The American Association of Individual Investors (AAII) On-Line Discount Broker Survey polls members on their experiences with electronic trades handled by discount brokers. As part of the survey, members were asked to rate their satisfaction with the trade price and the speed of execution, as well as provide an overall satisfaction rating. Possible responses (scores) were no opinion (0), unsatisfied (1), somewhat satisfied (2), satisfied (3), and very satisfied (4). For each broker, summary scores were computed by computing a weighted average of the scores provided by each respondent. A portion the survey results follow (AAII website, February 7, 2012). (a)Develop an estimated regression equation using trade price and speed of execution to predict overall satisfaction with the broker. Let x1 represent satisfaction with Trade Price. Let x2 represent satisfaction with speed of execution. If required, round your answers to four decimal places. For subtractive or negative numbers use a minus sign even if there is a + sign before the blank. (Example: -300) = + x1 + x2 What is the coefficient of determination? If required, round your answers to four decimal places. Interpret the coefficient of determination. If required, round your answer to one decimal places. The regression model explains approximately % of the variation in the values of overall satisfaction in the sample. (b)Use the t test to determine the significance of each independent variable. What are your conclusions at the 0.05 level of significance? We conclude that β1 = 0. That is, there a relationship between satisfaction with trade price and overall satisfaction with the electronic trade. We conclude that β2 = 0. That is, there a relationship between satisfaction with speed of execution and overall satisfaction with the electronic made. (c)Interpret the estimated regression parameters. Are the relationships indicated by these estimates what you would expect? (i)β0 is the estimated overall satisfaction with the electronic trade when satisfaction with trade price and speed of execution are both 0. β1 is the estimated change in overall satisfaction with the electronic trade if satisfaction with speed of execution is held constant and there is a 1 point increase in satisfaction with trade price. β2 is the is the estimated change in overall satisfaction with the electronic trade if satisfaction with trade price is held constant and there is a 1 point increase in satisfaction with speed of execution.(ii)β0 is the estimated overall satisfaction with the electronic trade when satisfaction with trade price and speed of execution are both 1. β1 is the estimated change in overall satisfaction with the electronic trade if satisfaction with speed of execution is held constant and there is a 1 point increase in satisfaction with trade price. β2 is the is the estimated change in overall satisfaction with the electronic trade if satisfaction with trade price is held constant and there is a 1 point increase in satisfaction with speed of execution.(iii)β0 is the estimated overall satisfaction with the electronic trade when satisfaction with trade price and speed of execution are both 1. β1 is the estimated change in overall satisfaction with the electronic trade if satisfaction with trade price is held constant and there is a 1 point increase in satisfaction with speed of execution. β2 is the estimated change in overall satisfaction with the electronic trade if satisfaction with speed of execution is held constant and there is a 1 point increase in satisfaction with trade price.(iv)β0 is the estimated overall satisfaction with the electronic trade when satisfaction with trade price and speed of execution are both 0. β1 is the estimated change in overall satisfaction with the electronic trade if satisfaction with trade price is held constant and there is a 1 point increase in satisfaction with speed of execution. β2 is the estimated change in overall satisfaction with the electronic trade if satisfaction with speed of execution is held constant and there is a 1 point increase in satisfaction with trade price. (d)Finger Lakes Investments has developed a new electronic trading system and would like to predict overall customer satisfaction assuming they can provide satisfactory levels of service levels (3) for both trade price and speed of execution. Use the estimated regression equation developed in part (a) to predict overall satisfaction level for Lakes Investments if they can achieve these performance levels. If required, round your answer to one decimal places. Do not round intermediate calculations. (e)What concerns (if any) do you have with regard to the possible responses the respondents could select on the survey? The input in the box below will not be graded, but may be reviewed and considered by your instructor. BrokerageScottrade, Inc.Charles SchwabFidelity Brokerage ServicesTD AmeritradeE*Trade Financial(Not listed)Vanguard Brokerage ServicesUSAA Brokerage ServicesThinkorswimWells Fargo InvestmentsInteractive BrokersZecco.comFirstrade SecuritiesBanc of America Investment ServicesSatisfaction with Satisfaction with Overall Satisfaction withTrade Price Speed of Execution3.33.23.12.92.82.42.62.42.62.33.72.53.04.03.13.33.33.53.23.23.83.82.62.74.02.53.01.0Electronic Trades3.43.34.03.72.92.72.83.62.62.34.02.53.02.0

Given information: The data represents the satisfaction ratings.

