Question: Question 3:

A regression model was produced by an analyst to investigate the effect of Age, Years-of Service, and Years-of-Education on Wages (measured in thousands of dollars per year) paid to employees in a particular industry. The model output based on a sample of 200 workers indicates the following:

• The R2 value (coefficient of determination) is 0.76

• The associated F statistic and p-value of the F are 28.67 and 0.0005 respectively

• The standard error of the estimate is 3.96

• Coefficient values and the associated p-values for hypothesis testing are as follows

a) What are the independent and dependent variables in the model? Formulate the regression equation.

b) What are your expectations about the correlations between each independent variable and the dependent variable? Why?.

c) How would you evaluate the model? Is it any good? Why or why not? (5)

d) There is a charge that age based wage discrimination occurs in this industry. How would you respond to this charge based on the regression model results? (7)

e) Construct a 95% confidence interval prediction of the wages earned by a 35 year old employee with 8 years of education and 5 years of service. (7)