Chapter 13

45. a. There is an inverse relationship between the variables. As the months owned
increases the number of hours exercised decreases.

15

Hours 10

0
0 2 4 6 8 10 12
Months

b.
X  X  Y  Y  X  X  Y  Y   X  X Y  Y 
2 2
X Y
12 4 5.5 -1.8 30.25 3.24 -9.90
2 10 -4.5 4.2 20.25 17.64 -18.90
6 8 -0.5 2.2 0.25 4.84 -1.10
9 5 2.5 -0.8 6.25 0.64 -2.00
7 5 0.5 -0.8 0.25 0.64 -0.40
2 8 -4.5 2.2 20.25 4.84 -9.90
8 3 1.5 -2.8 2.25 7.84 -4.20
4 8 -2.5 2.2 6.25 4.84 -5.50
10 2 3.5 -3.8 12.25 14.44 -13.30
5 5 -1.5 -0.8 2.25 0.64 1.20

65 58 100.50 59.60 -64.00

r
  x  x  y  y 
 n  1 sx s y
65 58
X  6.5 Y  5.8
10 10

100.50
sx   3.342
9

59.60
sy   2.573
9
64.00
r  0.827
(10  1)(3.342)(2.573)
There is a strong negative correlation between months owned (X) and hours exercised
(Y). There, there exist strong inverse relationship between the variables.

c. Ho:   0 H1:  < 0

1
 r n2
t
1 r2
0.827 10  2
t  4.16
1  (0.827)2

Reject Ho if t < 2.896

Reject Ho. We can conclude that there is a negative association between months owned
and hours exercised.

49. a.

x y (x  x ) ( y  y) ( x  x )2 ( y  y )2 (x  x ) ( y  y )
1 9 5.1 1.8667 -2.8 3.4844 7.8774 -5.2391
2 9 8.0 1.8667 0.1 3.4844 0.0087 0.1742
3 3 9.7 -4.1333 1.8 17.0844 3.2160 -7.4124
4 10 7.8 2.8667 -0.1 8.2178 0.0114 -0.3058
5 5 7.7 -2.1333 -0.2 4.5511 0.0427 0.4409
6 10 5.5 2.8667 -2.4 8.2178 5.7920 -6.8991
7 7 8.3 -0.1333 0.4 0.0178 0.1547 -0.0524
8 11 5.5 3.8667 -2.4 14.9511 5.7920 -9.3058
9 6 10.3 -1.1333 2.4 1.2844 5.7280 -2.7124
10 6 8.0 -1.1333 0.1 1.2844 0.0087 -0.1058
11 4 8.8 -3.1333 0.9 9.8178 0.7980 -2.7991
12 7 9.4 -0.1333 1.5 0.0178 2.2300 -0.1991
13 7 8.6 -0.1333 0.7 0.0178 0.4807 -0.0924
14 7 8.1 -0.1333 0.2 0.0178 0.0374 -0.0258
15 6 7.8 -1.1333 -0.1 1.2844 0.0114 0.1209
Sum 107 118.6 73.7333 32.1893 -34.4133
Mean 7.1333 7.9067 SD 2.2949 1.5163

n = 15  x = 107  y = 118.6
107 118.6
x  7.1333 y  7.9067
15 15
 ( x  x)2  73.73333  ( y  y)2  32.1893
73.73333 32.1893
sx   2.294922 sy   1.516323
14 14

y  a  bx
 sy 
b  r 
 sx 
 34.41333
r  0.706381
(15  1)( 2.294922 )(1.516323 )

