Question

A researcher analyzes the factors that may influence amusement park attendance and estimates the following model: Attendance = ?₀ + ?₁Price + ?₂Rides + ?, where Attendance is the daily attendance (in 1,000s), Price is the gate price (in $), and Rides is the number of rides at the amusement park. The researcher would like to construct interval estimates for Attendance when Price and Rides equal $85 and 30, respectively. The researcher estimates a modified model where Attendance is the response variable and the explanatory variables are now defined as

Price* = Price – 85 and Rides* = Rides – 30. A portion of the regression results is shown in the accompanying table.

	Coefficients	Standard Error	t-stat	p-value	Lower 95%	Upper 95%
Intercept	34.41	4.06	8.48	4.33E-09	26.08	42.74
Price*	?1.20	0.28	?4.23	0.0002	?1.79	?0.62
Rides*	3.62	0.36	10.15	1.04E-10	2.89	4.35

According to the modified model, which of the following is the predicted value for Attendance when Price and Rides equal $85 and 30, respectively?

		55,600
		25,670
		34,410
		40,910

Question 27

Tiffany & Co. has been the world's premier jeweler since 1837. The performance of Tiffany's stock is likely to be strongly influenced by the economy. Monthly data for Tiffany's risk-adjusted return and the risk-adjusted market return are collected for a five-year period (n = 60). The accompanying table shows the regression results when estimating the CAPM model for Tiffany's return.

	Coefficients	Standard Error	t-stat	p-value	Lower 95%	Upper 95%
Intercept	0.0198	0.010	1.98	0.0598	?0.0008	0.0405
RM – Rf	1.827	0.191	9.58	1.494E-13	1.4456	2.2094

When testing whether the beta coefficient is significantly greater than one, the relevant critical value at the 5% significance level is t_0.05,58 = 1.672. The conclusion to the test is to ________.

		not reject H0, and conclude that the return on Tiffany stock is less risky than the return on the market
		not reject H0, and conclude that the return on Tiffany stock is riskier than the return on the market
		reject H0, and conclude that the return on Tiffany stock is riskier than the return on the market
		reject H0, and conclude that the return on Tiffany stock is less risky than the return on the market

40,910

Answer 1

THe true regression modle is

Attendance =B₀+B₁Price + B₂Rides + e

when researcher estimates a modified model where Attendance is the response variable and the explanatory variables are now defined as

Price* = Price – 85 and Rides* = Rides – 30.

Then, estimated regression model is

Attendance =34.41 -1.20 Price^* +3.62 Rides^*

the predicted value for Attendance when Price and Rides equal $85 and 30 is

Attendance =34.41 -1.20 (Price-85) +3.62 (Rides-30)

Attendance =34.41 -1.20 (85-85) +3.62 (30-30)

Attendance =34.41 (in 1,000s)

Attendance =34,410

27.

The conclusion to the test is to reject H₀, and conclude that the return on Tiffany stock is riskier than the return on the market