Prediction intervals

In Excel it is rather difficult to calculate prediction intervals. It can be done in StatTools, but we are no longer using StatTools. So there won't be any questions about prediction intervals. BUT you should be able to calculate a point prediction just by plugging in the numbers in a regression equation. So, in this question from Part 3: make sure you can do a) but forget about b).

Prediction Intervals

1.         The owner of Showtime Movie Theaters, Inc., used multiple regression analysis to predict gross revenue (y) as a function of television advertising (x₁) and newspaper advertising (x₂).  The estimated regression equation was

   83.2  2.29x₁  1.30x₂

a)   What is the gross revenue expected for a week when $3500 is spent on television advertising (x₁  3.5) and $1800 is spent on newspaper advertising (x₂  1.8)?

b)  Provide a 95% prediction interval for next week’s revenue, assuming that the advertising expenditures will be allocated as in part (a). (15/29)

a.     = 83.2 + 2.29(3.5) + 1.30(1.8) = 93.555 or $93,555

         b.     Using StatTools, the prediction interval estimate: 91.774 to 95.401 or $91,774 to $95,401