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# Simple Linear Regression, Correlation and Multiple Regression

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From your textbook, Statistics for Management and Economics, complete the following exercises:

Exercise 16.1

The term regression was originally used in 1885 by Sir Francis Galton in his analysis of the relationship between the heights of children and parents. He formulated the "law of universal regression," which specifies that "each peculiarity in a man is shared by his kinsmen, but on average in a less degree." (Evidently, people spoke this way in 1885.) In 1903, two statisticians, K. Pearson and A. Lee, took a random sample of 1,078 father —son pairs to examine Galton's law ("On the Laws of Inheritance in Man, I. Inheritance of Physical Characteristics," Biometrika 2:457-462). Their sample regression line was.

Son's height = 33.73 + .516 × Father's height
a. Interpret the coefficients.
b. What does the regression line tell you about the heights of sons of tall fathers?
c. What does the regression line tell you about the heights of sons of short fathers?

Exercise 16.7

Florida condominiums are popular winter retreats for many North Americans. In recent years, the prices have steadily increased. A real estate agent wanted to know why prices of similar-sized apartments in the same building vary. A possible answer lies in the floor. It may be that the higher the floor, the greater the sale price of the apartment. He recorded the price (in \$1,000s) of 1,200 sq. ft. condominiums in several buildings in the same location that have sold recently and the floor number of the condominium.

a. Determine the regression line.
b. What do the coefficients tell you about the relationship between the two variables?

Exercise 16.28

Refer to Exercise 16.6.
a. What is the standard error of estimate? Interpret its value.
b. Describe how well the memory test scores and length of television commercial are linearly related.
c. Are the memory test scores and length of commercial linearly related? Test using a 5% significance level.
d. Estimate the slope coefficient with 90% confidence.

Exercise 16.100

Pick any 1 (or more) of the 11 exercises above and briefly describe why the prediction interval is so wide.

Exercise 17.2

Pat Statsdud, a student ranking near the bottom of the statistics class, decided that a certain amount of studying could actually improve final grades. However, too much studying would not be warranted because Pat's ambition (if that's what one could call it) was to ultimately graduate with the absolute minimum level of work. Pat was registered in a statistics course that had only 3 weeks to go before the final exam and for which the final grade was determined in the following way:

Total mark = 20% (Assignment)
+ 30% (Midterm test)
+ 50% (Final exam)

To determine how much work to do in the remaining 3 weeks, Pat needed to be able to predict the final exam mark on the basis of the assignment mark (worth 20 points) and the midterm mark (worth 30 points). Pat's marks on these were 12/20 and 14/30, respectively. Accordingly, Pat undertook the following analysis. The final exam mark, assignment mark, and midterm test mark for 30 students who took the statistics course last year were collected.

Exercise 17.5

When one company buys another company, it is not unusual that some workers are terminated. The severance benefits offered to the laid-off workers are often the subject of dispute. Suppose that the Laurier Company recently bought the Western Company and subsequently terminated 20 of Western's employees. As part of the buyout agreement, it was promised that the severance packages offered to the former Western employees would be equivalent to those offered to Laurier employees who had been terminated in the past year. Thirty-six-year-old Bill Smith, a Western employee for the past 10 years, earning \$32,000 per year, was one of those let go. His severance package included an offer of 5 weeks' severance pay. Bill complained that this offer was less than that offered to Laurier's employees when they were laid off, in contravention of the buyout agreement. A statistician was called in to settle the dispute. The statistician was told that severance is determined by three factors: age, length of service with the company, and pay. To determine how generous the severance package had been, a random sample of 50 Laurier ex-employees was taken. For each, the following variables were recorded:

Number of weeks of severance pay
Age of employee
Number of years with the company
Annual pay (in thousands of dollars)

a. Determine the regression equation.
b. Comment on how well the model fits the data.
c. Do all the independent variables belong in the equation? Explain.
d. Perform an analysis to determine whether Bill is correct in his assessment of the severance package.