The finance manager performed a regression analysis of the number of cars sold and interest rates using the sample of data above. Shown below is a portion of the regression output.
Regression Statistics
Multiple R
0.998868
R2
0.997738
Coefficient
Intercept
14.88462
Interest Rate
-1.61538
1.Are there factors other than the interest rate charged for cars sold that the finance manager should consider in predicting future car sales?
2.Is interest rate charged for a loan the most important factor to be considered in predicting future car sales? Explain your reasoning. The dealership’s vice-president of marketing has requested a sales forecast at the prevailing interest rate of 7%.
3.As a finance manager, what reasons would you convey to the vice-president in recommending this forecasting model?
4.Is the prediction of car sales at 7% a reflection of the current downturn in the economy? How might this impact the dealership’s business?
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