Institute of Management Technology, Ghaziabad

Project Report
On
Investment in Retirement
Submitted as the Term 1 project for Business Statistics
for the session 2011-2012

Submitted to : Dr. Roma Mitra

Date of Submission : 6 September 2011
Submitted By:
GROUP - 8, SECTION B
Ankit Gupta - 11IB-008

International Business

Hitesh Kothari - 11IB-025

International Business

Mohit Jain - 11DM-073

Marketing

Pallavi Kumar - 11DM-098

Marketing

Roby Babu - 11IT-027

Soumyarup Chatterjee - 11FN-106

[Type text]

Information Technology
Finance

PAGE INDEX
Topic

Page No.

1.

INTRODUCTION : THE CASE

2.

OBJECTIVES

3.

METHODOLOGY

USED
4.

ANALYSIS

4.1 CASE DATA

4.2 PROBLEM FORMULATION

10

4.3 SCATTER PLOT ANALYSIS

10

4.4 CORRELATION ANALYSIS

12

4.5 REGRESSION ANALYSIS

14

4.6 RESIDUAL PLOTS & NORMAL

25

PROBABILITY CURVE
5.

CONCLUSION

28

6.

MANAGERIAL INPLICATIONS

29

Group 8 Investment on Retirement

SECTION 1
INTRODUCTION : THE CASE

1.1 Problem Statement :

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 income of his
$100,000 income a tax-deferred retirement plan, he pays in-come 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 who?

The file RETIREPLAN.XLS lets you investigate this question. It contains data on 194 couples:
number of dependent children, combined annual salary of husband and wife, current mortgage on
home, aver-age 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, scatter-plots, and regression analysis, what can you conclude about the tendency to
invest in tax-deferred retirement plans in this group of people?

Group 8 Investment on Retirement

SECTION 2
OBJECTIVES

2.1 OBJECTIVES:

To take suitable managerial decisions about the tendency to invest in tax deferred retirement plan
from group of 194 couples depending on their number of dependent children, combined annual
salary of husband and wife, current mortage on home and other debt using correlation, scatterplot
and regression analysis.

Group 8 Investment on Retirement

SECTION 3
METHODOLOGY USED

3.1 METHODOLOGY USED :

1) Scatterplots
2) Correlation Analysis
3) Multiple Regression
4) Hypothesis Testing
5) Study of ANOVA table.
6) Study of residual plot and normal probability plot

Group 8 Investment on Retirement

SECTION 4
ANALYSIS

4.1 CASE DATA

In the given excel sheet we are provided with the following data.
Amounts invested in tax-deferred retirement plans
Couple
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38

Children
2
3
1
2
1
4
2
2
3
3
0
2
2
2
3
2
2
2
0
1
1
3
1
2
1
3
1
1
1
2
1
3
2
2
0
3
2
3

Salary
95920
99850
81940
70370
77430
55090
89730
58330
50730
65760
100820
48310
44690
76120
32120
110950
61180
100290
43810
73320
103070
71960
87170
71700
110580
86930
57620
54420
100450
39680
97360
53050
82760
53780
52180
58240
68480
98060

Group 8 Investment on Retirement

Mortgage
87340
105320
35720
78610
55640
130020
99600
85320
102220
114050
76250
39840
47760
35650
65560
120710
68890
104540
39540
75800
103040
67280
83130
59920
94030
103450
50980
54850
75050
72590
76020
76390
47790
100470
75910
96630
83230
124960

Debt
6230
15240
2030
13450
5270
11260
11520
10630
11740
19380
9140
3260
9880
9370
10500
16970
6650
19480
7850
5980
3010
12800
14940
6930
8230
13600
5130
10590
15790
15810
13180
16870
16490
18740
5880
14220
1240
11630

Invested
6.0%
9.9%
9.0%
8.4%
15.0%
0.0%
4.8%
2.9%
0.0%
9.5%
9.7%
3.6%
9.4%
8.4%
7.5%
15.0%
8.8%
3.9%
15.0%
6.8%
15.0%
4.7%
10.1%
13.9%
11.8%
14.0%
5.8%
0.0%
5.3%
4.5%
7.6%
0.0%
10.6%
0.0%
8.2%
11.4%
5.3%
7.2%

Invested amount
5755.2
9885.15
7374.6
5911.08
11614.5
0
4307.04
1691.57
0
6247.2
9779.54
1739.16
4200.86
6394.08
2409
16642.5
5383.84
3911.31
6571.5
4985.76
15460.5
3382.12
8804.17
9966.3
13048.44
12170.2
3341.96
0
5323.85
1785.6
7399.36
0
8772.56
0
4278.76
6639.36
3629.44
7060.32

