  2.33 10.3 / 175  45.2  1.8  (43.4, 47.0)

Hypothesis test:
H 0 :   44
two-sided test,  = .02, critical value: |Z|= 2.33
H 1 :   44
X  44 45.2  44
Test statistic: Z    1.54
S/ n 10.3 / 175

Since |Z| = 1.54 < 2.33, do not reject H 0 at the 2% level.

As expected, the results of the hypothesis test are consistent with the confidence
interval for ;  = 44 is not ruled out by either procedure.

CHAPTER 3

EXPLORING DATA PATTERNS AND

CHOOSING A FORECASTING TECHNIQUE
4
ANSWERS TO ODD NUMBERED PROBLEMS

1. Qualitative forecasting techniques rely on human judgment and intuition. Quantitative

forecasting techniques rely more on manipulation of past historical data.

3. The secular trend of a time series is the long-term component that represents the growth or
decline in the series over an extended period of time. The cyclical component is the wave-
like fluctuation around the trend. The seasonal component is a pattern of change that
repeats
itself year after year. The irregular component measures the variability of the time series
after the other components have been removed.

5. The autocorrelation coefficient measures the correlation between a variable, lagged one or
more periods, and itself.

7. a. nonstationary series
b. stationary series
c. nonstationary series
d. stationary series

9. Naive methods, simple averaging methods, moving averages, simple exponential

smoothing, and Box-Jenkins methods. Examples are: the number of breakdowns per
week
on an assembly line having a uniform production rate; the unit sales of a product or
service
in the maturation stage of its life cycle; and the number of sales resulting from a constant
level of effort.

11. Classical decomposition, census II, Winter's exponential smoothing, time series multiple
regression, and Box-Jenkins methods. Examples are: electrical consumption,
summer/winter activities (sports like skiing), clothing, and agricultural growing seasons,
retail sales influenced by holidays, three-day weekends, and school calendars.

13. 1985 2,413 -

1986 2,407 -6
1987 2,403 -4
1988 2,396 -7
1989 2,403 7
1990 2,443 45
1991 2,371 -77
1992 2,362 -9
1993 2,334 -28
1994 2,362 28
1995 2,336 -26
1996 2,344 8
5
 1997 2,384 40
1998 2,244 -140

Yes! The original series has a decreasing trend.

15. a. MPE
b. MAPE
c. MSE

17. Y = 4465.7  (Yt-1  Y ) = 2396.1  (Yt  Y )2 = 55,912,891

 (Yt  Y ) (Yt-1  Y ) = 50,056,722  (Yt  Y ) (Yt-2  Y ) = 44,081,598

50,056,722
r1 = = .895
55,912 ,891

H0: ρ1 = 0H1: ρ1  0
Reject if t < -2.069 or t > 2.069

k 1 11
1  2 ri 2 1  2  r1 
2
1
SE( r k ) = i 1
= i 1
= = .204
24
n 24

r1  1 .895  0
t = = 4.39
SE(rk) .204

Since the computed t (4.39) is greater than the critical t (2.069), reject the null.

H0: ρ2 = 0H1: ρ2  0
Reject if t < -2.069 or t > 2.069

44,081,598
r2 = 55,912,891 = .788

k 1 2 1
1  2 ri 2 1  2  .895
2
2.6
SE( r k )= i 1
= i 1
= = .33
24
n 24

r1   1 .788 0
t   = 2.39
SE(r1) .33
Since the computed t (4.39) is greater than the critical t (2.069), reject the null.

b. The data are nonstationary.

6
 Autocorrelation Function for Loans

1.0
0.8
0.6
0.4
0.2

0.0
-0.2
-0.4
-0.6
-0.8
-1.0

1 2 3 4 5 6

Lag Corr T LBQ

1 0.90 4.39 21.74

2 0.79 2.39 39.37

3 0.67 1.68 52.85

4 0.56 1.25 62.57

5 0.43 0.92 68.73

6 0.31 0.63 72.04

19. Figure 3.18 - The data are nonstationary. (Trended data)

Figure 3.19 - The data are random.
Figure 3.20 - The data are seasonal. (Monthly data)
Figure 3.21 - The data are stationary and have some pattern that could be modeled.

