Identify non-linear relationships

Assignment Help Finance Basics
Reference no: EM13986134

1. Pearson Correlation cannot be used to identify non-linear relationships between two variables.

A) True

B) False

2. Regression cannot be used to identify non-linear relationships between two variables.

A) True

B) False

3. Suppose you have a regression model that depicts the relationship between sales in dollars (S) and the price of the product in dollars (P) such that S = 10 - 2P. Which of the following is the correct interpretation of the price coefficient (i.e., -2)?

A) A $1 increase in price will decrease sales by $2.

B) A $1 increase in sales will occur if there is a $2 decrease in price.

C) A 1% increase in price will cause a 2% decrease in sales.

D) A 1% increase in sales will be caused by a 2% decrease in price.

4. Suppose you have a regression model that depicts the relationship between sales in dollars (S) and the price of the product in dollars (P) such that log(S) = 10 - 2(logP). Which of the following is the correct interpretation of the price coefficient (i.e., -2)?

A) A $1 increase in price will decrease sales by $2.

B) A $1 increase in sales will occur if there is a $2 decrease in price.

C) A 1% increase in price will decrease sales by 2%.

D) A 1% increase in sales will result from a 2% decrease in price.

Situation 8.1:

A chemist employed by a pharmaceutical company has developed a muscle relaxant. She took a sample of 14 people suffering from extreme muscle constriction. She gave each a vial of the liquid drug and recorded the time to relief (measured in seconds)for each. She then estimated a regression model to this data and found the following: Relief = 1283 (3.65) - 25.22Dose (2.92) - 0.86DoseSquared (2.13) where numbers in parentheses are t-statistics for the corresponding variable coefficient.

5. The chemist ask you to determine if the there is a significant relationship between dose and time to relief. Using a one-tail test, your best answer would be:

A) Given the results provided, dose is significant at .01 level.

B) Given the results provided, dose is significant at the .05 level.

C) Given the results provided, dose is significant at the .10 level.

D) Given the results provided, dose does not significantly affect time to relief.

6. Suppose the chemist decides to determine if there is a quadratic effect (e.g. DoseSquared). Should the chemist use a one-tail or two-tail test?

A) A one-tail since the effect of increasing the dosage will eventually taper off so expect dose squared to be negative.

B) A one-tail test since the effect of increasing the dosage will be to accelerate time to relief so expect sign of dose squared is positive.

C) A two-tail test since we do not know what effect an increased dosage will have so do not know sign to expect for dose squared.

D) One could select either a one-tail or two-tail test as long as test at alpha = 0.01.

7. The chemist concludes that there is a quadratic effect (Dose-squared) for the muscle relaxation medication. This conclusion is appropriate using a two-tail test and alpha = .05.

A) True

B) False

8. A dummy variable is used when:

A) Two variables are collinear.

B) The model is non-linear

C) The variable is categorical or qualitative.

D) The preferred variable is missing and you must use a proxy variable.

You are hired by a major refrigerator manufacturer to estimate the demand for their refrigerators. You use the following independent variables in this effort.

i.

Population (POP), age 21-35, in thousands.

ii.

Housing starts (H), in thousands.

iii.

Refrigerator price index (P).

iv.

Disposable personal income per capita (Y), in thousands of dollars.

v.

Advertising expenditures (A), in thousands of dollars.

vi.

Replacement trend (R), a replacement probability function constructed from prior refrigerator sales, based on a 16-year average refrigerator life, and average age of refrigerators in market area.

Quarterly data for the years 1997 through 2002 were used to run the regression on refrigerator sales (in thousands). The results are described in Tables 1 and 2 below.

