Suppose that the estimated regression equation of a College of Business graduates is given by: $\hat{ Y }$ = 20,000 + 2000x + 1500D,where y is the starting salary,x is the grade point average and D is a dummy variable which takes the value of 1 if the student is a finance major and 0 if not.A hotel management major graduate with a 3.5 grade point average would have an average starting salary of:
A) $22,000.
B) $27,000.
C) $28,500.
D) $20,000.

Question

Quizplus · Accepted Answer

Since the graduate is a hotel management major, D = 0 (not a finance major). Plugging x = 3.5 into the equation: $\hat{Y} = 20,000 + 2000(3.5) + 1500(0) = 20,000 + 7000 + 0 = 27,000$.

Suppose That the Estimated Regression Equation of a College of Business