39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91

0
2
4
2
1
3
1
1
2
3
1
2
3
3
2
3
3
3
3
2
0
2
0
1
2
3
1
2
1
2
1
2
4
3
2
2
3
1
2
1
1
3
1
3
3
1
2
2
3
2
2
1
1

89470
128230
77470
85390
60130
90090
74660
90970
62450
89760
68600
75040
38310
72330
97680
49810
73420
63030
46410
51280
78970
36270
79910
36370
63810
64110
90630
83210
103280
71020
95590
98950
33020
71330
40380
73020
63730
96500
132060
70160
72380
45200
86990
44620
90950
77160
49140
62800
35060
75610
54770
56070
32640

Group 8 Investment on Retirement

77950
143480
128690
94010
70270
114130
56740
101050
44200
137030
113640
92510
23760
69200
94650
71860
149560
85950
73330
51240
51290
64380
22310
20580
69330
124480
82530
94290
60610
80630
71820
53410
100920
66790
73450
112630
93420
99330
97140
93190
86350
99300
100670
96890
110720
75780
50760
102240
46090
45470
89750
72030
25460

4630
20620
23670
4050
4520
8390
16160
3310
11100
17120
7100
13100
12360
10210
9670
8900
20940
3530
13830
9250
620
7460
0
8510
7970
7820
17090
4390
4210
13850
9500
5840
17800
16700
7430
14080
14910
12190
10910
12430
2000
6300
12100
9850
14750
4400
10230
7030
9430
4400
1960
3840
8060

13.6%
5.7%
0.0%
10.4%
7.5%
7.5%
7.0%
8.2%
11.7%
0.0%
1.4%
4.4%
5.2%
12.6%
10.5%
5.7%
0.0%
12.0%
1.5%
4.2%
12.4%
1.5%
9.0%
4.4%
7.3%
8.7%
4.3%
4.7%
10.4%
8.4%
15.0%
15.0%
0.0%
8.5%
0.9%
6.3%
0.0%
10.6%
15.0%
2.9%
6.0%
0.0%
1.0%
3.6%
10.5%
9.4%
2.2%
0.0%
5.0%
10.6%
7.2%
5.2%
7.1%

12167.92
7309.11
0
8880.56
4509.75
6756.75
5226.2
7459.54
7306.65
0
960.4
3301.76
1992.12
9113.58
10256.4
2839.17
0
7563.6
696.15
2153.76
9792.28
544.05
7191.9
1600.28
4658.13
5577.57
3897.09
3910.87
10741.12
5965.68
14338.5
14842.5
0
6063.05
363.42
4600.26
0
10229
19809
2034.64
4342.8
0
869.9
1606.32
9549.75
7253.04
1081.08
0
1753
8014.66
3943.44
2915.64
2317.44

92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144

0
3
2
2
1
0
2
3
2
3
3
3
1
2
3
2
3
1
2
2
2
1
3
0
3
3
1
3
1
2
2
3
2
3
4
1
1
2
2
2
2
4
1
3
2
2
1
2
2
2
1
1
1

124360
84740
110010
45490
121760
59240
64660
90040
47740
83150
78630
58160
82370
76450
43060
83380
105510
59620
58500
44220
76670
69850
89370
78220
58940
90460
66970
73780
88910
73100
35000
46840
102960
38320
25150
52460
65850
33140
114810
48300
46960
60240
87580
77080
69020
103880
53310
91270
36970
25610
70860
73050
82600

Group 8 Investment on Retirement

73880
98820
106890
55330
120800
21840
21250
120950
64370
132920
107140
104090
82450
86220
53570
83370
99530
18190
47290
84250
97520
22220
133680
60650
126350
101000
49830
36360
52420
90030
13540
49490
98590
109310
55610
37820
76890
97840
106680
56650
15440
59510
95190
89110
98460
86070
51480
118430
38720
36930
96660
89210
125180

7300
15670
13470
10780
8040
3090
0
9810
8800
15420
9160
7830
12340
13290
11410
3060
17210
9140
7370
13150
11320
6830
21310
4290
10620
11190
4050
16420
5680
7220
9900
16110
9970
3250
11900
2450
13180
11330
11470
8650
5000
10780
1740
13180
9290
3870
7350
3790
4860
7240
12970
2910
9840

