Problem 7-11 The American Association of Individual Investors (AAII) On-Line Dis
ID: 3260101 • Letter: P
Question
Problem 7-11 The American Association of Individual Investors (AAII) On-Line Discount Broker Survey polls members on their experiences with electronic trades handled by discount brokers. As part of the survey, members were asked to rate their satisfaction with the trade price and the speed of execution, as well as provide an overall satisfaction rating. Possible responses (scores) were no opinion (0), unsatisfied (1), somewhat satisfied (2), satisfied (3), and very satisfied (4). For each broker, summary scores were computed by computing a weighted average of the scores provided by each respondent. A portion the survey results follow Satisfaction with Satisfaction with Overall Satisfaction with Brokerage Trade Price Speed of Execution Electronic Trades 3.3 3.3 3.5 3.2 3.2 3.3 4 3.7 3.1 2.8 2.7 2.6 2.6 3.8 2.6 2.6 2.7Explanation / Answer
a) -0.7627
0.5995
0.6614
coefficient of detemination=0.6207
It means 62% of the total variation of overall satisfaction with electronic trades has been explained by satisfaction with trade price and satisfaction with speed of execution.
b)
for satisfaction with speed of execution.,value of t statistic is 4.768
Pr(>|t|) = 0.000249
we do not accept the null hypothesis
for satisfaction with trade price,
value of t statistic is 2.973
Pr(>|t|) =0.009479
we donot accept null hypothesis
c)interpretation
if satisfaction with trade price increases by 1 unit overall satisfaction with electronic trades will increase by .5995 units
if satisfaction with speed of execution increases by 1 unit overall satisfaction with electronic trades will increase by .6614 units
d)
the predicted level is obtained by putting x1=4 and x2=4 in the estimated regression equation and it is 4