CASE STUDY 9-4

CASE STUDY

READ THE CASE STUDY SUMMARY BELOW

C09_04.xlsx is attach this is all the data needed for the case study the data is already done

I need you to use the data to Answer Question number 6 that you will see below.

Case 9.4. Investing for Retirement (CASE STUDY SUMMARY)

Financial advisors offer many types of advice to customers, but they generally agree that one of the best things people can do is invest as much as possible in tax-deferred retirement plans. Not only are the earnings from these investments exempt from income tax (until retirement), but the investment itself is tax-exempt. This means that if a person invests, say, $10,000 of his $100,000 income in a tax-deferred retirement plan, he pays income tax that year on only $90,000 of his income. This is probably the best method available to most people for avoiding tax payments. However, which group takes advantage of this attractive investment opportunity: everyone, people with low salaries, people with high salaries, or some other group?

The file C09_04.xlsx lets you investigate this question. It contains data on 194 (hypothetical) couples: number of dependent children, combined annual salary of husband and wife, current mortgage on home, average amount of other (nonmortgage) debt, and percentage of combined income invested in tax-deferred retirement plans (assumed to be limited to 15%, which is realistic). Using correlations, scatterplots, and regression analysis, what can you conclude about the tendency of this group of people to invest in tax-deferred retirement plans?

Case 9-4 Organization of the document: (QUESTIONS REGARDING CASE STUDY)

1. Present a summary of the context of the case. In other words, explain what the case is about.

2. Run a regression with “percentage of income invested in tax-deferred retirement plans” as the

dependent variable. Are all the independent variables significant? If not, eliminate those

variables that are not statistically significant and run the regression again.

3. Provide an interpretation of the coefficients of the regression. You will get coefficients that are

very small, so you may want to express the units of the independent variables in thousands of

dollars rather than dollars.

4. What can you say about the fit of the regression to the data (R-square)? What about the

Standard Error of the Estimate?

5. Compute a correlation matrix. Do you see any evidence of multicollinearity?

6. Answer the case questions: Using correlations, scatterplots, and regression analysis, what can

you conclude about the tendency of this group of people to invest in tax-deferred How

successful is regression with these data? Make sure you provide an interpretation of your

correlations and scatterplots. Think about other variables that may be relevant to explain the

percentage invested in tax-deferred plans.

Conclusion

Give a short final conclusion about how useful the regression was for this case.

YOU ARE ONLY TO ANSWER QUESTION 6 & CONCLUSION !!!!!!!  THIS IS YOUR ONLY AND MAIN TASK

All the info you need to answer Question 6 will be available be in the excel document which I will attach!