Question 4 EQ Insurances incomes (Premium) are thought to be related to the level of insurance sold. Data for Premium income and policies sold are given below: Year 1 2 3 4 5 6 Units sold (x) 10 14 7 12 5 6 Premium (y) 5 3 5 2 7 8 a) Compute the simple linear expression of insurance income on units sold using the least squares method. b) Estimate the level of insurance Premium for year 7 if the units sold is 10 Ghana cedis, using the regression equation obtained in (a) above. c) Calculate the correlation coefficient between the Premium and units sold explain your answer. d) Estimate the coefficient of determination and explain your results. The management of Exceltor Ltd. is considering the factors that affect consumers demand for the firms products. The effects of four factors were considered to see which ones have the most impact on the demand for the products. These were: Income of consumers (Inc), Expectation of Price Changes (Exp), Taste and Preferences (Tast) and Advertising Expenditure (Adv). The regression results have been presented below: SUMMARY OUTPUT Regression Statistics Multiple R 0.9549 R Square 0.9118 Adjusted R Square 0.9044 Standard Error 0.0787 Observations 53 ANOVA df SS MS F Significance F Regression 4 3.0709 0.7677 124.019 0.000 Residual 48 0.2971 0.0062 Total 52 3.3681 4 Standard P value Coefficient Error t Stat value Intercept 1.7581 0.9178 1.9155 0.0614 Adv 0.1779 0.0886 2.0089 0.0402 Inc 1.8689 0.5297 3.5280 0.0009 Tast -0.0272 0.0763 -0.356 0.7231 Exp -0.0806 0.0514 -1.568 0.1235 (a) For each of the blacked-out cells, compute the number that should appear in that cell (a). How well can the model predict demand? (b) What does the result in the ANOVA table imply? (c) Which factor has the greatest impact on the demand for the product? (d) If Management of Exceltor would want to improve the demand for the product, which aspects of the product must be concentrated on, and why? (e) Provide an economic interpretation for each of the coefficients. (f) Write the regression equation of the model above.