Choose the One Alternative That Best Completes the Statement or Answers

question 162

Multiple Choice

Choose the one alternative that best completes the statement or answers the question.
-Each year a nationally recognized publication conducts its "Survey of America's Best Graduate and Professional Schools." An academic advisor wants to predict the typical starting salary of a graduate at a top business school using GMAT score of the school as a predictor variable. A simple linear regression of SALARY versus GMAT using 25 data points shown below.
$$\mathrm { b } _ { 0 } = - 92040 \mathrm {~b} _ { 1 } = 228 \mathrm {~s} = 3213 \mathrm { R } ^ { 2 } = 0.66 \mathrm { r } = 0.81 \mathrm { df } = 23 \mathrm { t } = 6.67$$
Give a practical interpretation of $\mathrm { R } ^ { 2 } = 0.66$ .

• A) \(66 \%\) of the sample variation in SALARY can be explained by using GMAT in a straight-line model.
• B) \(66 \%\) of the differences in SALARY are caused by differences in GMAT scores.
• 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:

Compounded Monthly

The process of calculating interest where the accrued interest is added to the principal sum each month, resulting in interest earned on interest.

Deposit Today

An action where money is placed into a bank account or investment at the current date.

Investment Return

The profit or loss on an investment over a specified period, represented as a percentage of the investment's initial cost.

Present Values

The worth of a future amount of money today, calculated by discounting future cash flows at a specific interest rate.