Question

1. A corporation owns several companies. The strategic planner for the corporation believes amount spent on advertising can to some extent be a predictor of total sales. As an aid in long term planning, she gathers the following sales and advertising information from several of the companies in millions for the year 2019.

Advertising	12.5	3.7	21.6	60.0	37.6	6.1	16.8	41.2
Sales	148	55	338	994	541	89	126	379

1. Develop the equation of the simple regression line to predict sales on advertising expenditures using these data.                                                                                                              [10 Marks]
2. Find out the sales that are likely to be attained when advertising expenditure is 25

million.                                                                                                           [2 Marks]

3. Compute the coefficient of correlation and coefficient of determination and interpret their values. [4 Marks]
4. Test the hypothesis that the population correlation coefficient is zero at 5% level of significance. [4 Marks]

Answer 1

Solution:

1) simple regression line is

Y= -46.29 + 15.24X

2) for X=25 find Y

Y= -46.29 + 15.24*25

Y= 334.71

calculation:

1) correlation coefficient r= 0.948 and coefficient of determination R²= 0.8981

​​​Calculation:

2) Test for hypothesis is:

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