An Academic Advisor Wants to Predict the Typical Starting Salary

question 57

Multiple Choice

An academic advisor wants to predict the typical starting salary of a graduate at a top business school using the GMAT score of the school as a predictor variable. A simple linear regression of SALARY versus GMAT was created from a set of 25 data points. Which of the following is not an assumption required for the simple linear regression analysis to be valid?

• A) SALARY is independent of GMAT.
• B) The errors of predicting SALARY are normally distributed.
• C) The errors of predicting SALARY have a mean of 0.
• D) The errors of predicting SALARY have a variance that is constant for any given value of GMAT.

---

Definitions:

Account Analysis

A detailed examination of the components of an account, usually to identify specific trends, costs, or areas of improvement within a business.

Variable Cost

Costs that vary directly with the level of production or output, such as raw materials and direct labor.

Fixed Cost

Costs that remain constant in total regardless of changes in the level of activity within a relevant range, such as rent, salaries, and insurance premiums.

Variable Cost

Costs that vary directly with the level of production or service activity.