Question

Shown below are dollar figures for commercial and industrial loans at all commercial banks in the United States as recorded for the month of April during a recent 9-year period and published by the Federal Reserve Bank of St. Louis. Plot the data, fit a trend line, and discuss the strength of the regression model. In addition, explore a quadratic trend and compare the results of the two models. Year Loans ($ billion) 1 741.0 2 807.4 3 871.3 4 951.6 5 1,033.6 6 1,089.8 7 1,002.6 8 940.8 9 888.5 With the help of linear and quadratic trend, compare the results of the two models. Choose the correct values for r^2 linear and r^2 quadratic.

Answer 1

Solution:-

Regression Analysis using Excel:

Linear regression:

Quadratic Regression Analysis:

From both the regression analysis we can clearly see that in the quadratic model data are fitted more accurately, and the value of the r² of linear regression=0.3296 and value of the r² of quadratic  regression=0.9061. so value of the r² of quadratic  regression is very close to 1 so this model is strong and appropriate for our data.