Answered: The American Association of Individual…

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The American Association of Individual Investors (AAII) On-Line Discount Broker Survey polls members on their experiences with electronic trades handled by discount brokers. As part of the survey, members were asked to rate their satisfaction with the trade price and the speed of execution, as well as provide an overall satisfaction rating. Possible responses (scores) were no opinion (0), unsatisfied (1), somewhat satisfied (2), satisfied (3), and very satisfied (4). For each broker, summary scores were computed by computing a weighted average of the scores provided by each respondent. A portion the survey results follow (AAII website, February 7, 2012).

(a)

Develop an estimated regression equation using trade price and speed of execution to predict overall satisfaction with the broker.

Let x₁ represent satisfaction with Trade Price.

Let x₂ represent satisfaction with speed of execution.

If required, round your answers to four decimal places. For subtractive or negative numbers use a minus sign even if there is a + sign before the blank. (Example: -300)

= + x₁ + x₂

What is the coefficient of determination?

If required, round your answers to four decimal places.

Interpret the coefficient of determination. If required, round your answer to one decimal places.

The regression model explains approximately % of the variation in the values of overall satisfaction in the sample.

(b)

Use the t test to determine the significance of each independent variable. What are your conclusions at the 0.05 level of significance?

We conclude that β₁ = 0. That is, there a relationship between satisfaction with trade price and overall satisfaction with the electronic trade.

We conclude that β₂ = 0. That is, there a relationship between satisfaction with speed of execution and overall satisfaction with the electronic made.

(c)

Interpret the estimated regression parameters. Are the relationships indicated by these estimates what you would expect?

(i)	β₀ is the estimated overall satisfaction with the electronic trade when satisfaction with trade price and speed of execution are both 0. β₁ is the estimated change in overall satisfaction with the electronic trade if satisfaction with speed of execution is held constant and there is a 1 point increase in satisfaction with trade price. β₂ is the is the estimated change in overall satisfaction with the electronic trade if satisfaction with trade price is held constant and there is a 1 point increase in satisfaction with speed of execution.
(ii)	β₀ is the estimated overall satisfaction with the electronic trade when satisfaction with trade price and speed of execution are both 1. β₁ is the estimated change in overall satisfaction with the electronic trade if satisfaction with speed of execution is held constant and there is a 1 point increase in satisfaction with trade price. β₂ is the is the estimated change in overall satisfaction with the electronic trade if satisfaction with trade price is held constant and there is a 1 point increase in satisfaction with speed of execution.
(iii)	β₀ is the estimated overall satisfaction with the electronic trade when satisfaction with trade price and speed of execution are both 1. β₁ is the estimated change in overall satisfaction with the electronic trade if satisfaction with trade price is held constant and there is a 1 point increase in satisfaction with speed of execution. β₂ is the estimated change in overall satisfaction with the electronic trade if satisfaction with speed of execution is held constant and there is a 1 point increase in satisfaction with trade price.
(iv)	β₀ is the estimated overall satisfaction with the electronic trade when satisfaction with trade price and speed of execution are both 0. β₁ is the estimated change in overall satisfaction with the electronic trade if satisfaction with trade price is held constant and there is a 1 point increase in satisfaction with speed of execution. β₂ is the estimated change in overall satisfaction with the electronic trade if satisfaction with speed of execution is held constant and there is a 1 point increase in satisfaction with trade price.

(d)

Finger Lakes Investments has developed a new electronic trading system and would like to predict overall customer satisfaction assuming they can provide satisfactory levels of service levels (3) for both trade price and speed of execution. Use the estimated regression equation developed in part (a) to predict overall satisfaction level for Lakes Investments if they can achieve these performance levels.

If required, round your answer to one decimal places. Do not round intermediate calculations.

(e)

What concerns (if any) do you have with regard to the possible responses the respondents could select on the survey?

The input in the box below will not be graded, but may be reviewed and considered by your instructor.