For problem 1, give a 99% prediction interval for wealth growth when the income quartile is 5.
Problem 1
For problem 2, give a point prediction and a 99% prediction interval for wealth growth when the income quartile is 5.
Problem 2
An article in the Journal of Monetary Economics assesses the relationship between percentage growth in wealth over a decade and a half of savings for baby boomers of age 40 to 55 with these people's income quartiles. The article presents a table showing five income quartiles, and for each quartile there is a reported percentage growth in wealth. The data are as follows.
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Income quartile:
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1
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2
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3
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4
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5
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Wealth growth (%):
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17.3
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23.6
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40.2
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45.8
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56.8
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Run a simple linear regression of these five pairs of numbers and estimate a linear relationship between income and percentage growth in wealth.