A manager at a local bank analyzed the relationship between monthly salary (y, in $) and length of service (x, measured in months) for 30 employees. She estimates the model: Salary = β₀ + β₁Service + ε. The following ANOVA table summarizes a portion of the regression results. Which of the following is the monthly salary of an employee that has worked for 48 months at the bank? A) $441 B) $785 C) $1,050 D) $1,226

Question

Quizplus · Accepted Answer

Look at the estimated regression equation: Salary = β₀ + β₁Service + ε. An employee with 48 months of service has x=48. So, Salary = β₀ + β₁*48 + ε The table indicates that β₀ = 1,120 and β₁ = 18. Thus, Salary = 1,120 + 18*48 = 1,120 + 864 = $1,984 However, the table also indicates that there is an error term ε, which means that this estimate may not be perfectly accurate.

A Manager at a Local Bank Analyzed the Relationship Between