15.0%
1.9%
10.3%
3.6%
14.1%
15.0%
14.3%
6.9%
8.3%
2.6%
5.0%
4.4%
15.0%
10.2%
0.0%
15.0%
4.7%
8.1%
10.1%
1.9%
0.0%
9.8%
3.3%
15.0%
7.2%
8.4%
11.3%
7.6%
7.2%
9.4%
10.9%
0.0%
4.8%
7.2%
6.6%
7.5%
7.0%
0.3%
10.7%
5.2%
3.5%
12.5%
12.3%
1.1%
5.4%
15.0%
8.5%
10.8%
3.9%
6.6%
2.7%
9.1%
2.8%

18654
1610.06
11331.03
1637.64
17168.16
8886
9246.38
6212.76
3962.42
2161.9
3931.5
2559.04
12355.5
7797.9
0
12507
4958.97
4829.22
5908.5
840.18
0
6845.3
2949.21
11733
4243.68
7598.64
7567.61
5607.28
6401.52
6871.4
3815
0
4942.08
2759.04
1659.9
3934.5
4609.5
99.42
12284.67
2511.6
1643.6
7530
10772.34
847.88
3727.08
15582
4531.35
9857.16
1441.83
1690.26
1913.22
6647.55
2312.8

145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
169
170
171
172
173
174
175
176
177
178
179
180
181
182
183
184
185
186
187
188
189
190
191
192
193
194

2
2
1
1
2
2
4
2
0
2
3
3
3
1
1
2
2
3
3
3
4
2
2
3
3
1
0
3
1
2
1
3
2
3
2
1
1
3
3
3
3
3
2
2
2
2
1
1
2
2

45580
31360
111880
77890
50350
55330
36410
79870
106560
109180
85930
82060
77040
93640
76040
52530
59950
66380
103620
53110
89610
86120
47740
49240
59270
79050
79740
16650
59250
58140
91970
73150
84990
79900
101760
53500
75330
32010
78230
50700
10770
64670
31640
83170
104640
79910
71870
82800
37310
125830

Group 8 Investment on Retirement

63090
39560
97300
93980
53710
78080
69470
85440
77630
106570
47860
68330
71310
94130
51790
103960
78980
99630
145260
94680
185460
92170
68390
78220
76940
72910
54710
53530
13590
46000
88710
116170
66780
106840
74260
74580
78800
55310
77720
89490
35160
116990
63620
87790
62030
108590
71570
92230
5070
116960

7350
1910
15070
5640
10680
200
13140
8030
8480
14830
6520
6150
11480
10230
7510
10500
13670
11060
18860
11730
19870
2060
4980
12680
12140
14400
3090
16210
0
7190
6590
14820
11320
15720
15230
12190
10330
6470
15570
7580
12590
11860
11890
6810
3720
10420
8040
14590
7720
15510

7.3%
3.4%
14.8%
7.8%
2.3%
13.7%
3.2%
7.8%
14.4%
3.0%
7.9%
10.3%
0.0%
8.2%
7.6%
8.2%
3.9%
7.2%
1.9%
7.1%
0.0%
15.0%
3.6%
0.0%
10.9%
8.3%
10.3%
0.0%
15.0%
10.1%
4.9%
0.0%
11.0%
4.3%
10.2%
3.0%
12.0%
3.5%
3.4%
6.3%
0.0%
0.8%
10.5%
14.8%
15.0%
7.7%
9.0%
8.1%
10.3%
10.4%

3327.34
1066.24
16558.24
6075.42
1158.05
7580.21
1165.12
6229.86
15344.64
3275.4
6788.47
8452.18
0
7678.48
5779.04
4307.46
2338.05
4779.36
1968.78
3770.81
0
12918
1718.64
0
6460.43
6561.15
8213.22
0
8887.5
5872.14
4506.53
0
9348.9
3435.7
10379.52
1605
9039.6
1120.35
2659.82
3194.1
0
517.36
3322.2
12309.16
15696
6153.07
6468.3
6706.8
3842.93
13086.32

4.2 PROBLEM FORMULATION

Firstly we identify the independent variables as :
x1= Number of dependent children
x2= Combined annual salary of husband and wife
x3= Current mortgage
x4= Other debts
Now we define dependent variable as
Y= Investment amount
Investment as a percentage of salary is given in Retirementplan.xls. We have calculated investment
amount for all 194 couples using the following :
Investment Amount(Y) = Invested % x Combined annual salary

4.3 SCATTER PLOT ANALYSIS

We often study the relationship between variables using graphical methods. A simple graph that
can be used to study the relationship between two variables is called a scatter plot.

