A Study of the Top MBA Programs Attempted to Predict $$\text { Least Squares Linear Regression of Salary }$$

question 30

Multiple Choice

A study of the top MBA programs attempted to predict the average starting salary (in $1000's) of graduates of the program based on the amount of tuition (in $1000's) charged by the program and the average GMAT score of the program's students. The results of a regression analysis based on a sample of 75 MBA programs is shown below:

$$\text { Least Squares Linear Regression of Salary }$$

$\begin{array}{l}\text { Predictor }\\\begin{array}{lcccccccc}\text { Variables } & \text { Coefficient } & {\text { Std Error }} & \text { T } & \text { P } &{\text { VIF }} \\\text { Constant } & -203.402 & 51.6573 & -3.94 & 0.0002 & 0.0 \\\text { Gmat } & 0.39412 & 0.09039 & 4.36 & 0.0000 & 2.0 & \\\text { Tuition } & 0.92012 & 0.17875 & 5.15 & 0.0000 & 2.0 &\end{array}\end{array}$


$\begin{array}{lccc}\text { R-Squared } & 0.6857 & \text { Resid. Mean Square (MSE) } & 427.511 \\\text { Adjusted R-Squared } & 0.6769 & \text { Standard Deviation } & 20.6763\end{array}$

Interpret the coefficient for the tuition variable shown on the printout.

• A) For every $1000 increase in the tuition charged by the MBA program, we estimate that the average starting salary will increase by $920.12, holding the GMAT score constant
• B) For every $1000 increase in the tuition charged by the MBA program, we estimate that the average starting salary will increase by $394.12, holding the GMAT score constant
• C) For every $1000 increase in the tuition charged by the MBA program, we estimate that the average starting salary will decrease by $203,402, holding the GMAT score constant.
• D) For every $1000 increase in the average starting salary, we estimate that the tuition charged by the MBA program will increase by $920.12.

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Definitions:

Restitution

A legal process through which someone who has lost money or property to someone else's wrongful act is compensated by the person responsible for the loss.

Involuntary Bankruptcy

A legal process initiated by creditors to force a debtor into bankruptcy proceedings against their will.

Security

An investment instrument or collateral that signifies ownership or creditor relationship and may generate income.

Median Income

The middle income in a list of incomes sorted from lowest to highest, where half the incomes are above it and half are below it.