Part IV: The Bank of America is expanding its bankingbranch locations on the big island of Hawaii.
Question:
Part IV: The Bank of America is expanding its bankingbranch locations on the big island of Hawaii. Just as ithas done in the mainland 48 states, it is choosing town locationsfor expansion based upon five characteristics (variables) of acandidate town’s population:
1.median age (years)
2.median years of education
3.median household income (dollars)
4.median home value (dollars)
5.median household wealth (dollars).
Years of experience have proven to the Bank of Americathat these 5 variables predict the average bankbalance per person in the town. And, of course, TheBank of America wants to expand into the towns that are likely tohave the highest bank balances perperson. The Regression Analysis OutputTable here below shows the way The Bank of America usesregression analysis to predict the average bank balance per personin a town. On the next page answer the five questionspertaining to this problem.
Regression Statistics |
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| Multiple R |
| 0.973 |
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| R-squared |
| 0.983 |
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| Adjusted R-Squared | 0.944 |
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| Standard Error | 2055 |
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| Observations | 102 |
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Regression Formula |
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| Coefficients | Std error | t Stat | P-Value | Lower 95% | Upper 95% |
| Intercept |
| -10710.640 | 4260.976 | -2.51 | 0.01300 | -19168 | -2252 |
| Age |
| 318.664 | 60.986 | 5.225 | 0.00060 | 197 | 439 |
| Education |
| 621.860 | 318.95 | 1.9496 | 0.04500 | 11 | 1254 |
| Income |
| 0.146 | 0.04078 | 3.588 | 0.00050 | 0.0653 | 0.2272 |
| Home Value |
| 0.009 | 0.011 | 0.83194 | 0.04700 | 0.012 | 0.031 |
| Wealth |
| 0.074 | 0.01118 | 6.643 | 0.00080 | 0.0526 | 0.0965 |
1. Write the linear equation for the regression line/modelindicated by the Regression Analysis Output Table
2. What is the net effect on “average bank balance perperson” for every $10,000 increase in “median household income” inthat town? Show your work.
3. Are all five independent variablessignificant? Which has the lowest PValue? Does this value make you more or less confidentabout the significant linear relationship of that IV with theDV?
4. Controlling for Age, Education, Income, and Wealth, whatis the net effect of every $100,000 increase in “median home value”on “average bank balance per person”?
5. The town of Kalola has the followingcharacteristics: median age of 34.8 years; 13.7 median years ofeducation; $75,591 of median household income;
$155,334 of median home value; and $188,310 of median householdwealth. What is the likely average bank balance per person in thetown? Show your work and round to the nearest penny (2decimal places).
Accounting concepts and applications
ISBN: 978-0538745482
11th Edition
Authors: Albrecht Stice, Stice Swain