Q5. Suppose that the board of directors of X-Innovation, Inc. believe that the a

Question

Q5. Suppose that the board of directors of X-Innovation, Inc. believe that the annual salary is related to years of experience and to the score on the programmer aptitude test. An econometrician conducted a study for this corporation and reported the following results. Annual Salary ($1,000)- 7.29+1.148. Years of experience +0.260 Aptitude Test Score p-value (0.009) (0.034) (0.0014) R-square 0.92 F-stat-96.88 p-value 0.00 a. Provide the accurate interpretation of the estimated coefficients associated with years of experience and aptitude test score. Discuss the significance of the estimated coefficients associated with years of experience and aptitude test score b.

Explanation / Answer

Annual Salary($1000's) =7.29+ 1.148* Years of Exp + 0.260*Aptitude test score

a) To interpret slopes:

For every additonal unit of years of experience output annual salary increases by 1.148($1000's) units.

For every additional unit of Aptitude test score output annual income increases by 0.260 units.

b) Test statistic p-value of coefficients:

Let assume significant level =0.05

Years of Experienc: P-value= 0.034

Aptitude test score P-value: 0.0014

and F-statistic= 98.88 and p-value: 0.000

Both p-values are less than the significant level 0.05. Their is a significant difference between input to an output variable. So, they're two variables are good for prediction.

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