THE HONG KONG POLYTECHNIC UNIVERSITY
DEPARTMENT OF APPLIED MATHEMATICS
AMA3602 APPLIED LINEAR MODELS
Tutorial 1 Solution
1. (a) Notice that X1 ∼ N(0, 1) and 12 2 2
P
i=2 Xi ∼ χ11 . P
Since X1 is independent of
X2 , . . . , X12 , it follows that X1 is independent of 12 2
i=2 Xi . Thus,
√
X1 11X1
qP = qP = Y1 ∼ t11 ,
12 2 12 2
i=2 X i /11 i=2 X i
where t11 denote a random variable following t-distribution with 11 degrees of
freedom. From the t-table, we find that P (Y1 = t11 > 1.363) = 0.1.
(b) Notice that 3i=1 Xi2 ∼ χ23 and 12 2 2
P P
i ∼ χ9 . Since X1 , X2 , X3 P
i=4 XP are inde-
pendent of X4 , . . . , X12 , it follows that i=1 Xi2 is independent of 12
3 2
i=4 Xi .
Thus,
P3 2
3 3i=1 Xi2
P
i=1 Xi /3
P12 2
= P12 2
= 3Y2 ∼ F3,9 ,
i=4 X i /9 i=4 X i
where t3,9 denote a random variable following F -distribution with degrees of
freedom 3 and 9. In addition, we have
P (Y2 > c) = P (3Y2 = F3,9 > 3c) = 0.01.
From the F -table, we find that 3c = 6.99 and hence, c = 2.33.
2. (a) Since the alternative hypothesis is µ ̸= 0, we conduct a two-sided test. Under
the null hypothesis µ = 0, the test statistic T ∼ N (0, 10). Therefore, the
rejection region is
T −0
T : √ > z0.05/2 = 1.96 ,
10
where zα is a constant satisfying P (Z > zα ) = α for Z ∼ N(0, 1).
√
(b) Under the null hypothesis, the statistic (T − 0)/ 10 ∼ N(0, 1). We obtain
√
p-value = P (|Z| > |tobs / 10| ≈ 1.581) = 2P (Z > 1.581) ≈ 2 × 0.0571 ≈ 0.1142.
Since p-value > 0.05, we do not reject H0 at the 5% significance level.
3. (a) False. The intercept and slope of the true model are constants.
(b) True. The expected value of Y given X is
E(Y | X) = E(1 + 2X + ε | X) = 1 + 2X + E(ε | X) = 1 + 2X + 0.
1
(c) False. Since ε is random, P (Y = 1 + 2(2) + ε = 5 | X = 2) = P (ε =
0 | X = 2) < 1. In particular if ε follows normal distribution, we have
P (Y = 5 | X = 2) = 0.
(d) True. Conditioning on X, the covariance of Y and ε is
Cov(Y, ε | X) = Cov(1 + 2X + ε, ε | X) = Cov(ε, ε | X) = Var(ε) = 3.
4. (a) The intercept is the expected hourly wage when the years of working expe-
rience is 0, i.e. E(Y |X = 0). The slope represents the change in expected
hourly wage associated with a one-unit increase in years of working experience.
(b) The expected hourly wage for a person with 10 years of working experience is
E(Y | X = 10) = 5.3733 + 0.0307(10) = 5.6803.
(c) Let Y and X denote the hourly wage and years of working experience of this
person respectively. We have
P (Y ≥ 6 | X) = 0.5
P (5.3733 + 0.0307X + ε ≥ 6 | X) = 0.5
P (ε ≥ 0.6267 − 0.0307X | X) = 0.5.
Since ε ∼ N(0, 13.49) is independent of X, this implies
ε
P √ ≥ 0.6267 − 0.0307X X = P (Z ≥ 0.6267 − 0.0307X) = 0.5,
13.49
where Z ∼ N(0, 1). Remark that P (Z ≥ 0) = 0.5. Thus,
0.6267 − 0.0307X = 0
X ≈ 20.414.
The minimum number of years of working experience required is 20.42.
(d) Let Ye denote the hourly wage in Hong Kong dollar. Since 1 US dollar = 7.78
Hong Kong dollar, we obtain
Ye = 7.78Y
= 7.78(5.3733 + 0.0307X + ε)
= 41.80427 + 0.238846X + 7.78ε.
Let εe = 7.78ε. Thus, the linear model in Hong Kong dollars is:
Ye = 41.80427 + 0.238846X + εe,
where E(e ε) = 7.782 × 13.49 = 816.5281, and εe is independent of
ε) = 0, Var(e
X.