7
21. a. Time series plot follows

b. The sales time series appears to vary about a fixed level so

it is stationary.

c. The sample autocorrelation function for the sales series

follows

The sample autocorrelations die out rapidly. This behavior is consistent with a
stationary series. Note that the sales data are not random. Sales in adjacent weeks
tend to be positively correlated.

Since, in this case, the residuals differ from the original observations by the constant

CHAPTER 4
8
 MOVING AVERAGES AND SMOOTHING METHODS

ANSWERS TO ODD NUMBERED PROBLEMS

1. Exponential smoothing

3. Moving average

5. Winter's three-parameter linear and seasonal model

7.
Price AVER1 FITS1 RESI1
19.39 * * *
18.96 * * *
18.20 18.8500 * *
17.89 18.3500 18.8500 -0.96000
18.43 18.1733 18.3500 0.08000
19.98 18.7667 18.1733 1.80667
19.51 19.3067 18.7667 0.74333
20.63 20.0400 19.3067 1.32333
19.78 19.9733 20.0400 -0.26000
21.25 20.5533 19.9733 1.27667
21.18 20.7367 20.5533 0.62667
22.14 21.5233 20.7367 1.40333

Accuracy Measures
MAPE: 4.63186 MAD: 0.94222 MSD: 1.17281

The naïve approach is better.

a. 221.2 is forecast for period 9

9. 3-month moving-average

Period Yield AVER1 FITS1 RESI1

9
 1 9.29 * * *
2 9.99 * * *
3 10.16 9.8133 * *
4 10.25 10.1333 9.8133 0.436667
5 10.61 10.3400 10.1333 0.476667
6 11.07 10.6433 10.3400 0.730000
7 11.52 11.0667 10.6433 0.876667
8 11.09 11.2267 11.0667 0.023333
9 10.80 11.1367 11.2267 -0.426667
10 10.50 10.7967 11.1367 -0.636667
11 10.86 10.7200 10.7967 0.063333
12 9.97 10.4433 10.7200 -0.750000

Accuracy Measures
MAPE: 4.58749 MAD: 0.49111 MSD: 0.31931 MPE: .6904

Row Period Forecast Lower Upper

1 13 10.4433 9.33579 11.5509

Moving Average

Actual
11.5
Predicted

Forecast

Actual

Predicted

Forecast

10.5

Yield
Moving Average

Length: 3

MAPE: 4.58749
9.5
MAD: 0.49111

MSD: 0.31931

0 2 4 6 8 10 12 14

Time

b. 5-month moving-average

Period Yield MA Predict Error

1 9.29 * * *
2 9.99 * * *
10
 3 10.16 * * *
4 10.25 * * *
5 10.61 10.060 * *
6 11.07 10.416 10.060 1.010
7 11.52 10.722 10.416 1.104
8 11.09 10.908 10.722 0.368
9 10.80 11.018 10.908 -0.108
10 10.50 10.996 11.018 -0.518
11 10.86 10.954 10.996 -0.136
12 9.97 10.644 10.954 -0.984

Row Period Forecast Lower Upper

1 13 10.644 9.23041 12.0576

Accuracy Measures
MAPE: 5.58295 MAD: 0.60400 MSD: 0.52015 MPE: .7100

Moving Average

Actual
12
Predicted

Forecast

Actual

Predicted

11 Forecast

Yield
Moving Average

Length: 5
10

MAPE: 5.58295

MAD: 0.60400

MSD: 0.52015

0 2 4 6 8 10 12 14

Time

g. Use 3-month moving average forecast: 10.4433

11.
Time Demand Smooth Predict Error

11
 1 205 205.000 205.000 0.0000
2 251 228.000 205.000 46.0000
3 304 266.000 228.000 76.0000
4 284 275.000 266.000 18.0000
5 352 313.500 275.000 77.0000
6 300 306.750 313.500 -13.5000
7 241 273.875 306.750 -65.7500
8 284 278.938 273.875 10.1250
9 312 295.469 278.938 33.0625
10 289 292.234 295.469 -6.4688
11 385 338.617 292.234 92.7656
12 256 297.309 338.617 -82.6172

Accuracy Measures
MAPE: 14.67 MAD: 43.44 MSD: 2943.24

Row Period Forecast Lower Upper

1 13 297.309 190.879 403.738

Single Exponential Smoothing

Actual
400
Predicted

Forecast

Actual

Predicted

Forecast

300

Demand Smoothing Constant

Alpha: 0.500

MAPE: 14.67

200 MAD: 43.44

MSD: 2943.24

0 2 4 6 8 10 12 14

Time

12
13. a.  = .4

Accuracy Measures
MAPE: 14.05 MAD: 24.02 MSD: 1174.50

Row Period Forecast Lower Upper

1 57 326.367 267.513 385.221

b.  = 0.6

Accuracy Measures
MAPE: 14.68 MAD: 24.56 MSD: 1080.21

Row Period Forecast Lower Upper

1 57 334.07 273.889 394.251

c. A smoothing constant of approximately .6 appears to be best.

13
 d. No! When the residual autocorrelations shown above are examined, some of
them were found to be significant.

15. The autocorrelation function shows that the data are seasonal with a slight trend.
Therefore, the Winters’ model is used to forecast revenues.

Smoothing Constants - Alpha (level): 0.8 Beta (trend): 0.1

Gamma (seasonal): 0.1

14
An examination of the autocorrelation coefficients for the residuals of this
Winters’ model shown below indicates that none of them are significantly
different from zero.

15
 CHAPTER 5

TIME SERIES AND THEIR COMPONENTS

ANSWERS TO ODD NUMBERED PROBLEMS

1. The purpose of decomposing a time series variable is to observe its various elements
in isolation. By doing so, insights into the causes of the variability of the series are
frequently gained. A second important reason for isolating time series components
is to facilitate the forecasting process.

3. The basic forces that affect and help explain the trend-cycle of a series are
population growth, price inflation, technological change, and productivity increases.

5. Weather and the calendar year such as holidays affect the seasonal component.

7. a.

YEAR Y T C
1980 11424 11105.2 102.871
1981 12811 12900.6 99.306
1982 14566 14695.9 99.116
1983 16542 16491.3 100.307
1984 19670 18286.7 107.565
1985 20770 20082.1 103.426
1986 22585 21877.4 103.234
16
 1987 23904 23672.8 100.977
1988 25686 25468.8 100.855
1989 26891 27263.6 98.633
1990 29073 29059.0 100.048
1991 28189 30854.3 91.362
1992 30450 32649.7 93.263
1993 31698 34445.1 92.025
1994 35435 36240.5 97.777
1995 37828 38035.8 99.454
1996 42484 39831.2 106.660
1997 44580 41626.6 107.095

b. Y = 9309.81 + 1795.38X

c. Y = 9309.81 + 1795.38(19) = 43422.03

d. If there is a cyclical affect, it is very slight.

9. Y = TS = 850(1.12) = $952

11. All of the statements are correct except d.

13. a. The regression equation and seasonal indexes are shown below. The trend is
the most important but both trend and seasonal should be used to forecast.

