# Question 3 To study the relationship between weekly expenditure and weekly income (in dollars) of recent graduates, the following equation has been estimated

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Question 3 (24 points)

 To study the relationship between weekly expenditure and weekly income (in dollars) of recent graduates, the following equation has been estimated:

EXPENDITURE, = B,0 + B11NCOME, + ei

The summary output based on data obtained from 10 alumni is given as follows:

 Summary Output         Regression Statistics Multiple R                                                          0_83 R Square                                                                   A Adjusted R Square                                          0.65 Standard Error                                                   B Observations                                                      10

Anova

 Df SS MS F Significance F Regression 1  8 9 216216.22 98783.78 315000.00 216216.22 12347.97 17.51 0.00 Residual Total

Coefficients         Standard Error            t stat             p-value

 intercept C 133.87 0.44 0.67 income D 0.13 4.18 0

(A) Find the values of A, B, C, lD and interpret their meanings. (8 Points)

(B) What is the significance level of the coefficient on INCOME? (4 Points)

(C) What conclusions can you reach based on the regression results? (6 Points)

(D) What is the predicted weekly expenditure for a graduate with a weekly income of (i) \$1,000, (ii) \$2,000, (iii)\$10,000? Are these predictions reliable? (6 Points)

(8+4+6+6 = 24 Points)

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