1) Investment Amount V/S Dependent Childeren

Invested amount V/S no of children scatter

plot
25000

Invested amount

20000
15000
10000
5000
0
0

0.5

1.5

2.5

3.5

4.5

No Of children

This scatter plot indicates that there is no significant correlation between invested amount and
number of dependent children. So we cannot conclude that with a change in independent variable
(Number of Childeren) , the dependent variable (Investment amount) will also change.
Group 8 Investment on Retirement

10

2) Investment Amount V/S Combined Salary

25000

Invested amount vs salary scatter plot

Investment amount

20000

15000

10000

5000

0
0

20000

40000

60000
80000
Salary amount

100000

120000

140000

This scatterplot indicates there is indeed a positive correlation between the independent variable (
Salary) and the dependent variable (Investment amount). Points tend to rise from bottom left to top
right but relationship is not perfect.
Interpretation : In most of the cases dependent variable ( Investment amount) will increase with
increase in independent variable (Salary).
3) Investment Amount V/S Mortgage on Home

Invested amount vs Mortgage scatter plot

25000

Invested Amount

20000
15000
10000
5000
0
0

20000

40000

60000

80000 100000 120000 140000 160000 180000 200000

Mortgage amount

Group 8 Investment on Retirement

11

This scatterplot indicates there is very little positive correlation between the independent variable
(Mortgage on home) and the dependent variable (Investment amount). The relationship is not
perfect.

Interpretation : In most of the cases dependent variable ( Investment amount) will increase with
increase in independent variable (mortgage).

4) Investment Amount V/S Other Debts

Invested amount vs debt scatter plot

Invested Amount

25000
20000
15000
10000
5000
0
0

5000

10000

15000

20000

25000

Debt amout

This scatterplot indicates there is very little positive correlation between the independent variable
(Debts) and the dependent variable (Investment amount). The relationship is not perfect.

Interpretation : In most of the cases dependent variable ( Investment amount) will increase with
increase in independent variable (Debts).

4.4 CORRELATION ANALYSIS:

Correlations are numerical summary measures that indicate the strength of relationships between
pairs of variables. A correlation between a pair of variables is a single number that summarizes the
information in a scatterplot.

Group 8 Investment on Retirement

12

Covariance :

A covariance is a single number that measures the strength of the linear relationship between two
variables. By looking at the sign of the covariance or correlationplus or minuswe can tell
whether the two variables are positively or negatively related.
It can be calculated by using the following formula :

We calculated using Excel function:

=Covar(array1, array2)
Correlation coeffcients
Between no of children and invested amount
Between salary and invested amount
Between mortgage amount and invested amount
Between debt amount and invested amount

(r)
-0.40077
0.685392
0.010924
-0.26176

Variance:

The variance is a parameter describing in part either the actual probability distribution of an
observed population of numbers, or the theoretical probability distribution of a not-fully-observed
population of numbers.

It is calculated by using the following formula :

We calculated using Excel function :

=Variance(P)
Variance
Inveted amount (Y)
No of dependent children per family (X1)
Salary drawn (X2)
Mortgage amount (X3)
Other Debt amount (X4)
Group 8 Investment on Retirement

(Var)
19247458
0.901823
5.48E+08
9.04E+08
23884527
13

Correlation Coefficient:

It is a measure of the strength of the linear relationship between two variables that is defined in
terms of the (sample) covariance of the variables divided by their (sample) standard deviations.
It is calculated by using the following formula :

We calculated it using the following Excel function :

=CORREL(X-range,Y-range)
Correlation coeffcients
Between no of children and invested amount
Between salary and invested amount
Between mortgage amount and invested amount
Between debt amount and invested amount

(r)
-0.40077
0.685392
0.010924
-0.26176

Interpretation :

We can see there exists high positive correlation between Salary and the invested amount
which was evident from the scatter plot as well.

A slight positive correlation exists between Mortgage amount and the invested amount as
the coefficient of correlation is 0.010.

As the coefficient of correlation between Debt and Invested amount is negative there exists
a negative correlation between them.

