Reference no: EM131793817

Assignment

Suppose we know the Age and Salary of 5 employees as follows:

We can see there is a positive association between Age and Salary, and we'd like to use the following linear model to capture this positive relationship:

Salary = α + β Age

where α and β are both unknown parameters for us to estimate.

(a) Find the α and β that minimize the TOTAL estimation error. Estimation error for a specific employee is defined as the Euclidean distance between the model-predicted salary and actual salary. For example, if α = 0 and β = 100, the estimation error for Employee 1 is:

( ModelPredicted Salary - Actual Salary)² = (0 + 100 * 20 - 3000)² = 1000000

(b) Use the model, predict the salary of an employee whose age is 45.