Using R to complete the assignment
Include the output of any R commands you use. Tables/charts/pictures/results from your statistical program should be explained in words; you need to demonstrate that you understand the output that the computer is generating. Answers should be written in complete sentences.

The data set
401ksubs contains information on net financial wealth (nett f a), age of the survey respondent (age), annual family income (inc), and participation in certain pension plans for people in the United States.
It also includes family size (fsize), but we will be working only with the data points for which fsize= 1. (You will likely use a command like s401ksubs <- k401ksubs[k401ksubs$fsize==1,] near the beginning of your code.)

The wealth and income variables are both recorded in thousands of dollars.

1. Use OLS to estimate
Nettf a = β0+β1inc+β2age+u
Interpret the slope coefficients. Are there any surprises in the slope estimates?

2. Doesβ0have an interesting meaning? Discuss briefly.

3. TestH0:β2= 1 againstH1:β26= 1 at the 5% significance level. What is the p-value?

4. Use OLS to estimate
nettfa=γ0+γ1inc+u
How doesγ1compare toβ1from question 1? Why do you think this is?

5. Use OLS to estimate
nettfa=β0+β1inc+β2age+β3age2+u
and report the results.

6. What is the literal interpretation ofβ2? Is its sign of concern? By itself, is it of much interest?

7. The youngest people in the data set are 25; because ∂nettfa/∂age=β2+ 2β3age,the marginal effect of age on net financial assets at that age isβ2+ 50β3. Perform a Wald test onH0:β2+ 50β3= 0H1:β2+ 50β36= 0Report the p-value; also report the estimate and standard error of β2+ 50β3.

8. Note that the model
nett f a=β0+β1inc+β3(age−25)2+u
has one fewer parameter than the model in 5, and that it forces the marginal effect of age at age= 25 to be 0. Perform this regression, and compare its goodness-of-fit metrics to those of the regression in question 5.

9. Does including a quadratic term in inc improve the fit? Does such a term deserve inclusion or not?

Using R to complete the assignment Include the output of any R com...