4.5 REGRESSION ANALYSIS

The Regression Model :
Dependent variable Investment Amount (y) is function of all four independent variables Number of
dependent children (x1), Combine salary of husband and wife (x2), mortgage on home (x3) and
other debt (x4).
Y = f(x1, x2, x3, x4)

Group 8 Investment on Retirement

14

So we can write dependent variable Investment Amount (y) in terms of all four independent
variables Number of dependent children (x1), Combine salary of husband and wife (x2), mortgage
on home (x3) and other debt (x4) as following
Y = 0 + 1x1 + 2x2 + 3x3 + 4x4 +
Where
0, 1, 2, 3 and 4 Regression parameters relating the mean value of independent variable y to
x1, x2, x3 and x4.
- Is an error that describes the effects on y of all factors other than the values of independent
variables x1, x2, x3 and x4.
Now we minimise the effect of error term while forming regression equation using Ordinary
Least Square Method (OLS) we get following regression equation:
Y = 0 + 1x1 + 2x2 + 3x3 + 4x4
Now we do regression analysis using data analysis tool of Microsoft Excel and get following

Regression Statistics
Multiple R
R Square
Adjusted R Square
Standard Error
Observations
ANOVA

Regression
Residual
Total

Df
4
189
193

0.80005212
0.64008339
0.6324661
2666.59834
194

SS
2390075800
1343931124
3734006924

Group 8 Investment on Retirement

MS
597518950
7110746.689

F
84.03040864

Significance
F
7.07731E-41

15

Regression Analysis:Multiple Coefficient of Determination (R^2):In case of multiple regression we consider adjusted R^2 instead of normal R^2 to determine how
much variation in dependent variable is explained by independent variable in regression equation.
In given output adjusted R^2 = 0.6324 so we can say that about 63% variation in dependent
variable is explained by independent variables in regression equation.
Test for significance of regression model:Now we test overall validity of regression model by hypothesis testing method using ANOVA
table.
We define null and alternate hypothesis as
H0 : All independent variables are insignificant
H1 : At least one independent variable is significant.
That is
H0 : All the Bi are zero.
H1 : At least one Bi is non-zero.
From ANOVA table we get that
Significant F value (P value) : 7.07731E-41
Now we define confident level (1-) % to be 95% so level of significance () is 0.05.
Here F value (P value) < level of significance ()
Hence we reject null hypothesis H0. We conclude that at least one independent variable amongst
x1, x2, x3 and x4 is significant in regression model to define dependent variable Investment
Amount. Hence overall regression model is significant.
Test for significance independent variables of regression model:Now we test significance of independent variables of regression model by hypothesis testing
method.
We define null and alternate hypothesis as
H0 : Particular independent variables is insignificant
H1 : Particular independent variable is significant.
Testing for Number of Dependent Children (x1) :
H0 : B1 = 0.
H1 : B1 0
From table we get that
P value: 0.88213
Group 8 Investment on Retirement

16

And level of significance () = 0.05.

Here P value > level of significance ()
Hence we accept hypothesis H0. We conclude that independent variable number of dependent
children x1 is not significant in regression model to define dependent variable Investment Amount.
Testing for Combine Salary of Husband and Wife (x2) :
H0 : B2 = 0.
H1 : B2 0
From table we get that
P value: 0. 2.51E-34
And level of significance () = 0.05.
Here P value < level of significance ()
Hence we reject hypothesis H0. We conclude that independent variable Salary of Husband and Wife
(x2) is significant in regression model to define dependent variable Investment Amount.
Testing for Combine Mortgage on Home (x3) :
H0 : B3 = 0.
H1 : B3 0
From table we get that
P value: 4.38E-06
And level of significance () = 0.05.
Here P value < level of significance ()
Hence we reject hypothesis H0. We conclude that independent variable Combine Mortgage on
Home (x3) is significant in regression model to define dependent variable Investment Amount.
Testing for other debt (x4) :
H0 : B4 = 0.
H1 : B4 0
From table we get that
P value: 3.08E-06
And level of significance () = 0.05.
Here P value < level of significance ()
Hence we reject hypothesis H0. We conclude that independent variable other debt (x4) is significant
in regression model to define dependent variable Investment Amount.
Since number of dependent children x1 is insignificant independent variable, we redefine
regression equation as
Y = 0 + 2x2 + 3x3 + 4x4
Group 8 Investment on Retirement

17

Regression :
Dependent variable Investment Amount (y) is function of all four independent variables Combine
salary of husband and wife (x2), mortgage on home (x3) and other debt (x4).
Y = f(x2, x3, x4)
So we can write dependent variable Investment Amount (y) in terms of all four independent
variables Number of dependent children (x1), Combine salary of husband and wife (x2), mortgage
on home (x3) and other debt (x4) as following
Y = 0 + 2x2 + 3x3 + 4x4 +
Where
0, 2, 3 and 4 Regression parameters relating the mean value of independent variable y to x2,
x3 and x4.
- Is an error that describes the effects on y of all factors other than the values of independent
variables x2, x3 and x4.
Now we minimise the effect of error term while forming regression equation using Ordinary
Least Square Method (OLS) we get following regression equation:
Y = 0 + 2x2 + 3x3 + 4x4
Now we do regression analysis using data analysis tool of Microsoft Excel and get following
Regression Statistics
Multiple R
0.800026
R Square
0.640041
Adjusted R
Square
0.634358
Standard Error
2659.727
Observations
194
ANOVA
df

