An Academic Advisor Wants to Predict the Typical Starting Salary $$\hat { \beta } _ { 0 } = - 92040 \hat { \beta } 1 = 228 s = 3213 r ^ { 2 } = .66 r = .81 \mathrm { df } = 23 \quad t = 6.67$$

question 90

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 using 25 data points is shown below. $$\hat { \beta } _ { 0 } = - 92040 \hat { \beta } 1 = 228 s = 3213 r ^ { 2 } = .66 r = .81 \mathrm { df } = 23 \quad t = 6.67$$ Give a practical interpretation of r = .81.

• A) There appears to be a positive correlation between SALARY and GMAT.
• B) We estimate SALARY to increase 81% for every 1-point increase in GMAT.
• C) 81% of the sample variation in SALARY can be explained by using GMAT in a straight -line model.
• D) We can predict SALARY correctly 81% of the time using GMAT in a straight-line model.

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Definitions:

Bonds

Long-term debt instruments issued by corporations, governments, or other entities to finance their operations, projects, or expansions, which pay periodic interest and return the principal at maturity.

Stockholders' Equity

Represents the portion of the total value of a company that is owned by its shareholders.

Debt to Assets Ratio

A financial metric measuring the proportion of a company's total assets financed through debt, indicating financial leverage and risk.

Times Interest Earned

A financial ratio that measures a company's ability to meet its debt obligations based on its current income, indicating financial stability against interest charges.