Question 1.

1. Drinking Longevity Away!

According to the Center for Disease Control and Prevention, life expectancy at age 65 in America is about 18.7 years. Medical researchers have argued that while excessive drinking is detrimental to health, drinking a little alcohol every day, especially wine, may be associated with an increase in life expectancy. Others have also linked longevity with income and gender. The accompanying table shows a portion of data relating to the length of life after 65 , average income (in $1,000s ) at a retirement age of 65 , a 'woman' dummy, and the average number of alcoholic drinks consumed per day. The full data set is below.

1. Use the data to model life expectancy at 65 on the basis of Income, Woman, and Drinks.
2. Does consumption of alcohol influence longevity?
3. Estimate the life expectancy at 65 of a man with an income of $\$ 40,000$ and an alcoholic consumption of two drinks per day; repeat the prediction for a woman. Conclude.

2. Thou Shall NOT Discriminate!

Three female Seton Hall professors recently learned in a court decision that they could pursue their lawsuit alleging that the university paid better salaries to younger instructors and male professors (www.nj.com, November 23, 2010). Numerous studies have focused on salary differences between men and women, whites and blacks, young and old. Mary Schweitzer works in the human resources department at a large liberal arts college. After the Seton Hall news, the college asked her to test for both gender and age discrimination in salaries. Mary gathered information on the annual salaries (in \(\\) 1,000 \mathrm{~s}$ ) of 42 professors, along with their experience (in years), gender (male or female), and age (under 60 years old or at least 60 years old). A portion of the data is below.

Mary would like to use the sample data to:

1. Estimate \(y=\beta_{0}+\beta_{1} x+\beta_{2} d_{1}+\beta_{3} d_{2}+\varepsilon\), where \(y\) is the annual salary (in \(\\) 1,000 \mathrm{~s}$ ) of a professor, \(x\) is the number of years of experience, \(d_{1}\) is a dummy variable that equals 1 if the professor is male and 0 otherwise, and \(d_{2}\) is a dummy variable that equals 1 if the professor is 60 years of age or older and 0 otherwise.
2. Interpret and Discuss the significance of the regressors (independent variables)
3. Compute the salary of a 50 -year-old male professor with 10 years of experience. Compute the salary of a 50 -year-old female professor with 10 years experience. Discuss the impact of gender on salary.
4. Compute the salary of a 65 -year-old female professor with 10 years of experience. Discuss the impact of age on salary.

Question 3: The Chartered Financial Analyst (CFA®) designation is fast becoming a requirement for serious investment professionals. Although it requires a successful completion of three levels of grueling exams, it also promises great careers with lucrative salaries. Susan Wayne works as a research analyst at Fidelity Investments. She is thinking about taking the CFA exam in the summer and wants to understand why the recent pass rate for level I has been under 40 percent. She firmly believes that those who were good students in college have a better chance of passing. She has also been told that work experience helps. She has access to the information on 30 Fidelity employees who took the test last year, including their success on the exam ( 1 for pass, 0 for fail), their college GPA, and years of work experience. The full data set is below.

In a report, use the sample information to:

1. Analyze a linear probability model to explain the probability of success. Predict the probability of passing the CFA exam for a candidate with various values of college GPA and years of experience.
2. Analyze a logit model to explain the probability of success. Predict the probability of passing the CFA exam for a candidate with various values of college GPA and years of experience.
3. Choose which model is more reliable in predicting the probability of passing the CFA exam. Provide at least one reason for your choice.

Price: $18.64

Solution: The downloadable solution consists of 7 pages, 1164 words and 7 charts.
Deliverable: Word Document