SS
MS
F
Significance F
Regression
3 2.39E+09 7.97E+08 112.6128
6.18568E-42
Residual
190 1.34E+09 7074147
Total
193 3.73E+09
Coefficients Standard Error
t Stat
P-value
Lower 95%
Intercept
-350.683392
700.9336248 -0.50031 0.617437
-1733.29472
Salary
0.158133126
0.009258688 17.07943 3.07E-40
0.139870103
Mortgage -0.04011113
0.007930723 -5.05769 9.96E-07 -0.055754703
Debt
-0.22192098
0.043524152
-5.0988 8.23E-07
-0.3077736

Group 8 Investment on Retirement

Upper 95%
1031.927937
0.176396148
-0.02446755
-0.13606836

18

RESIDUAL OUTPUT

Observation
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
Group 8 Investment on Retirement

Predicted
Invested
amount
9931.572242
7832.329254
10723.47578
4639.17154
8492.257697
646.7911716
7287.003743
3091.920204
965.8980698
1172.64797
10505.46692
4967.238102
2607.99913
8177.048746
-231.3033727
8586.373364
5084.870983
6992.249539
3249.05506
6876.126283
11147.06493
5489.310945
6783.843479
7046.09042
11537.61844
6228.207497
5577.62728
3704.682636
9019.316476
-496.1986071
9070.99109
1230.382747
7160.026184
-35.04830719
3550.971882
1827.335017
6864.641727
7562.623129
9643.330661
9595.571767
1485.118915
8482.676941
5336.169539
7455.729637

Residuals
-4176.372242
2052.820746
-3348.875779
1271.90846
3122.242303
-646.7911716
-2979.963743
-1400.350204
-965.8980698
5074.55203
-725.9269196
-3228.078102
1592.86087
-1782.968746
2640.303373
8056.126636
298.9690165
-3080.939539
3322.44494
-1890.366283
4313.435075
-2107.190945
2020.326521
2920.20958
1510.821561
5941.992503
-2235.66728
-3704.682636
-3695.466476
2281.798607
-1671.63109
-1230.382747
1612.533816
35.04830719
727.7881178
4812.024983
-3235.201727
-502.303129
2524.589339
-2286.461767
-1485.118915
397.8830593
-826.4195385
-698.9796372
19

45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
Group 8 Investment on Retirement

5593.387183
9246.898958
5288.495461
4547.630653
4363.381291
4897.780882
2011.412855
6045.582181
9153.266002
2668.445078
613.4047715
5385.514867
977.7586403
3650.319917
9942.198698
1146.920022
11390.85538
2686.58377
5190.176508
3058.775806
6877.920656
8051.262476
12615.88292
4572.165196
9776.231422
11858.23542
-3127.336278
4543.849693
1439.696854
3553.83348
2671.117123
8219.707949
14214.82413
4247.50272
7187.554245
1415.796535
6682.0859
632.9276517
6317.08562
7834.794862
3113.685806
3919.010507
1252.027159
8805.45685
4275.328903
4774.45973
2000.869343
14731.31868
5608.234045

-367.187183
-1787.358958
2018.154539
-4547.630653
-3402.981291
-1596.020882
-19.29285481
3067.997819
1103.133998
170.7249224
-613.4047715
2178.085133
-281.6086403
-1496.559917
-149.9186979
-602.8700219
-4198.955377
-1086.30377
-532.0465082
2518.794194
-2980.830656
-4140.392476
-1874.762923
1393.514804
4562.268578
2984.264583
3127.336278
1519.200307
-1076.276854
1046.42652
-2671.117123
2009.292051
5594.175872
-2212.86272
-2844.754245
-1415.796535
-5812.1859
973.3923483
3232.66438
-581.7548622
-2032.605806
-3919.010507
500.9728409
-790.7968504
-331.8889027
-1858.81973
316.570657
3922.681317
-3998.174045
20

94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
Group 8 Investment on Retirement

