Question

Suppose that the estimated regression equation of a College of Business graduates is given by: = 32,000 + 4,000x + 1,800D, where y is the starting salary, x is the grade point average and D is a dummy variable which takes the value of 1 if the student is a finance major and 0 if not. An accountancy major graduate with a 3.5 grade point average would have an average starting salary of:

A. $46,000
B. $32,000

C. $47,800

D. $37,800

Answer 1

In the given problem, the student is an accountancy major.

So, dummy variable, D = 0 and grade point average, x = 3.5

Therefore average starting salary, y = $ (32000 + 4000*3.5) = $ 46000

So, the correct option is (a).