Question

Starting salaries for accountants in Tampa follow those of many U.S. cities. The scatter diagram bellow shows starting salaries (in thousands of dollars) and the cost of living index (a number from 1 to 100) for 5 metropolitan areas. A regression analysis helps provide explanation on how cost of living explains salary in this sample of cities.

Salary in

Thousands $

  

Cost of Living Index

1. (6pt) Use the least squares method (OLS) to develop an estimated                                                                 regression equation for this problem (calculate the coefficients bo and b1).                                         Show all your work for full credit.

	Index	Salary (Thousand $)
1	135	12
2	115	14
3	148	16
4	167	19
5	165	22
6	176	25
Mean	151	18

2. (1pt) Write down the estimated regression equation.   

3. (3pt) Provide an interpretation for the slope coefficient (b1).

4. (4pt) Provide an interpretation for the intercept coefficient (b0).

Answer 1