The finance manager performed a regression analysis of the number of cars sold and interest rates using the sample of data above. Shown below is a portion of the regression output. Regression Statistics Multiple R
Correlation
Correlation defines a relationship between two independent variables. It tells the degree to which variables move in relation to each other. When two sets of data are related to each other, there is a correlation between them.
Linear Correlation
A correlation is used to determine the relationships between numerical and categorical variables. In other words, it is an indicator of how things are connected to one another. The correlation analysis is the study of how variables are related.
Regression Analysis
Regression analysis is a statistical method in which it estimates the relationship between a dependent variable and one or more independent variable. In simple terms dependent variable is called as outcome variable and independent variable is called as predictors. Regression analysis is one of the methods to find the trends in data. The independent variable used in Regression analysis is named Predictor variable. It offers data of an associated dependent variable regarding a particular outcome.
The finance manager performed a
| Regression Statistics | |
| Multiple R | 0.998868 |
| R2 | 0.997738 |
| Coefficient | |
| Intercept | 14.88462 |
| Interest Rate | -1.61538 |
- Are there factors other than the interest rate charged for cars sold that the finance manager should consider in predicting future car sales?
- Is interest rate charged for a loan the most important factor to be considered in predicting future car sales? Explain your reasoning. The dealership's vice-president of marketing has requested a sales forecast at the prevailing interest rate of 7%.
- As a finance manager, what reasons would you convey to the vice-president in recommending this forecasting model?
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