Y = 10 + 0.51X1 + 0.45X2 The coefficient of determination is 0.96

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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A manager uses regression to express sales as a function of advertising expenditures (X1), and per capita income (X2) in your sales area. The following multiple linear regression equation is developed:

 

Y = 10 + 0.51X1 + 0.45X2

The coefficient of determination is 0.96

 

Determine which of the following conclusions is valid regarding the coefficient of determination:

 

Multiple Choice
  •  

    The coefficient of determination should always be greater than one.

  •  

    More analysis is needed. The coefficient of determination leaves much unexplained.

  •  

    The coefficient of determination is positive because the constant term is positive.

  •  

    The regression line fits the data used in the sample very well. There is a strong indication of the relationship of the two variables with sales.

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