Question

The regional transit authority for a major metropolitan area wants to determine whether there is any linear relationship between the mileage of a bus and the market resale value of the bus. A very small random sample resulted in the following data:

Bus Mileage Resale Value

(In 1000 of Miles)       (In $1000)

5 58      

3 90

4 85

2 96

5 64

5 57

a. Use the method of OLS to compute the slope and intercept of sample linear regression line. You need to decide which one is the dependent variable. In addition, write down the estimated sample regression line. Show all of your computations.

b. Explain the meaning of estimated sample intercept and slope in the context of this problem and in plain English.

c. Use a level of significance of 0.05 to check if the population slope is statistically equal to or different from zero. What is your conclusion? Why? Make sure the null and alternative hypotheses are explained in plain English. Also, show the decision rule and critical points or the p-value.

d.  Compute the value of coefficient of determination. Explain what it means in the context of this problem and plain English.

--Show all computations!

Answer 1