9768.787478
2231.135495
12273.93684
7455.360062
9021.843009
6859.137281
2663.733965
4044.493108
5753.021655
2933.530428
6629.074602
5330.882606
1777.657368
8811.313549
8522.421846
6319.23432
5367.691494
344.3398309
5349.600469
8287.925816
3690.482096
8633.708672
1544.84098
7419.519268
7341.974465
6213.995394
10345.79621
5995.373604
2443.853572
1496.025367
9763.59476
603.1872261
-1245.074898
5884.271052
4053.31962
-1548.989259
10980.09179
3095.234583
5346.327429
4395.934576
9294.294826
5338.996619
4552.677194
11764.98658
4383.35336
8490.685394
2863.859349
611.0940223
4099.172957

1562.242522
-593.495495
4894.223164
1430.639938
224.5369914
-646.3772813
1298.686035
-1882.593108
-1821.521655
-374.4904276
5726.425398
2467.017394
-1777.657368
3695.686451
-3563.451846
-1490.01432
540.8085058
495.8401691
-5349.600469
-1442.625816
-741.2720959
3099.291328
2698.83902
179.1207316
225.6355346
-606.7153944
-3944.276212
876.0263963
1371.146428
-1496.025367
-4821.51476
2155.852774
2904.974898
-1949.771052
556.1803796
1648.409259
1304.578214
-583.6345825
-3702.727429
3134.065424
1478.045174
-4491.116619
-825.5971938
3817.013423
147.9966402
1366.474606
-1422.029349
1079.165978
-2185.952957
21

143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
169
170
171
172
173
174
175
176
177
178
179
180
181
182
183
184
185
186
187
188
189
190
191
Group 8 Investment on Retirement

6976.837514
5506.29912
2695.294086
2597.706068
10094.08858
6945.027468
3086.834613
5222.561265
-295.6181772
7070.288951
11504.26555
9348.560007
9871.052621
8520.11337
6423.91507
8410.990211
7929.777497
1455.926351
2927.760637
3695.475579
6023.098667
1646.912034
1971.045981
9113.541358
3350.225383
1484.341094
3241.595921
6029.575573
9378.636312
-3462.254756
8473.594051
5402.452703
9172.102594
3268.17586
7898.284192
4510.08241
9382.434414
2412.734002
6108.284198
1056.782625
5447.324326
2394.960046
-2851.882126
2551.201941
-537.8618494
7768.610712
12882.72745
5617.650479
6359.346102

-329.2875137
-3193.49912
632.0459137
-1531.466068
6464.15142
-869.6074684
-1928.784613
2357.648735
1460.738177
-840.4289511
3840.374449
-6073.160007
-3082.582621
-67.93337013
-6423.91507
-732.5102114
-2150.737497
2851.533649
-589.7106369
1083.884421
-4054.318667
2123.897966
-1971.045981
3804.458642
-1631.585383
-1484.341094
3218.834079
531.574427
-1165.416312
3462.254756
413.9059494
469.687297
-4665.572594
-3268.17586
1450.615808
-1074.38241
997.0855861
-807.7340023
2931.315802
63.56737521
-2787.504326
799.1399538
2851.882126
-2033.841941
3860.061849
4540.549288
2813.272548
535.4195214
108.9538983
22

192
193
194

5805.462787
3632.670103
11413.81564

901.3372134
210.259897
1672.504355

Regression Analysis:Multiple Coefficients of Determination (R^2):In case of multiple regression we consider adjusted R^2 instead of normal R^2 to determine how
much variation in dependent variable is explained by independent variable in regression equation.
In given output adjusted R^2 = 0.6343 so we can say that about 63.5% variation in dependent
variable is explained by independent variables in regression equation.
Test for significance of regression model:Now we test overall validity of regression model by hypothesis testing method using ANOVA
table.
We define null and alternate hypothesis as
H0 : All independent variables are insignificant
H1 : At least one independent variable is significant.
That is
H0 : All the Bi are zero.
H1 : At least one Bi is non-zero.
From ANOVA table we get that
Significant F value (P value) : 6.18568E-42
Now we define confident level (1-) % to be 95% so level of significance () is 0.05.
Here F value (P value) < level of significance ()
Hence we reject null hypothesis H0. We conclude that at least one independent variable amongst
x2, x3 and x4 is significant in regression model to define dependent variable Investment Amount.
Hence overall regression model is significant.
Test for significance independent variables of regression model:Now we test significance of independent variables of regression model by hypothesis testing
method.
We define null and alternate hypothesis as
H0 : Particular independent variables is insignificant
H1 : Particular independent variable is significant.

