MARA UNIVERSITY OF TECHNOLOGY MALAYSIA (UiTM) MALACCA

CITY CAMPUS

FACULTY OF BUSINESS AND MANAGEMENT

SEM 4 MARCH - AUGUST 2023

BUSINESS ANALYTICS (MGT555)

INDIVIDUAL ASSIGNMENT 1

PREPARED FOR:
DR JUAN RIZAL BIN DATUK HAJI SA’ARI

PREPARED BY:
NAME STUDENT
STUDENTIDID GROUP
GROUP

NORAINA NAZIRA BINTI NAZRI 2021230564 M1BA2324A

SUBMISSION DATE:
23rd June 2023 (Friday)

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1. Using the data in Excel file Loans, construct a scatter chart for monthly income versus
loan amount and add a linear trendline. What is the regression model? If an individual
has 7,336 as monthly income, what would you predict the loan amount to be?

Scatter Charts for monthly income versus loan amount and add a linear trendline

Regression Analysis

SUMMARY OUTPUT

Regression Statistics
Multiple R 0.479291512
R Square 0.229720354
Adjusted R Square 0.217869898
Standard Error 1456.897398
Observations 67

ANOVA
df SS MS F Significance F
Regression 1 41145500.15 41145500 19.38493774 4.0711E-05
Residual 65 137965751.8 2122550
Total 66 179111251.9

Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept 6871.853861 441.7068983 15.5575 1.34831E-23 5989.70427 7754.003452 5989.70427 7754.003452
X Variable 1 -0.012045904 0.002735944 -4.40283 4.0711E-05 -0.017509961 -0.006581847 -0.017509961 -0.006581847

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What is the regression model?

The data set uses a basic linear regression model, specifically simple linear regression.
Simple linear regression involves establishing a linear connection between a single
independent variable (X) and a single dependent variable (Y). Graphically, linear
regression is represented by a straight line, where the slope indicates the extent to which
changes in one variable affect changes in the other. Both variables should be
quantitative.

If an individual has 7,336 as monthly income, what would you predict the loan
amount to be?

Answer:

y = a + bx

Loan = 244864.4 + (-19.0704) (7336)

y = RM104,963.95

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2. The Excel file Salary Data provides information on current salary, beginning salary,
previous experience (in months) when hired and total years of education for a sample of
100 employees in a firm.

a. Develop a multiple regression model for predicting current salary as a function of the
other variables. Interpret all key regression results and hypothesis tests.

Multiple Linear Regression for Predicting Current Salary

Y= B0 + B1X1 + B2X2 n +
Current Salary = -4139.237674 + 1.730241662 Beginning Salary − 10.90710724
Previous Exp (Months) + 719.1221472 Education (Years)

• If the employees beginning salary increase by $1, the current salary will increase
by $1.73.
• If the previous experience decreases by 1 month, the current salary will reduce
by $10.91.
• If the education increases by 1 year, the current salary will increase by $719.12.

R-squared (𝑹𝟐 )

Regression Statistics
Multiple R 0.896159669
R Square 0.803102152
Adjusted R Square 0.796949095
Standard Error 7790.874638
Observations 100

𝐑𝟐 = 0.80

About 80% of the variation in Current Salary is explained by Starting Salary, Prior
Experience and Education. The remaining 20% consists of additional factors that
potentially contribute to variability in the dependent variable.

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F-Test
ANOVA
df SS MS F Significance F
Regression 3 23766951872 7922317291 130.5208218 9.40762E-34
Residual 96 5826981852 60697727.63
Total 99 29593933724

The significant-F is close to zero, which is less than the significance level (0.05). The null
hypothesis is rejected. At least one slope is statistically different from zero.

Testing Hypothesis for Regression Coefficients

ßn 0
t=
SE
The Null hypothesis is tested by setting ßn equal to zero

H:ß=0

H : ß≠0

Coefficients Standard Error t Stat P-value

Intercept -4139.237674 4203.358159 -0.984745415 0.327224523
Beginning Salary 1.730241662 0.113810766 15.20279426 2.66715E-27
Previous Experience (months) -10.90710724 7.770950797 -1.403574353 0.16367212
Education (years) 719.1221472 351.7339406 2.044505987 0.043641406

Beginning Salary Previous Experience (Months) Education (Years)

2.66715E-27 0.16367212 0.043641406
p-value < 0.05 p-value > 0.05 p-value < 0.05
Reject Null Fail to reject Reject Null

Conclusion
The p-values are examined to evaluate the hypothesis concerning each independent
variable. With the exception of Previous Experience, all values are below 0.05.
Consequently, we reject the null hypothesis regarding the regression coefficients of
Beginning Salary and Education (Years), implying their statistical significance.
Conversely, the null hypothesis for the regression coefficient of Previous Experience
(Months) is not rejected, indicating its lack of statistical significance.

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 Confidence Interval
Since the confidence interval for Beginning Salary and Education (Years) excludes zero,
while the confidence interval for Previous Experience (Months) includes zero, we can
infer that the coefficient is not statistical significance.

Correlation
Current Salary Beginning Salary Previous Experience (months) Education (years)
Current Salary 1
Beginning Salary 0.886592162 1
Previous Experience (months) 0.017495746 0.122832883 1
Education (years) 0.562697022 0.525166723 -0.164366991 1

Experts often rely on a general guideline stating that absolute values exceeding 0.7 or
0.8 could indicate the presence of multicollinearity. In this case, multicollinearity is absent
since the independent values are below the thresholds of 0.7 and 0.8.

b. Find the best model for predicting current salary using t-value criterion.
Coefficients Standard Error t Stat P-value
Intercept -4139.237674 4203.358159 -0.984745415 0.327224523
Beginning Salary 1.730241662 0.113810766 15.20279426 2.66715E-27
Previous Experience (months) -10.90710724 7.770950797 -1.403574353 0.16367212
Education (years) 719.1221472 351.7339406 2.044505987 0.043641406

The amount of t-value for Beginning Salary (15.20279426) is higher than Previous
Experience (-1.403574353) and Education (2.044505987). Therefore, Beginning Salary
is the good predictor of Current Salary.