Tutorial 7

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BQA1014 Quantitative Analysis Models for Business TRI 2 2022/2023

Tutorial 7: Simple Linear Regression

1. Fitting a straight line to a set of data yields the following prediction line:

(a) Interpret the meaning of the Y intercept, b0.


(b) Interpret the meaning of the slope, b1.
(c) Predict the mean value of Y for X = 3.

2. A research from a local university wishes to determine the relationship between


annual salary and number of years of working experience at administration of his
university. The data was collected from 8 employees and is shown below in the
following table.

Annual Salary Years of Experience


($000)
35 4
78.2 13
45.9 6
42.2 7
65.6 10
51.5 9
57.2 5
71.4 7

(a) Identify the dependent variable and independent variable.


(b) Compute and interpret the coefficient of correlation.
(c) Compute the coefficient of determination and interpret its meaning.

(d) Determine the equation of the regression line.


(e) Interpret the slope that you obtained in part (d).
(f) Estimate the annual salary if the number of years of experience for a staff
is 15 years. Is the estimation reliable?

3. Shipments (in tons) of welded tube by an aluminium producer are shown in the
following table.

Year 1 2 3 4 5 6 7 8 9 10 11
Tons 2 3 6 10 8 7 12 14 14 18 19

(a) Compute and interpret the coefficient of correlation (r).


(b) Determine the coefficient of determination (r²) and interpret.
(c) Determine the equation of the regression line.
(d) What does the slope of the regression equation represent?

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BQA1014 Quantitative Analysis Models for Business TRI 2 2022/2023

(e) Use the equation to forecast tube shipments for year 12.
4. A medical statistician wanted to examine the relationship between the amount of
sunshine in hours, and incidence of skin cancer. As an experiment he found the
number of skin cancers detected per 100,000 of population and the average daily
sunshine in eight counties around the country. These data are shown below.

Average Daily Sunshine 5 7 6 7 8 6 4 3


Skin Cancer per 100,000 7 11 9 12 15 10 7 5

(a) Identify the dependent variable and independent variable.


(b) Compute and interpret the coefficient of correlation.
(c) Compute the coefficient of determination and interpret its meaning.

(d) Determine the equation of the regression line.


(e) Explain the value of the slope that you obtained in part (d).
(f) Estimate the number of skin cancer per 100,000 of population for 9 hours
of sunshine. Is the estimation reliable?

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