A Student Used Multiple Regression Analysis to Study How Family $\begin{array}{lrr} & d f & S S \\\text { Regression }& 3 & 45.9634 \\\text { Residual } & 11 & 2.6218\\\text { Total }\end{array}$

question 53

Essay

A student used multiple regression analysis to study how family spending (y) is influenced by income (x₁), family size (x₂), and additions to savings (x₃).The variables y, x₁, and x₃ are measured in thousands of dollars.The following results were obtained. ANOVA
$\begin{array}{lrr} & d f & S S \\\text { Regression }& 3 & 45.9634 \\\text { Residual } & 11 & 2.6218\\\text { Total }\end{array}$
$\begin{array}{ll}&\text { Coefficients } & \text { Standard Error } \\\text { Intercept } &0.0136 & \\\mathrm{x}_{1}&0.7992 & 0.074 \\\mathrm{x}_{2}&0.2280 & 0.190 \\\mathrm{x}_{3}&-0.5796 & 0.920\end{array}$

a.
Write out the estimated regression equation for the relationship between the variables.
b.
Compute R². What can you say about the strength of this relationship?
c.
Carry out a test to determine whether y is significantly related to the independent variables. Use a .05 level of significance.
d.
Carry out a test to see if x₃ and y are significantly related. Use a .05 level of significance.

Understand how initial deposit amounts impact future savings goals.

Analyze the impact of interest rates on investment outcomes.

Understand the principle of discounted cash flows.

Recognize the impact of time on the value of money.

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Definitions:

Equivalent Cash Flows

Streams of equal value cash flows occurring at regular intervals.

Hurdle Rate

The minimum rate of return on a project or investment required by a manager or investor to proceed with the project.

Present Value

The present value of a future amount of money or series of cash flows, using a certain return rate.

Payment Options

The various methods by which a buyer can fulfill a financial obligation to a seller, including cash, credit, and electronic transfers.