Question

The regression equation NetIncome = 2,159 + 0.0312 Revenue was estimated from a sample of 100 leading world companies (variables are in millions of dollars).

(a-1)

Calculate the residual for the x, y pair ($45,533, $2,697). (A negative value should be indicated by a minus sign. Round your answer to 4 decimal places.)

  

Residual

(a-2)

Did the regression equation underestimate or overestimate the net income?

	The regression equation overestimated the net income.
	The regression equation underestimated the net income.

(b-1)

Calculate the residual for the x, y pair ($60,417, $3,497).(A negative value should be indicated by a minus sign. Round your answer to 4 decimal places.)

   

Residual

(b-2)

Did the regression equation underestimate or overestimate the net income?

	The regression equation overestimated the net income.
	The regression equation underestimated the net income.

Answer 1

Answer :

Given data :-

The regression equation Net Income revenue = 2,159 + 0.0312

the residual for the x, y pair ($45,533, $2,697)

the residual for the x, y pair ($60,417, $3,497).

(a-1) now we need to find out the residual for the x, y pair ($45,533, $2,697).

Residual = measured value - predicted value

= 2697 - (2159 + 0.0312*45533)

=  2697 - (2159 + 1420.6296)

= 2697 - 3597.6296

= - 882.6296

(a-2). Since the residual is negative,

it means that we have overestimated the net income

(b-1) now we need to find out the residual for the x, y pair ($60,417, $3,497)

Residual = measured value - predicted value

= 3497 - (2159 + 0.0312 * 60417)

= 3497 - (2159 + 1885.0104)

= 3497 - 4044.0104

= -547.0104

(b-2). Since the residual is negative,

it means that we have overestimated the net income