SCENARIO 13-8
a Financial Analyst Wanted to Examine the Relationship

question 251

Short Answer

SCENARIO 13-8
A financial analyst wanted to examine the relationship between salary (in $1,000) and 2 variables: age (X1 = Age) and experience in the field (X2 = Exper).He took a sample of 20 employees and obtained the following Microsoft Excel output: $$\begin{array}{l}\begin{array} { l r } \hline { \text { Regression Statistics } } \\\hline \text { Multiple R } & 0.8535 \\\text { R Square } & 0.7284 \\\text { Adjusted R Square } & 0.6964 \\\text { Standard Error } & 10.5630 \\\text { Observations } & 20 \\\hline\end{array}\\\\\text { ANOYA }\\\begin{array} { l r c c c c } & d f & \text { SS } & \text { MS } & \text { F } & \text { Siqnificonce F } \\\hline \text { Regression } & 2 & 5086.5764 & 2543.2882 & 22.7941 & 0.0000 \\\text { Residual } & 17 & 1896.8050 & 111.5768 & & \\\text { Total } & 19 & 6983.3814 & & & \\\hline\end{array}\\\\\begin{array} { l r r r r r r } \hline & \text { Coefficients } & \text { Standard Error } & { t \text { Stat } } & \text { P-value } & \text { Lower 95\% } & \text { Upper 95\% } \\\hline \text { Intercept } & 1.5740 & 9.2723 & 0.1698 & 0.8672 & - 17.9888 & 21.1368 \\\text { Age } & 1.3045 & 0.1956 & 6.6678 & 0.0000 & 0.8917 & 1.7173 \\\text { Exper } & - 0.1478 & 0.1944 & - 0.7604 & 0.4574 & - 0.5580 & 0.2624 \\\hline\end{array}\end{array}$$
-Referring to SCENARIO 13-8, _% of the variation in salary can be explained by the variation in experience while holding age constant.

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Definitions:

Amortizing

The process of gradually paying off a debt over a period of time through regular payments.

Bond Discount

The difference between the bond's face value and its selling price when the bond is sold for less than its face value.

Bond Premium

The amount by which the market price of a bond exceeds its face value.

Annual Interest Expense

The total amount of interest a company expects to pay on its debts over a year.