TABLE 1: Regression Results

Variable

Coefficient

t-stat

POP

+0.045

1.41

H

+0.657

3.13

P

-1579.0

2.21

Y

+2254.0

1.56

A

+67.5

2.74

R

+0.756

4.85

CONSTANT

-1245.0

1.11

 

 

 

R2 = .67

Adjusted R= .59

F = 2.75

TABLE 2:Correlation Matrix

Variables

Correlation

Variables

Correlation

Variables

Correlation

POP,H

.844

H,P

.356

P,A

.055

POP,Y

.767

H,Y

.904

P,R

-.005

POP,R

-.003

H,A

.015

Y,A

.805

POP,P

.450

H,R

.120

Y,R

.225

POP,A

.674

P,Y

.856

A,R

.022

9. Assuming that a one-tail test is appropriate for all coefficients and a significance level of .05, which of the variables in the model are significant (exclude constant or intercept from consideration)?

A) R,H,A

B) R,H,A,P

C) R,H,A,P,Y

D) R,H,A,P,Y,POP

10. What problem can be caused by multicollinearity?

A) The inability to isolate the distinct effects of the related independent variables.

B) Smaller than expected p-values leading to misinterpretations.

C) Smaller than expected standard errors leading to wrong conclusions.

D) Significant t-values and a high R-squared.

11. Which of the following is the best example of the potential issues associated with multicollineary?

A) Adjusted R-squared is less than R-squared.

B) H and R have a low correlation but both have significant coefficients.

C) POP and Y are correlated and both have insignificant coefficients.

12. Suppose you check on seasonality in the sales of refrigerators by creating the following variables: Q1 = 1 if first quarter, 0 otherwise; Q2 = 1 if second quarter, 0 otherwise; and Q3 = 1 if third quarter, 0 otherwise. The coefficient for Q2 equals +0.5 and is statistically significant and Q4 is the "omitted" category. Interpret Q2.

A) There are, on average, 500 more refrigerators sold in the second quarter, holding constant the other variables.

B) There are, on average, 500 more refrigerators sold in the second quarter than the first quarter, holding constant the other variables.

C) There are, on average, 500 more refrigerators sold in the second quarter than the third quarter, holding constant the other variables.

D) There are, on average, 500 more refrigerators sold in the second quarter than the fourth quarter, holding constant the other variables.

Reference no: EM13986134

Questions Cloud

What is apoptosis : What is nacrosis? Nacroptotic - difference between dis two ,including pathways - why would it be useful to identify new inhibitors of nacroptotic regulators?
How long does it take for the pendulum to reach : A 140 g mass on a 1.4-m-long string is pulled 7.4o to one side and released. How long does it take for the pendulum to reach 4.8o on the opposite side?
What is maximum height of the rocket above the earth surface : A 140 kg rocket is moving radially outward from the earth at an altitude of 240 km above the surface with a velocity of 3.6 km/sec. At this point, its final stage engine shuts off. Ignoring any minor air resistance, what is the rocket's velocity 9..
What is the probability that the roll will be rejected : A roll of plastic-coated wire has an average of 0.09 flaws per 5-meter length of wire. Suppose a quality control engineer will sample a 5-meter length of wire from a roll of wire 230 meters in length. If no flaws are found in the sample, the engin..
Identify non-linear relationships : 1. Pearson Correlation cannot be used to identify non-linear relationships between two variables.
What would be the resultant overall company net income : If the Eastern Division is eliminated, what would be the resultant overall company net income(loss)?
What is the magnitude of the force needed to restrain : A 1420 kg car traveling east at 13.6 m/s has a head-on collision with a 1980 kg car traveling west at 20.5 m/s. If the collision time is 0.10 s, what is the magnitude of the force needed to restrain a 69 kg person in the smaller car?
Identify a problem or opportunity that may be facing : A 1,400-word Discussion Guide for Panera Bread Company to be used during the course of a Focus Group that researches Breakfast services target market. In your plan, be sure to do the following: Identify a problem or opportunity that may be facing ..
Find the time for the current in the circuit to decrease : A 1.44 μF capacitor is charged through a 127Ω resistor and then discharged through the same resistor by short-circuiting the battery. While the capacitor is being charged, find the time for the charge on its plates to reach 1e of its maximum valu..

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd