Dependent variable (Y)

Income

Independent variable (X)

Age (A), Education (E), Job Experience (J)

Intercept (Constant or Coefficient) :

Intercept
Estimated variable

a
-6.495

Slope (Constant or Coefficient):

Slope

Independent Variable

-0.241

2.265

1.041

Estimated Value

(a) Determine the estimated regression line. Hence, the estimated regression equation :

Y = a + b (A) + c (E) + d (J)

Y= - 6.495 + (-0.241)(A) + 2.265 (E) + 1.041 (J)
(b) Are the sign of the estimated slope coefficients logical?
Interpretation sign of the slope coefficient of each independent variable.
Independent
variable

Sign of
slope

Interpretation

Negative

Positive

Positive

Inverse relationship
between Income and Age
Direct relationship between
Income and Education
Direct relationship between
Income and Job

Evaluation/
Expected
sign
Positive

Comparison
of sign

Interpretation
(Estimate sign)

Different

Positive

Same

Positive

Same

Wrong ,
Bad Result
Correct,
Good Result
Correct,
Good Result

(c) Test the hypothesis ( at the 0.05 level of significance ) that there is no relationship
between the dependent variable and each of the independent variables.

Interpretation and evaluation of t-statistic

5% significant level ()
Critical t = t n-k-1 = t 20-4-1 = t 15, 0.05
= 2.9467

t- statistic =

Estimated coefficient
Standard error coefficient

I Calculated t I (A) = -0.241

0.113
= 2.133

I Calculated t I (E) = 2.265

0.265
= 8.547

I Calculated t I (J) = 1.041

0.265
= 3.989
Independent
variable
A
E
J

I Calculated t I

Critical t

Comparison

2.133

2.947

I Calculated t I < Critical t

8.547
3.989

2.947
2.947

I Calculated t I > Critical t

I Calculated t I > Critical t

Significance
Not
Significant
Significant
Significant

Results
Bad Result
Good Result
Good Result

d) Interpret the coefficient of determination

R2 = 0.865 = 87%
About 87% of change in dependent variable (Income) can explained by the independent
variable, Age (A) , Education (E), Job Experience (J). The other 13% cannot be explained by
regression analysis. R2 is high, therefore overall fit is good.

e) Evaluate the regression results overall

Interpretation of F-statistic
(Critical F at 5% significance level = 34.070

I Calculated FI =

R2 / (K-1)
(1-R2) / (n-k)

I Calculated F I =

0.865 / (4-1)
(1-0.865) / (20-4)

0.2883
0.135/16

= 34.17
I Calculated F I < Critical F
I 34.17 I < 34.070
Overall regression is significant = Good result

f) Evaluate the regression results overall

R2 = Overall regression is not significant = Good Result

t-statistic = Overall regression is not significant = Good Result
F-statistic = Overall regression is not significant = Good Result
In conclusion, overall regression is significant and Good Result.

g) Based on the regression model, determine the best estimate of the income of a person who
has 14 years of education, has 10 years of job experience, and is 45 years of age. State the
95% per confidence interval estimate.

Education = 14
Job Education = 10
Age = 45 years old
Y=a+bx
Y = -6.495 + (-0.241)(A) + 2.265(E) + 1.041(J)
Y = -6.495 + (-0.241)(45) + 2.265 (14) + 1.041 (10)
Y= 24.78