Trend Line Equation

Y = 2241.77 + 25.5111X

Seasonal Indices

Period Index
1 0.96392
2 1.02559
3 1.00323
4 1.00726

Accuracy of Model

MAPE: 3.2
MAD: 87.3
MSD: 11114.7

b. Forecasts

Row Period Forecast

17
 1 43 3349.53
2 44 3388.67

c. The forecast for third quarter is very accurate (3,349.5 versus 3,340)
The forecast for fourth quarter is high compared to Value Line (3,388.7
versus 3,300). Following are computer generated graphs for this problem:

Decomposition Fit for Sales

Actual
3400
Predicted

3200 Forecast

Actual
3000 Predicted

Forecast

2800
Sales
2600

2400

2200 MAPE: 3.2

MAD: 87.3

2000 MSD: 11114.7

0 5 10 15 20 25 30 35 40 45

Time

18
15. a. Addivitive Decomposition Ln(Sales)
19
 Data LnCavSales
Length 77.0000
NMissing 0

Trend Line Equation

Yt = 4.61322 + 2.19E-02*t

Seasonal Indices

Period Index

1 0.33461
2 -0.01814
3 -0.40249
4 -0.63699
5 -0.71401
6 -0.57058
7 -0.27300
8 -0.00120
9 0.46996
10 0.72291
11 0.74671
12 0.34220

b. Pronounced trend and seasonal components. Would use both to forecast.

c. Forecasts

20
 Date Period Forecasts(Ln(Sales)) Forecasts(Sales)

Jun. 78 5.74866 314

Jul. 79 6.06811 432
Aug. 80 6.36178 579
Sep. 81 6.85482 948
Oct. 82 7.12964 1248
Nov. 83 7.17532 1307
Dec. 84 6.79267 891

d. See last column of table in part c.

e. Forecasts of sales developed from additive decomposition are higher (for

all months June 2000 through December 2000) than those developed from
the multiplicative decomposition. Forecasts from multiplicative decomposition
appear to be a little more consistent with recent behavior of Cavanaugh sales time
series.

17. a.

Variation appears to be increasing with level. Multiplicative

decomposition may be appropriate or additive decomposition with the
logarithms of demand.

b. Neither a multiplicative decomposition or an additive decomposition with a

linear trend work well for this series. This time series is best modeled with other
methods. The multiplicative decomposition is pictured below.
21
 c. Seasonal Indices (Multiplicative Decomposition for Demand)

Period Index Period Index Period Index

1 0.951313 5 1.00495 9 1.04368
2 0.955088 6 1.00093 10 0.98570
3 0.966953 7 1.02748 11 0.99741
4 0.988927 8 1.07089 12 1.00669

Demand tends to be relatively high in the summer months.

d. Forecasts derived from a multiplicative decomposition of demand (see plot

below).

Date Period Forecast

Oct. 130 172.343
Nov. 131 175.773
Dec. 132 178.803

600
19. a. JAN = = 500
1.2
500(1.37) = 685 people estimated for FEB

b. Tˆ = 140 + 5(t); t for JAN 2003 = 72

. Tˆ = 140 + 5(72) = 500

JAN Yˆ = (140 + 5(72) = 500)(1.20) = 600

FEB Yˆ = (140 + 5(73) = 505)(1.37) = 692
MAR Yˆ = (140 + 5(74) = 510)(1.00) = 510
APR Yˆ = (140 + 5(75) = 515)(0.33) = 170
22
 MAY Yˆ = (140 + 5(76) = 520)(0.47) = 244
JUN Yˆ = (140 + 5(77) = 525)(1.25) = 656
JUL Yˆ = (140 + 5(78) = 530)(1.53) = 811
AUG Yˆ = (140 + 5(79) = 535)(1.51) = 808
SEP Yˆ = (140 + 5(80) = 540)(0.95) = 513
OCT Yˆ = (140 + 5(81) = 545)(0.60) = 327
NOV Yˆ = (140 + 5(82) = 550)(0.82) = 451
DEC Yˆ = (140 + 5(83) = 555)(0.97) = 538

c. 5

23. 1289.73(2.847) = 3,671.86

CHAPTER 6

REGRESSION ANALYSIS

ANSWERS TO ODD NUMBERED PROBLEMS

23
1. Option b is inconsistent because the regression coefficient and the correlation coefficient
must have the same sign.

3. Correlation of Sales and Expend. = 0.848

The regression equation is

Sales = 828 + 10.8 Expend.

