420Hw10 - STAT 420(10 points(due Friday November 7 by 3:00...

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STAT 420 Fall 2008 Homework #10 (10 points) (due Friday, November 7, by 3:00 p.m.) 1. Can a corporation’s annual profit be predicted from information about the company’s chief executive officer (CEO)? Forbes (May, 1999) presented data on company profit ( y ) , (in $ millions), CEO’s annual income ( x 1 ) (in $ thousands), and percentage of the company’s stock owned by the CEO ( x 2 ) . Company Profit, y CEO Income, x 1 Stock, x 2 Gap 824.5 . Drexler 3,743 . 1.71% Intel 6,068.0 . Grove 52,598 . .13 % Gateway 2000 346.4 . Waitt 855 . 43.93 % HJ Heinz 746.9 . O’Reilly 2,916 . 1.63 % Conseco 630.7 . Hilbert 124,579 . 3.64 % Citicorp 5,807.0 . Reed 6,200 . .22 % Cisco Systems 1,362.3 . Chambers 560 . .06 % General Electric 9,296.0 . Welch 40,626 . .03 % America Online 254.0 . Case 26,917 . .54 % Computer Associates 570.0 . Wang 10,614 . 3.79 % Lockheed Martin 1,001.0 . Augustine 2,533 . .01 % Bear Stearns 538.6 . Cayne 23,215 . 3.44 % Source : “Compensation Fit for a King,” Forbes , May 1999. The data are stored in http://www.stat.uiuc.edu/~stepanov/Hw10_1.csv a) Fit the interaction model Y = β 0 + β 1 x 1 + β 2 x 2 + β 3 x 1 x 2 + ε Give the least squares prediction equation and determine whether the overall model
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