An Accountancy Firm Would Like to Establish Groups of Similar

question 13

Multiple Choice

An accountancy firm would like to establish groups of similar taxation policies based on a database they have populated. They are faced with Kaiser's criterion for retaining factors. What rule should they follow for retaining factors?

• A) Retain any factor with an eigenvalue greater than 0.7.
• B) Retain any factor with an eigenvalue greater than 1.
• C) Retain factors before the point of inflexion on a scree plot.
• D) Retain factors with communalities greater than 0.7.

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Definitions:

Values

Represent individual measurements or quantities in a set of data.

Residuals

Differences between observed and predicted values in a statistical model, representing the unexplained part of the data.

Linear Regression Model

A mathematical approach that fits a linear equation to observed data to model how a dependent variable changes in relation to one or more independent variables.

Standard Deviation

A statistic that measures the dispersion or variation of a set of values from their mean.