## Determine the equation of the “best fit” line, which describes the relationship between CREDIT BALANCE and SIZE

Generate a scatterplot for CREDIT BALANCE vs. SIZE, including the graph of the “best fit” line. Interpret.

Determine the equation of the “best fit” line, which describes the relationship between and SIZE. Interpret the values for slope and intercept.

Determine the coefficient of correlation. Interpret.

Determine the coefficient of determination. Interpret.

Test the utility of this (use a two tail test with α =.05). Interpret your results, including the p-value.

Based on your findings in 1-5, what is your opinion about using SIZE to predict CREDIT BALANCE? Explain.

Compute the 95% confidence interval for β1 (the population slope). Interpret this interval.

What can we say about the credit balance for a customer that has a household size of 10? Explain your answer.

In an attempt to improve the model, we attempt to do a multiple regression model predicting CREDIT BALANCE based on INCOME, SIZE and YEARS.

Using Excel run the multiple regression analysis using the variables INCOME, SIZE and YEARS to predict CREDIT BALANCE. State the equation for this multiple regression model.

Perform the Global Test for Utility (F-Test). Explain your conclusion.

Perform the t-test on each independent variable. Explain your conclusions and clearly state how you should proceed. In particular, which independent variables should we keep and which should be discarded.

Is this multiple regression model better than the linear model that we generated in parts 1-8? Explain.

……………..Answer preview………………………….

We interpret a scatter plot graph by examining the trend of the data as displayed by the graph. A scatter plot assesses how close a data fits into a model in explaining the relationship between two variables. The scatter plot graph between credit balance and the household size portrays a positive linear relationship……………

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