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Q2b) F-Test of Validity

SOLUTION

Given

Degrees of Freedom (Regression): df_{1} = 3

Degrees of Freedom (Residual): df_{2} = 105

F-Statistic: F = 5.3362

Hypotheses

H_{0}: \beta_1 = \beta_2 = \beta_3 = 0

(The regression model does not explain a significant portion of the variance in the dependent variable.)

H_{1}: \beta_i \neq 0 for at least one i

(The regression model explains a significant portion of the variance in the dependent variable.)

Rejection Region

Critical Value

The critical value for an F-test at 97.5% confidence level with df_{1} = 3 and df_{2} = 105 is 3.25.

Decision Rule

Reject the H_{0} if F > 3.25

Test Statistic

This is given in the summary output as F = 5.3362

Conclusion

Since the calculated F-value F = 5.3362 is greater than the critical value (3.25), we reject the null hypothesis.

This suggests that the regression model is valid (has explanatory power), and at least one of the coefficients is significantly different from zero.

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