10. The following regression analysis output was obtained showing how annual inc

Question

10. The following regression analysis output was obtained showing how annual income (in 1000 KWD) is related to the duration of the person in years in a particular company: The regression equation is Predictor Coef StDe T P Constant 6.938 215 9.00 0.000 years S = 4.21 R-Sq 70.0% R-Sq(adj) = 68.7% 0.4322 0.1150 4.77 0.001 Answer the following questions: a) What is the regression equation? b) What are the regression coefficients, and what do they mean, are they significant? c) What is the coefficient of determination, and what does it mean? d) Predict the annual income of a person who has 20 years experience

Explanation / Answer

Answer to each part of the question, please get back in case you don't understand any part of it:

a. The linear regression equation is : AnnualIncome = 6.938 + 0.4322*Years

b. Years coefficient means that per increase in Year the Annual Income increases by .4322 units. Please note that since the units of annual income are in 1000KWD, the net income increase per additional year is 432.2KWD

c. Coefficient of determination is 70.0%. It is also known as the Rsquare It means that 70% of the variance in Annual Income is explained by 'Year' variable

d. Annual income of a person who has 20 years of exp:

Annual Income = 6.938 + 0.4322*20 = 15.582 (1000s KWD)

So, annual income is 15,582 KWD for a person who has 20 years of exp

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