# Are there factors other than interest rate charged for a loan that

A finance manager employed by an automobile dealership believes that the number of cars sold in his local market can be predicted by the interest rate charged for a loan.

 Interest Rate (%) Number of Cars Sold (100s) 3 10 5 7 6 5 8 2

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 interest rate charged for a loan 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 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?

Specifically, the following critical elements must be addressed:

1-Main Elements

2-Integration and Application

3-Analysis

4-Critical Thinking

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