Group 8 Investment on Retirement

23

Testing for Combined Salary of Husband and Wife (x2) :

H0 : B2 = 0.
H1 : B2 0
From table we get that
P value: 3.07E-40
And level of significance () = 0.05.
Here P value < level of significance ()
Hence we reject hypothesis H0. We conclude that independent variable Salary of Husband and Wife
(x2) is significant in regression model to define dependent variable Investment Amount.
Testing for Combine Mortgage on Home (x3) :
H0 : B3 = 0.
H1 : B3 0
From table we get that
P value: 9.96E-07
And level of significance () = 0.05.
Here P value < level of significance ()
Hence we reject hypothesis H0. We conclude that independent variable Combine Mortgage on
Home (x3) is significant in regression model to define dependent variable Investment Amount.
Testing for other debt (x4) :
H0 : B4 = 0.
H1 : B4 0
From table we get that
P value: 8.23E-07
And level of significance () = 0.05.
Here P value < level of significance ()
Hence we reject hypothesis H0. We conclude that independent variable other debt (x4) is significant
in regression model to define dependent variable Investment Amount.
All the independent variables and overall regression model is significant. So we find regression
equation by substituting regression parameters from excel out as following:
Y = -350.683 + 0.158 x2 - 0.040 x3 - 0.221 x4
Interpretation from equation:1. With one dollar change in combine salary of husband and wife, investment amount will
change by 0.158 dollars considering all other independent variables kept constant.
2. With one dollar change in mortgage on home, investment amount will change by 0.040
dollars considering all other independent variables kept constant.
Group 8 Investment on Retirement

24

3. With one dollar change in other debt, investment amount will change by 0.221 dollars
considering all other independent variables kept constant.
4. Intercept -350.686 takes care in defining total investment amount of all other parameters
other than mentioned independent variables.

4.6 RESDUAL PLOTS AND NORMAL PROBABILITY CURVE:

The following residual plots are obtained by the regression analysis in excel for all the three
independent variables with respect to the dependent variable.

Mortgage Residual Plot

10000
8000
6000
Residuals

4000
2000
0
-2000

20000 40000 60000 80000 100000 120000 140000 160000 180000 200000

-4000
-6000
-8000

Mortgage

Fanning effect present therefore Heteroskedasticity is present

No rainbow pattern present therefore no Non-linearity
No linear increasing/ Decreasing trend observed therefore No Auto-Correlation

Group 8 Investment on Retirement

25

Debt Residual Plot

10000
8000

Residuals

6000
4000
2000
0
-2000 0

5000

10000

15000

20000

25000

-4000
-6000
-8000

Debt

No Fanning effect present therefore Heteroskedasticity is not present

No rainbow pattern present therefore no Non-linearity
No linear increasing/ Decreasing trend observed therefore No Auto-Correlation

Salary Residual Plot

10000
8000
6000
Residuals

4000
2000
0
-2000

20000

40000

60000

80000

100000

120000

140000

-4000
-6000
-8000

Salary

No Fanning effect present therefore Heteroskedasticity is not present

No rainbow pattern present therefore no Non-linearity
No linear increasing/ Decreasing trend observed therefore No Auto-Correlation

Group 8 Investment on Retirement

26

Now we will be doing the verification of the assumptions of the regression analysis.
The assumptions are :
1) The Regression model should be Linear.
To check the linearity, we refer to the residual plot for all the three independent variables. Now as
there is no rainbow pattern in any of the residual plot curves, then we can conclude that the model
is linear.
2) The error variance should be constant that is no heteroskedasticity should be present.
To check the heteroskedasticity we again refer to the residual plots for all the three independent
variables.
In the residual plot of the mortgage value we observe a Fanning effect. But no fanning effect is
present in the Debt residual plot and the salary residual plots. So we conclude that
hetereskedasticity is present among the independent and the dependent variables.
3) Error variances should be independent that is no Auto-Correlation should be present.
To check the Autocorrelation we again refer to the residual plots for all the three independent
variables. For the residual plots of all the independent variables no linearly increasing / decreasing
trend is observed. So we can conclude that there is no Auto Correlation present among any of the
independent variables and the dependent variable

4) The error should follow normal distribution.

Invested amount

Normal Probability Plot

30000
20000
10000
0
0

20

40

60

80

100

120

Sample Percentile

To check this assumption we observe the Normal Probability plot. As the Normal probability plot
shows almost a linear relationship we can conclude that the error follows a normal distribution.

Group 8 Investment on Retirement

27

SECTION 5
CONCLUSION

So after verifying all the assumptions we can conclude that

although there is a bit of

heteroskedasticity present in this regression model but still we can accept the model to forecast the
investment amount in the retirement plan for each of the families , depending on the given
variables.

Group 8 Investment on Retirement

28

SECTION 6
MANAGERIAL IMPLICATION

Group 8 Investment on Retirement

29