FINA 6204
Problem Set 1

The purpose of the assignment is to review basic hypothesis testing and regression techniques. There is an appendix in your textbook, Appendix C: Using Excel to Conduct Analysis, which may help you with running regressions in Microsoft Excel. You may also wish to use a basic statistics text for guidance if needed. I have also provided you with a table with the t distribution.

If you have an older version of EXCEL and have not previously loaded the Analysis ToolPak, go to TOOLS, ADD-INS, Analysis Tool Pak. This will load the regression software that you will need. Then go to TOOLS, DATA ANALYSIS, Regression. Now you are ready to run regressions in EXCEL. Alternatively, if you have the most recent …show more content…

After taking over the dealership, Jake decided to apply some of the knowledge he had gained from his studies to selling cars. After a few months of operation, he began experimenting with the price of cars and the monthly expenditure on radio advertising. He varied the price and advertising expenditure each month and kept track of the average rate of interest on automobile loans for the month. The data on per car price in thousands (Pr), advertising in thousands (Ad), interest rate (IR), month in which the values applied (Mth), and sales in the thousands (Sales) appear in the data table. Jake would like to know the functional relationship between sales, the price, advertising expenditure, and interest rate on car loans. He is also interested in determining whether there is a trend to the firm’s sales.

2a. See data is sheet 2 of Excel file with data for this assignment.

2b. Run a multiple linear regression on the data file for part (2a). (EXCEL Data, Data, Analysis, Regression). Since “Sales” is the dependent (or regressor) variable, the sales data is the Input Y Range. The other 4 variables (Month, Price, Advertising, and Interest Rate) are independent (or explanatory) variables; the explanatory variable data is the Input X Range. (Hint: Excel will permit you to include multiple columns and rows in your X range.) (10 points)

2c. From the regression results you obtain in part (2b), determine