2
  1.516323 
b  0.706381   0.466727
 2.294922 

a  y  bx

118 .6  107 
a  ( 0.466727 )   11.235986
15  15 

The regression equation is yˆ  11.236  0.4667 x . This indicates there is a negative

b. ŷ = 11.236 – 0.4667(7.0) = 7.9691

 x  x
2
^ 1
c. y  t.s y. x 1 
 x  x
2
n
2
 ^

SSE  

y  y 

s y. x  
n2 n2

 y  yˆ 
2
x y ŷ
1 9 5.1 7.0357 3.7469
2 9 8.0 7.0357 0.9299
3 3 9.7 9.8359 0.0185
4 10 7.8 6.5690 1.5154
5 5 7.7 8.9025 1.4460
6 10 5.5 6.5690 1.1428
7 7 8.3 7.9691 0.1095
8 11 5.5 6.1023 0.3628
9 6 10.3 8.4358 3.4752
10 6 8.0 8.4358 0.1899
11 4 8.8 9.3692 0.3240
12 7 9.4 7.9691 2.0475
13 7 8.6 7.9691 0.3980
14 7 8.1 7.9691 0.0171
15 6 7.8 8.4358 0.4042
Sum 107 118.6 16.1277
Mean 7.1333 7.9067 s y. x 1.114

1 (7  7.1333) 2
7.9689  (2.160)(1.114) 1    7.9689  2.4854
15 73.7333
[5.4835,10.4543]

3
 R2 =  0.706381  0.499. The number of bidders explains nearly 50 percent of the
2
d.
variation in the amount of the bid.

50. a. Use the following formulas

y  a  bx
 sy 
b  r 
 sx 

r
  x  x  y  y 
 n  1 sx s y
 x  x  y  y
2 2

sx  sy 
n 1 n 1

x
x y
y
n n
a  y  bx

x y (x  x ) ( y  y) ( x  x )2 ( y  y )2 (x  x ) ( y  y )
1 9.0 10.8 -70.6 -0.1 4982.48 0.01 7.53
2 94.4 11.3 14.8 0.4 219.43 0.15 5.83
3 27.3 11.2 -52.3 0.3 2733.90 0.09 -15.34
4 179.2 11.1 99.6 0.2 9922.82 0.04 19.26
5 71.9 11.1 -7.7 0.2 59.08 0.04 -1.49
6 97.9 11.2 18.3 0.3 335.38 0.09 5.37
7 93.5 11.0 13.9 0.1 193.58 0.01 1.30
8 70.0 10.7 -9.6 -0.2 91.90 0.04 1.98
9 160.7 11.3 81.1 0.4 6579.37 0.15 31.90
10 96.5 10.6 16.9 -0.3 286.06 0.09 -5.19
11 83.0 10.5 3.4 -0.4 11.65 0.17 -1.39
12 23.5 10.3 -56.1 -0.6 3145.71 0.37 34.03
13 58.7 10.7 -20.9 -0.2 436.25 0.04 4.32
14 93.8 11.0 14.2 0.1 202.02 0.01 1.33
15 34.4 10.8 -45.2 -0.1 2041.83 0.01 4.82
Sum 1193.80 163.60 31241.48 1.31 94.26
Mean 79.59 10.91 SD 47.24 0.31

4
 94.26
r  0.4598
15  1 (47.24)(0.31)
 0.31 
b  0.4598    0.003
 47.24 
a  10.91   0.003 79.59   10.6712

yˆ  10.6712  0.003x

b. Ho:β ≤ 0 H1:β > 0 df = n – 2 = 15 – 2 = 13

 y  yˆ 
2
x y ŷ
1 9.0 10.8 10.70 0.01
2 94.4 11.3 10.95 0.12
3 27.3 11.2 10.75 0.20
4 179.2 11.1 11.21 0.01
5 71.9 11.1 10.89 0.05
6 97.9 11.2 10.96 0.06
7 93.5 11.0 10.95 0.00
8 70.0 10.7 10.88 0.03
9 160.7 11.3 11.15 0.02
10 96.5 10.6 10.96 0.13
11 83.0 10.5 10.92 0.18
12 23.5 10.3 10.74 0.20
13 58.7 10.7 10.85 0.02
14 93.8 11.0 10.95 0.00
15 34.4 10.8 10.77 0.00
Sum 1193.80 163.60 1.03
Mean 79.59 10.91 Syx 0.28

1
sb  0.28   0.00158
31241.48
t = 0.003/0.00158 = 1.8987
Reject Ho if t > 1.771
Reject Ho and conclude the slope is positive.

c. R2 = (0.4598)2 = 0.2114
He shouldn’t be satisfied with using the size of the offering as it explains only around
21% of the uncertainty in the price per share.