An Academic Advisor Wants to Predict the Typical Starting Salary

question 56

Short Answer

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. $$\hat { \beta } _ { 0 } = - 92040 \hat { \beta } 1 = 228 \mathrm {~s} = 3213 \mathrm { r } ^ { 2 } = .66 \quad r = .81 \mathrm { df } = 23 \quad t = 6.67$$
Give a practical interpretation of $r ^ { 2 } = .66$ .
A) $66 \%$ of the sample variation in SALARY can be explained by using GMAT in a straight -line model.
B) We expect to predict SALARY to within $2 [ \sqrt { .66 } ]$ of its true value using GMAT in a straight-line model.
C) We estimate SALARY to increase $\$ .66$ for every 1 -point increase in GMAT.
D) We can predict SALARY correctly $66 \%$ of the time using GMAT in a straight-line model.

• A) \(66 \%\) of the sample variation in SALARY can be explained by using GMAT in a straight -line model.
• B) We expect to predict SALARY to within \(2 [ \sqrt { .66 } ]\) of its true value using GMAT in a straight-line model.
• C) We estimate SALARY to increase \(\$ .66\) for every 1 -point increase in GMAT.
• D) We can predict SALARY correctly \(66 \%\) of the time using GMAT in a straight-line model.

---

Definitions:

Procurement Department

The division within an organization responsible for acquiring goods and services necessary for its operations.

Boost Efficiency

Increase the effectiveness or productivity of a process or operation with the same amount of input.

Raw Materials Inventory

Stock of basic materials that are used in the production process of goods and are yet to be processed or transformed into final products.