Question

You are a personnel director and are interested in predicting the Number of Shares of Company Stock (Y) using the Number of Years Employed with the Company (X). You randomly selected 8 employees and found that the average number of shares is 525 and the average number of years employed is 22.5. If the slope (b1) is 20.0, what is the least squares estimate of the intercept (b0)

Answer 1

intercept=b0=75

Explanation:

The least squares estimate of the intercept b0 can be computed as

b0=ybar-b1*xbar.

ybar=average number of shares of company stock=525.

xbar= average number of years employed=22.5.

slope=b1=20.

Thus,

intercept=b0=ybar-b1*xbar

intercept=b0=525-20*22.5

intercept=b0=525-450

intercept=b0=75.

Thus, the estimate of intercept b0=75.