Question #80
Reading: Reading 1 Multiple Regression
PDF File: Reading 1 Multiple Regression.pdf
Page: 37
Status: Unattempted
Question
Consider the following estimated regression equation, with the standard errors of the slope coefficients as noted: Salesi = 10.0 + 1.25 R&Di + 1.0 ADVi – 2.0 COMPi + 8.0 CAPi where the standard error for the estimated coefficient on R&D is 0.45, the standard error for the estimated coefficient on ADV is 2.2 , the standard error for the estimated coefficient on COMP is 0.63, and the standard error for the estimated coefficient on CAP is 2.5. The equation was estimated over 40 companies. Using a 5% level of significance, which of the estimated coefficients are significantly different from zero?
Answer Choices:
A. R&D, ADV, COMP, and CAP
B. R&D, COMP, and CAP only
C. ADV and CAP only
Explanation
The critical t-values for 40-4-1 = 35 degrees of freedom and a 5% level of significance are ±
2.03.
The calculated t-values are:
t for R&D = 1.25 / 0.45 = 2.777
t for ADV = 1.0/ 2.2 = 0.455
t for COMP = -2.0 / 0.63 = -3.175
t for CAP = 8.0 / 2.5 = 3.2
Therefore, R&D, COMP, and CAP are statistically significant.