Predictor Coef StDev T P

Constant 828.1 136.1 6.08 0.000
Expend. 10.787 2.384 4.52 0.000

S = 67.19 R-Sq = 71.9% R-Sq(adj) = 68.4%

Analysis of Variance

Source DF SS MS F P
Regression 1 92432 92432 20.47 0.000
Error 8 36121 4515
Total 9 128552

a. Yes, because r = .848 and t = 4.52.

b. Y = 828 + 10.8X

c. Y = 828 + 10.8(50) = $1368

d. 72% since r2 = .719

e. Unexplained sum of squares = 36,121

Divide by df = (n - 2) = 8 to get 4515.

4515 = 67.19 = sy.x

f. Total sum of squares is 128,552

Divide by df = (n - 1) = 9 to get the variance, 14,283.6.
The square root is Y's standard deviation, sy = 119.5.

5.
. The regression equation is
Cost = 208 + 70.9 Age

Predictor Coef StDev T P

24
Constant 208.20 75.00 2.78 0.027
Age 70.918 9.934 7.14 0.000

S = 111.6 R-Sq = 87.9% R-Sq(adj) = 86.2%

Analysis of Variance

Source DF SS MS F P
Regression 1 634820 634820 50.96 0.000
Error 7 87197 12457
Total 8 722017

a.

25
 1100

1000

900

800

700
Cost
600

500

400

300

200

0 5 10

Age

b. Positive

c. Y = 6058 Y2 = 4,799,724 X = 59

X2 = 513 XY = 48,665 r = .938

d. Y = 208.2033 + 70.9181X

e. H0 :  = 0
H1:   0
Reject H0 if t < -2.365 or t > 2.365

sb1  s y  x / (X  X ) 2
 111 .6 / 126.22  9.93

b1 70.9181
t   7.14
sb1 9.93

Reject the null hypothesis. Age and maintenance cost are linearly related in
the population.

f. Y = 208.2033 + 70.9181(5) = 562.7938 or $562.80

26
7. The regression equation is
Orders = 15.8 + 1.11 Catalogs

Predictor Coef StDev T P

Constant 15.846 3.092 5.13 0.000
Catalogs 1.1132 0.3596 3.10 0.011

S = 5.757 R-Sq = 48.9% R-Sq(adj) = 43.8%

a. r = .7 and t = 3.1 so a significant relationship exists between Y and X.

b. Y = 15.846 + 1.1132X

c. sy.x = 5.57

d. Analysis of Variance
Source DF SS MS F P
Regression 1 317.53 317.53 9.58 0.011
Error 10 331.38 33.14
Total 11 648.92

e. 49% since r2 = .489

f. H0 :  = 0
H1:   0
Reject H0 if t < -3.169 or t > 3.169

sb1  s y  x / (X  X ) 2
 5.757 / 256.25  .36

b1 1.1132
t   3.09
sb1 .36

Fail to reject the null hypothesis. Orders received and catalogs distributed
are not linearly related in the population.

g. H0 :  = 0
H1:   0
Reject H0 if F > 10.04

MSR 317.53
F    9.58
MSE 33.14

Yes and Yes

h. Y = 13.846 + 1.1132(10) = 24.96 or 24,959

27
9. a. The two firms seem to be using very similar rationale since r = .959.

b. If ABC bids 1.01, the prediction for Y becomes

COMP = -3.257 + 1.03435(101) = 101.212, the point estimate. For an interval estimate
using 95% confidence the appropriate standard error is sy.x, since only the variability of
the data points around the (population) regression line need be considered: 101.205 
1.96(.7431)
101.205  1.456
99.749 to 102.661

c. If the data constitute a sample, the point estimate for Y would be the same but the
interval estimate would use the standard error of the forecast instead of S y.x, since
the variability of sample regression lines around the population regression line
would have to be considered along with the scatter of sample Y values around the
calculated line. The probability of winning the bid would then involve the same
problem as in c. above except that sf would be used in the calculation:

Z = (101 - 101.212)/.768 = -.276 where sf = .768, giving an area of .1103. (.5 –

.1103)
= .3897.

11. The regression equation is

Permits = 2217 - 145 Rate

Predictor Coef StDev T P

Constant 2217.4 316.2 7.01 0.000
Rate -144.95 27.96 -5.18 0.000

S = 144.3 R-Sq = 79.3% R-Sq(adj) = 76.4%

Analysis of Variance

Source DF SS MS F P
Regression 1 559607 559607 26.88 0.000
Error 7 145753 20822
Total 8 705360

a.

28
 b. Y = 5375 Y2 = 3,915,429 X = 100.6
X2 = 1151.12 XY = 56,219.8

r = -0.8907

c. Reject H0 if t < - 2.365 or t > 2.365.

Computed t score = 5.1842
Reject the null hypothesis: Interest rates and building permits are linearly related
in the population.

d. 44.9474

e. r2 = .7934

f. Using knowledge of the linear relationship between interest rates and

building permits (r = -0.8907) we can explain 79.3% of the building permit
variable variance.

13. The regression equation is

Defects = - 17.7 + 0.355 Size

Predictor Coef StDev T P

Constant -17.731 4.626 -3.83 0.003
Size 0.35495 0.02332 15.22 0.000

S = 7.863 R-Sq = 95.5% R-Sq(adj) = 95.1%

Analysis of Variance

Source DF SS MS F P
Regression 1 14331 14331 231.77 0.000

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Error 11 680 62
Total 12 15011

a.

b. Defects = - 17.7 + 0.355 Size

c. The slope coefficient, .355, is significantly different from zero. + 0.00101

d.

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 Examination of the residuals shows a curvilinear pattern.

e. The best model transforms the predictor variable and uses X2 as its
independent variable.

The regression equation is

Defects = 4.70 + 0.00101 Sizesqr

Predictor Coef StDev T P

Constant 4.6973 0.9997 4.70 0.000
Sizesqr 0.00100793 0.00001930 52.22 0.000

S = 2.341 R-Sq = 99.6% R-Sq(adj) = 99.6%

Analysis of Variance

Source DF SS MS F P
Regression 1 14951 14951 2727.00 0.000
Error 11 60 5
Total 12 15011

Unusual Observations
Obs Sizesqr Defects Fit StDev Fit Residual St Resid
3 5625 6.000 10.367 0.920 -4.367 -2.03R

f. The slope coefficient, .355, is significantly different from zero. + 0.00101

g.

Examination of the residuals shows a random pattern.

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 h. R denotes an observation with a large standardized residual

Fit StDev Fit 95.0% CI 95.0% PI

95.411 1.173 ( 92.828, 97.994) ( 89.645, 101.177)

i. Defects = 4.70 + 0.00101 Sizesqr

b. The regression equation is: Market = 60.7 + 0.414 Assessed

c. r 2  .376 . About 38% of the variation in market prices is explained by

assessed values (as predictor variable). There is a considerable amount of
unexplained variation.

15. a. The regression equation is: OpExpens = 18.9 + 1.30 PlayCosts

b. r 2  .751 . About 75% of the variation in operating expenses is explained

by player costs.

c. F  72.6 , p-value = .000 < .10. The regression is clearly significant at the
  .10 level.

d. Coefficient on X = player costs is 1.3. Is H 0 :  1  2 reasonable?

1 .3  2 .0
t  4.58 suggests  1  2 is not supported by the data. Appears
.153
that operating expenses have a fixed cost component represented by the intercept
b0  18.9 , and then are about 1.3 times player costs.

e. Yˆ  58.6 , Yˆ  2 s f gives 58.6  2(5.5) or (47.6, 69.6).

f. Unusual Observations
Obs Play Cost OpExpens Fit SE Fit Residual St Resid
7 18.0 60.00 42.31 1.64 17.69 3.45R

R denotes an observation with a large standardized residual

Team 7 has unusually low player costs relative to operating expenses.

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