Chapter 4, Problem 11P

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 web site. February 7, 2012).

1. a. Develop an estimated regression equation using trade price and speed of execution to predict overall satisfaction with the broker. Interpret the coefficient of determination.
2. b. Use the t test to determine the significance of each independent variable. What are your conclusions at the 0.05 level of significance?
3. c. Interpret the estimated regression parameters. Are the relationships indicated by these estimates what you would expect?
4. d. Finger Lakes Investments has developed a new electronic trading system and would like to predict overall customer satisfaction assuming they can provide satisfactory 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 Finger Lakes Investments if they can achieve these performance levels.
5. e. What concerns (if any) do you have with regard to the possible responses the respondents could select on the survey.