The IRS wants to develop a method for detecting whether or not individuals have overstated their deductions for charitable contributions on their tax returns. To assist in this effort, the IRS supplied data (provided in an excel sheet along with this question) listing the adjusted gross income (AGI) and charitable contributions for 11 taxpayers whose returns were audited and found to be correct.

a) Prepare a scatter plot of the data. Does there appear to be a linear relationship between these variables?

b) Develop a simple linear regression model that can be used to predict the level of charitable contributions from a returns AGI.

c) Estimate the regression parameters using the Analysis ToolPak add-in. (You will need to submit works done in excel along with the solution).

d) IRS wants to use the regression results to identify returns with unusually high contributions. For this purpose, it wants to construct confidence intervals. What is the 95% confidence interval for charitable contribution when AGI equals to $110,000?

Excel Data :

	AGI	Charitable
Person	(in $1,000s)	Contributions
1	$55	$4,200
2	$58	$4,800
3	$63	$6,329
4	$68	$8,017
5	$74	$7,600
6	$78	$8,600
7	$84	$12,290
8	$88	$10,406
9	$92	$11,820
10	$98	$12,090
11	$105	$14,675